10 - Organized Capitalism in the Core

ucla | GEOG 4 | 2023-10-31 21:29

Table of Contents

Background

  • 1890-1960s
  • countries in the world core -> inc focused on organization of economy within the country -> possibly argue against globalization
  • bureaucratic organization of labor, companies, lobbyists, government all communicating for diplomatic resolutions to problems

    What is Organized Capitalism

  • originated with monopoly capitalism and 3rd wave industrial revolution in Europe -> impacted US/Japan as well
    • vertical integration
    • firm economies of scale
    • increased government intervention
  • overcoming profit squeeze (margins) by increasing consumption required firms to pay workers MORE to consume -> Fordism
  • 1870s-1890s time of Long Depression across industrial world (esp. US) -> reversed with investments in electricity and internal combustion engine for transportation
  • we can see the steep drop in consumer commodity prices 1870-1900 and recovery in 1920s in Kondratieff Wave

    • How did it happen

      Govt as Mediators bw Big Firms and Labor

  • increased regulation of business and finance
    • Federal Reserve - to manage currency supply
    • FDA - Upton Sinclair’s “The Jungle” highlighted filth and unregulated health standards in food
    • anti-monopoly legislation - Sherman Antitrust 1890
  • government pension schemes
  • pushed by progressive socialist politicians and workers looking for higher wages
  • some biz recognized increase in wages -> increase in revenue (incl in Fordism)

    New Scientific Organization of Production

  • increase worker productivity with assembly line production (Ford 1907)
  • Based on Taylorism from Frederick Taylor
    • time and motion studies for efficient use of labor within factories
    • task specialization of interchangeable parts
    • producing Ford Model T with efficient labor productivity -> decreased to 84 distinct tasks

      Higher Wages and Higher Consumption

  • increased production needed increased sales
  • inc worker wage -> labor buys more -> firms sell more -> inc profit
  • opposite is to pay less and produce less -> stagnation in profits and minimal revenue
  • introduced cheaper products for mass consumption -> cars, advertising, consumer-credit economy (lending)

    Rise of Welfare State

  • provisions of healthcare benefits by corps or govt
  • state pensions, unemployment benefits
  • retraining workers, mass public education
  • reluctance of welfare expansion -> lobbying for welfare provides movements for powerful changes

    International Management of Trade and Currencies

  • Gold standard in 1870s-1930s set Britain as the standard
  • 1945-1971 Bretton Woods Agreement set US as the standard and allowed US currency to be used for international funding: IMF, World Bank, WTO, etc.

    Where did it happen

  • mostly US but never fully adopted
  • Federalism - states hostile to unions in the south
  • liberal ideology and private vs public goods (esp. healthcare)
  • less govt intervention in capital and labor relative to Europe/Japan

    Basic Business Model

  • integrated firms operating nationally
    • limited outsourcing to other firms
    • limited internationalization of firms
  • vertical integration
  • single-site economies of scale -> everything in one building
  • single-strand supply chains
    • little competition in monopolized markets
  • national markets dominate capitalism
  • high levels of labor unionization - national wage bargaining
  • govts as brokers bw biz and labor

    Post Organized Capitalism Comparison

Logic Behind shift to organized capitalism

  • basically fordism
  • to defuse hostility of social classes
    • populist and socialist movements in 1890s-1900s promoted more incentives, welfare for ppl
    • fear of overturn from capitalism to some anarchist socialist state -> organized capital to preserve liberal capitalism
  • stimulate economic growth
    • recover fallen commodity prices
    • increasing consumers in population by increasing wages
  • flattening business cycle
    • remove relying on seasonal availability and reliance on cyclical resources, supplies, connections, etc.
  • to combine economies of scale in big corps w/ govt regulation - allow for competition
  • encourage consumption as primary source of economic growth
  • consumerist capitalism - econ. growth and corp dev. through consuming goods/products of companies
  • prevent shift of manufacturing and labor from domestic to foreign countries
    • we see that now with the expansion to India, China, Taiwan for manufacturing