F201B2

Introduction to Social Science

Lecture 9:
Government and the Economy

Outline
Economic

Systems
Power and Authority
Types of Government
Functions of Government

Economic Systems
Two types of systems distinguish
contemporary industrial societies
Capitalism (market economy)
Socialism (command economy)
In practice, the economy of each state
represents a mixture.

Capitalism
Economic system in which the means of
production are held largely in private hands
Main incentive for economic activity is
accumulation of profits
Laissez-faire

The form of capitalism following the industrial

revolution
businesses compete with minimal government
intervention
Business retained right to regulate itself &
regulate itself without fear of government
intervention

Capitalism
Laissez-faire An economic doctrine that
opposes governmental regulation of or
interference in commerce beyond the
minimum necessary for a free-enterprise
system to operate according to its own
economic laws.
= Non-interference in the affairs of others.

Capitalism

Contemporary capitalism differs from laissezfaire - tolerates monopolistic practices,

Monopoly: exists when a single firm controls the
market
Firm can control a commodity by dictation price,
quality standards, & availability
Buyers have little choice, no other place to
purchase product or service.
Monopolies only in certain exceptional cases
such as utilities and transportation industries
vital to the economy/ economies of scale

Socialism
Govt ownership of major industries e.g.
steel production, electricity, automobile,
agriculture is a primary feature of pure
socialism.
Commitment to social services
programmes : healthcare, housing,
education, key services provided by govt
to all citizens. e.g; Germany, UK.

Socialism
Means of production and distribution owned
collectively rather than privately owned.
Objective is to meet peoples needs rather
than to maximise profits.
Aimed at eliminating economic exploitation
of capitalism.

Communism
Economic system under which all property is
communally owned and no social distinctions
are made on the basis of peoples ability to
produce
Central government (Central Committee)
as the representative of the people,
make basic economic decisions

Communism
Actual countries known as communist fall
short of the ideal of communism.
2006 China, Vietnam, Cuba, Laos
socialist societies ruled by communist
parties.
Capitalism made inroads 25% of Chinas
production originated in the private
business sector.

3 major economic systems

Economic
System

Characteristics

Contemporary
Examples

Capitalism

Private ownership of the means

production
Accumulation of profits the main
incentive

Canada
Mexico
United States

Socialism
(welfare
capitalism)

Collective ownership of the means

of production
Meeting peoples needs the basic
objective

Germany
Russia
Sweden

Communism

Communal ownership of all property

No social distinctions made on basis
of peoples ability to produce

Cuba
North Korea
Vietnam

Informal Economy

The

transfer of money, goods, or

services is not reported to the
government, i.e., a haircut in exchange
for a computer lesson

Difficult

to measure
In developing nations, informal economy
represents significant part of total
economic activity
Depend a large extent on women, work
undervalued/unrecognised the world over

Worlds Largest Economies

Power and Authority

In any society, someone or some group makes

important decisions about how to use
resources and how to allocate
One cultural universe is the exercise of power
and authority
Inevitably the struggle for power and authority
involves politics

Power

Ability to exercise ones will over others

Heart of political systems. Sources of power
in political systems include:

Force:

Actual or threatened use of coercion to

impose ones political dissidents
Influence:
Exercise of power through a process of
persuasion
Authority:
Institutionalised power recognized by people
over whom it is exercised

Authority

Weber developed a classification system for

authority:
Traditional authority: legitimate power
conferred by custom and accepted practice
Legal-rational authority: power is made
legitimate by law
Charismatic authority: power is made
legitimate by leaders exceptional personal or
emotional appeal to his or her followers

The Nature of Government:

Three Views
Government as a necessary evil
Government as a positive good
Government as an unnecessary evil

The Nature of Government:

Three Views
Government as a necessary evil
Individuals or groups that subscribe to this
view argue that the very essence of
government is to prohibit, enforce, regulate,
restrain, coerce and compel.

