Soci111 – Human Societies
Module 14 – Industrial Societies – Technology & Economy
François Nielsen
University of North Carolina
Chapel Hill
Fall 2011
Outline
Main Themes
Technological Foundation of Industrial Societies
Economies of Industrial Societies
Globalization – Increasing Integration of World Economy
Main Themes
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technological foundation of industrial societies
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productivity of labor %
energy consumption %
living standards %
shift from labor-intensive to capital-intensive production
economy of industrial societies
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labor force shifts among sectors
occupational specialization %
size of economic units %
industrial concentration %
trend from pure market to mixed economy
rise of modern corporation
change in control of modern corporations
globalization (integration of world economy) %
Technological Foundation of Industrial Societies
Industrial Societies Today - Gross National Income Per Capita
Table:
Gross National Income Per Capita 2003 (Current US $; World = $5,559)
Country
GNIPC
Country
GNIPC
Country
Luxembourg
Norway
Switzerland
United States
Japan
Denmark
Iceland
Sweden
United Kingdom
Isle of Man
Ireland
Finland
Austria
Netherlands
Belgium
Germany
Hong Kong, China
France
Canada
Australia
46,150
43,140
41,900
37,780
33,860
33,620
30,430
28,950
28,220
27,770
27,430
26,970
26,920
26,650
25,870
25,700
25,590
25,220
24,560
22,090
Singapore
Italy
United Arab Emirates
Kuwait
Spain
Israel
New Zealand
Cyprus
Greece
Bahrain
Korea Rep.
Slovenia
Portugal
Malta
Antigua and Barbuda
Saudi Arabia
Oman
Trinidad and Tobago
Seychelles
Czech Republic
21,890
21,630
21,170
19,870
17,450
16,330
15,650
13,420
13,340
12,630
12,060
12,000
11,870
10,650
9,220
8,880
8,130
7,770
7,450
7,160
St. Kitts and Nevis
Hungary
Palau
Mexico
Estonia
Poland
Croatia
Lebanon
Slovak Republic
Libya
Lithuania
Latvia
Chile
Costa Rica
Mauritius
St. Lucia
Malaysia
Panama
Uruguay
Grenada
GNIPC
6,980
6,430
6,420
6,370
5,480
5,440
5,370
5,240
4,970
4,620
4,590
4,450
4,320
4,120
4,080
4,040
3,940
3,900
3,750
3,730
Technological Foundation of Industrial Societies
Productivity of American Agriculture, 1800–1994
Technological Foundation of Industrial Societies
Cost of Productivity (1) – Energy Use by Income per Person 2006 (Gapminder)
Technological Foundation of Industrial Societies
Cost of Productivity (2) – CO2 Emission by Income per Person 2006 (Gapminder)
Technological Foundation of Industrial Societies
Characteristics of Industrial Technology
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harnessing of new energy sources (coal, oil, nuclear)
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increased productivity + stable population
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→ tremendous increase in productivity of labor (previous
slide)
→ tremendous increase in energy consumption and carbon
emission (previous slides)
→ living standards %
compare with Marx’s prediction of progressive pauperization
(= impoverishment) of proletariat
increased use of machines
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→ from labor-intensive to capital-intensive industries
Economies of Industrial Societies
Changes in the Labor Force
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labor force shifts from
primary to secondary and
tertiary industries
1. primary sector = raw
materials (agriculture,
fishing, forestry, mining)
2. secondary sector =
manufactured goods (e.g.
automobiles, CD players)
3. tertiary sector = services
(e.g. education, health
care, government)
É
lifestyle of the vast majority
of people is transformed
Economies of Industrial Societies
Changes in the Labor Force – Updated to 2003
Economies of Industrial Societies
Increase in Occupational Specialization – Workers Processing Poultry
Economies of Industrial Societies
Increase in Occupational Specialization – Job Titles in Meat-Packing Industry
Economies of Industrial Societies
Increase in Occupational Specialization
There is increased specialization in all fields:
É in blue collar occupations (previous slides)
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BUT: more recently there may be a reversal in the trend of
inreasing blue collar specialization
in professions (e.g. What is an endodontist?)
Economies of Industrial Societies
Trend Toward Larger Firms & Monopoly/Oligopoly
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two trends regarding the size of economic organizations
(firms)
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increase in average size
tendency toward monopolies ( = one firm dominates industrial
sector) & oligopolies ( = a few firms dominate industrial
sector)
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is monopolistic/oligopolistic trend the result of capitalist
greed?
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in fact, the trend is more fundamentally rooted in basic
economic mechanisms affecting the cost of production (next
slide)
Economies of Industrial Societies
Trend Toward Larger Firms & Monopoly/Oligopoly
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for a firm the cost of producing one unit is
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C = VC + FC/N
where
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C = cost per unit (e.g., the cost a making a woman’s dress)
VC = variable cost per unit (e.g., labor, fabric, buttons, etc., to
make one dress )
FC = total fixed cost (e.g., buying sewing machines, rent of
workspace for 6 months, R&D=developing new design,
advertising)
N = number of units (dresses) produced
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larger N implies lower C (= economies of scale)
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i.e., the more units a firm produces, the lower the cost per unit
Economies of Industrial Societies
Trend Toward Larger Firms & Monopoly/Oligopoly
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the cost of production per unit is (from previous slide)
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e.g., for a woman’s dress
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VC = $10 per unit
FC = $5,000 total
then if N=100
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C = VC + FC/N
C = $10 + $5,000/100 = $60
but if N=1,000
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C = $10 + $5,000/1,000 = $15
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thus the firm producing more dresses produces each dress at
lower cost
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this generates positive feedback: the larger firm will be able
to undersell competitors and acquire an even larger share of
the market
Economies of Industrial Societies
Trend Toward Larger Firms & Monopoly/Oligopoly
Economies of Industrial Societies
Trend Toward Larger Firms & Monopoly/Oligopoly
As a result the trend toward concentration is stronger in more
capital-intensive industries, because
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machines, assembly lines, R&D, advertising campaigns, etc.,
require capital
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capital represents fixed cost
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the larger the fixed cost relative to variable cost, the greater
the economies of scale
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thus, capital-intensive industries have greater economies of
scale
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thus, the more capital-intensive the industry, the stronger the
trend toward industry concentration & the emergence of a
monopoly or oligopoly
Economies of Industrial Societies
Trend Toward Larger Firms & Monopoly/Oligopoly
In next slide
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Why are washing machines, motor vehicles, and malt
beverages highly concentrated? (Hint: What are their fixed
costs?)
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Why are newspapers, fluid milk, fur goods, women’s dresses
less concentrated? (Hint: What other factors may affect
tendency to industrial concentration in a sector?)
Economies of Industrial Societies
Industrial Concentration – % Production of 4 Largest Companies
Economies of Industrial Societies
Evolution From Pure Market to Mixed Market Economy
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trend from pure market to mixed market-command economy
(with increased government control & regulation)
because of 3 flaws of pure market economy
1. fails to protect weaker members of society
2. has built-in tendency to self-destruct (trend toward industrial
concentration)
3. cannot provide for many collective needs of society
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consequences/reaction against flaws
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legislation against industrial concentration (e.g. Sherman
Antitrust Act of 1890)
formation of labor unions (along trade or industry lines)
growth in the role and size of government
Economies of Industrial Societies
Reaction to Pure Market – Formation of Labor Unions
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Table: Union Density – Union Members
as % of Eligible Workers 1970–2003
Sweden
Finland
Denmark
Belgium
Norway
Austria
Ireland
Italy
United Kingdom
Canada
Australia
Germany
Netherlands
New Zealand
Japan
Switzerland
Spain
United States
South Korea
France
Circa
1970
Circa
2003
Change
1970–2003
67.7
51.3
60.3
42.1
56.8
62.8
53.2
37.0
44.8
31.6
50.2
32.0
36.5
55.2
35.1
28.9
12.9
23.5
12.6
21.7
78.0
74.1
70.4
55.4
53.3
35.4
29.3
33.7
29.3
28.4
22.9
22.6
22.3
22.1
19.7
17.8
16.3
12.4
11.2
8.3
10.3
22.8
10.1
13.3
−3.5
−27.4
−23.9
−3.3
−15.5
−3.2
−27.3
−9.4
−14.2
−33.1
−15.4
−11.1
3.4
−11.1
−1.4
−13.4
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labor unions grew as a
reaction to the inability
of a pure market to
protect workers
union membership has
declined in many
societies in recent
decades
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although it has
increased in some,
notably Finland,
Belgium, Sweden and
Denmark
Economies of Industrial Societies
Causes of the Decline in Union Membership
Causes of the decline in union membership in many industrial
societies at the end of the 20th century include (Visser 2006):
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sharper international economic competition (“globalization”)
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decline in manufacturing (“deindustrialization”) and
corresponding rise in tertiary sector (service) employment
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slower growth of government employment
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ligher rates of longterm unemployment (mostly in Europe)
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increasing use of flexible employment contracts and
“outsourcing”
Economies of Industrial Societies
Reaction to Pure Market – Growth of Big Government
Economies of Industrial Societies
Trends in Modern Corporations
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emergence of modern corporation due to advantages
compared to traditional family-owned entreprise or
partnership
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pools capital & spreads risk
“immortal” legal entity
benefits from principle of limited-liability
shift in control of corporations
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from owners-stockholders (typically fragmented, untrained)
to managers + government (through increased scope of
regulation & control)
Globalization – Increasing Integration of World Economy
Globalization = International Trade + Investment + Migration
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recent globalization trend =
increasing volume of trade,
investment & migration
between societies of the
world
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dependence on foreign trade
(imports+exports as %
GDP) differs across
industrial societies (table)
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what kind of industrial
societies is most/least
dependent on foreign trade?
Technology & Economy of Industrial Societies
Review Questions
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Q – Since 1800, advances in agricultural technology have
reduced the man-hours required to produce a bushel of wheat
or corn by approximately what percentage? (10%, 30%,. . . ,
more than that?)
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Q – Over the past century, the average standard of living in
industrial societies has exhibited which trend: it has
deteriorated substantially, remained about the same, gone up
substantially?
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Q – Compared with other industrial countries, is the U.S.
more or less dependent on foreign trade? Why?
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Q – What type of countries seems to be most dependent on
foreign trade? What type least dependent? Why?
Technology & Economy of Industrial Societies
Review Questions
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Q – What are “primary industries”?
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Q – In the course of industrialization the greatest growth of
jobs in the long run occurred in what industrial sector?
(Primary, secondary, tertiary)
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Q – Today in the U.S. the labor force employed in agriculture
is about 20 to 30% of the total (TRUE/FALSE)?
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Q – Today in the U.S. union membership is much higher than
it was in 1945 (TRUE/FALSE)?
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Q – What’s an oligopoly?
Technology & Economy of Industrial Societies
Review Questions
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Q – What is the importance of the concept of “fixed costs”?
(Hint: what phenomenon does the concept explain?)
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Q – What industries are most likely to evolve into oligopolies
or monopolies?
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Q – Large corporations today are increasingly controlled by
their stockholders (TRUE/FALSE)?
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Q – Among industrial societies, countries with large
populations tend to be more dependent on imports than
countries with small populations (TRUE/FALSE)?
References
Visser, Jelle. 2006. “Union Membership Statistics in
24 Countries.” Monthly Labor Review January:
38–49.