The Nature of Government:

Three Views
Government as a positive good
Individuals or groups that subscribe to this
view the government as a supplier of the
defects of moral virtue to force us to the
right thing when our moral weaknesses
would lead us to injure each other

The Nature of Government:

Three Views
Government as a unnecessary evil
Government is Force- coercion/compliance
Government is War-genocide
Government is Oppressive-conflicts of interest
Government is Slavery-ruled by others
Government is Corrupt and Wasteful-civil service

Characterizations of
Governments Role in Society

How Strong a Role Should

Government Play?
(From LESS to MORE)
Anarchist: institutions of society exploit, corrupt
Libertarian: need greater freedom for individuals
Reactionaries: current government is too large
Conservative: need slightly less government
Moderates: current government about right
Liberals: government needs broader role

Radicals: current form of government needs drastic

change from what it is (not less to more or vice versa)

Types of Government
The two primary forms of government:
Autocracy
Democracy

Types of Government
Autocracy
A

government in which a single person or

a group of people has or claims unlimited
power

Characteristics of Autocracy

Single person or small group has power

Ancient

dictators; then monarchies emerged from

feudal Middle Ages
Hereditary rulers often successors
e.g. Julius Caesar, Queen Elizabeth

Four primary characteristics:

loyalty to the party and state

rule by leaders
one-party monopoly
controlled press

Justifications for Autocracy

Communists argue workers not truly free

Government

control temporary and necessary

Autocrats in underdeveloped countries

claim caretaking for future

Say

environment not yet right for democracy

Democracy can falter in clashing cultures

Nigeria,

Iraq, Afghanistan, Republic of Congo

Many Forms of Autocracy

Dictatorship
Totalitarian

Monarchy
Oligarchy

Types of Autocracy (continued)

Dictatorship
Government

in which one person has nearly

total power to make and enforce laws
forbids all activities which threaten its
position
Catherine the Great, 18th century Russia
Francisco Franco of Spain
African military juntas

Types of Autocracy
Totalitarian
involves

autocracy

virtually complete government control

and surveillance over all aspects of a societys
social and political life

wants

to control all aspects of individuals life

Nazism
Marxism

Types of Autocracy
Totalitarian
involves

autocracy

virtually complete government control

and surveillance over all aspects of a societys
social and political life

wants

to control all aspects of individuals life

Nazism
Marxism

Types of Autocracy

Monarchy:
Form of government headed by a single
member of a royal family
Over 25 modern monarchs
Most have limited power
Monarchies with high degree of power in
Swaziland, Brunei, Oman, Qatar, Saudi
Arabia

Types of Autocracy
Oligarchy:
form

of government in which a few

individuals rule
in developing countries like Africa, Asia and
Latin America, small factions of military
officers seize power, either by legally
elected regimes or by force.

Types of Government
Democracy
Government

by the people
Representative democracy: elected
members of legislatures make laws
U.S. is a representative democracy, but
critics question how representative their
democracy really is

Characteristics of Democracy
Popular

sovereignty

Majority

rule, plus individual liberty

People

are sovereign, not leaders

Freedom of speech
Representative legislature
Free elections
Respect

and guarantee rights of minorities

Compromise

for good of all

Characteristics of Democracy
(continued)

All are equal before the law

All

(or most) should be allowed to vote and

participate fully in political process
Public law applies equally to all

Individual is primary (not government)

Emphasis

on individuals dignity and worth

Supportive environment necessary

Many Forms of Democracy

Direct
Presidential
Unitary
Written constitution
Republic

Representative
Parliamentary
Federal
No formal constitution
Constitutional Monarchy

Functions of Government
The 5 primary functions of governments are:
Maintain internal order and ensure external
security
Ensure

justice

Safeguard

individual freedoms

Regulate

individual actions

Promote

the general welfare

Government and the Economy

Governments role in the economy
Direct role
Indirect role

Government and the Economy

Direct Role: Expenditure & taxes/borrowings
Expenditure: defence, education, health, social
security, administrative, public welfare, interest
Macroeconomic role: institute policies which
concern general welfare: policies affecting
inflation, unemployment, growth
Microeconomic role: protect & increase societys
welfare by considering individuals welfare

Government and the Economy

Indirect Role: determine what the laws are
Provide a legal and institutional setting for
the workings of the market by establishing
& enforcing laws that regulate actions of
individuals and businesses.
Age limits for driving, car insurance
mandatory, price controls

Readings
Hunt and Colander, Chapter 13, 17
Schaefer, Chapter 14