Business, Government & Society Mid-Term Study Guide
Business, Government & Society Mid-Term Study Guide BGSO 4000
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This 11 page Study Guide was uploaded by Dominique LaSalle on Monday October 17, 2016. The Study Guide belongs to BGSO 4000 at University of Colorado Colorado Springs taught by Kaitlyn DeGhetto in Fall 2016. Since its upload, it has received 35 views. For similar materials see Business, Government & Society in Business at University of Colorado Colorado Springs.
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Date Created: 10/17/16
BGSO 4000 Study Guide Week 1 - 4 models of Business-Government-Society relationships o Market Capitalism The classic explanation of how a market economy works was proposed by Adam Smith Each trader was “led by an invisible hand to promote an end which was no part of his intention,” the collective good of society. Government interference in economic life is slight, or Laissez- Faire Key assumptions: Limited government Own private property and freely risk investments Free competition = benefits for society (market disciplines economic activity) Consumers are informed Banking and laws exist to ease commerce (institutions) Profit (shareholders) Key criticisms: Exploitation of workers and promoted systems of inequality Markets erode virtue Negative effects of “evil” corporations Karl Marx believes that workers are equal to robots and that leads to a classless society Public vs. Private o Dominance Represents the perspective of business critics Business and government dominate the great mass of people Critics of market capitalism The belief that corporations and a powerful elite control a system that enriches a few at the expense of the many Elitist and undemocratic Populism: a recurrent spectacle in which common people who feel oppressed or disadvantaged in some way seek to take power from a ruling elite that thwarts fulfillment of the collective welfare. Marxism: an ideology holding that workers should revolt against property-owning capitalists who exploit them, replacing economic and political domination with more equal and democratic socialist institutions o Countervailing Forces An exchange of powers among government, public, and business, attributing constant dominance to none The power of each element can rise or fall depending on factors such as the subject at issue, the strength of competing interests, the intensity of feeling, and the influence of leaders The model reflects the BGS relationship in the United States and other western industrialized nations Conclusions: Business is deeply integrated into an open society and must respond to many forces, both economic and noneconomic. It is not isolated from any part of society, nor is it always dominant Business is a major force acting on government, the public, and environmental factors. Business often defeats labor, wins political battles, and shapes public opinion. To maintain broad public support, business must adjust to social, political, and economic forces it can influence but not control. o Stakeholder The model shows the corporation at the center of an array of relationships with persons, groups, and entities called stakeholders. Stakeholders are those whom the corporation benefits or burdens by its actions and those who benefit or burden the firm with their actions. Primary vs. Secondary Primary stakeholders are a small number of constituents for which the impact of relationship is mutually immediate, continuous, and powerful. They are usually stockholders (owners), customers, employees, communities, and governments and may, depending on the firm, include others such as suppliers or creditors. Secondary stakeholders include a possibly broad range of constituents in which the relationship is one of less immediacy, benefit, burden, or power to influence. Examples are activists, trade associations, politicians, and schools. Improves performance Ethical, activists and media Balanced Scorecard, TBL – Stakeholder Approach Financial (profit, revenue) Customers (value received from products) Internal Business Processes (asset use, quality) Innovation (culture of innovation/change) Employee Performance (morale, turnover) Week 2 - Internal Environment (Corporation): o Managers o Owners o Employees o Culture o BOD o Resources o Capabilities - Industrial Revolution o An economic metamorphosis in England in the late 1700s. it occurred when certain necessary conditions were present and shifted the country from simple agrarian economy into growing industrial economy o Turned simple economies of farmers and artisans into complex industrial societies greatly increasing their wealth and national power. o The right conditions started first in Great Britain. o Elevated living standards, altered life experiences, shifted values - Inequality o From time immemorial, status distinctions, class structures, and gaps between rich and poor have characterized societies. Inequality is ubiquitous, as are its consequences – envy, demands for fair distribution of wealth, and doctrines to justify why some people have more than others o Gini index: A statistical measure of inequality in which zero is perfect equality (everyone has the same amount of wealth) and 100 is absolute inequality (a single person has all the wealth) o The cause of most of the rise in world income inequality is a growing gap between the peoples of rich and poor nations, not a growing separation of rich and poor within nations - Population growth o What caused increases and decreases? Advancements in water sanitation, hygiene and scientific medicine reduced mortality rates. New forms of technology generated more supplies With lower fertility means fewer children and that frees women to attend school, enter professions, and increase income Replacement fertility rate: the number of children a woman must have on average to ensure that one daughter survives to reproductive age o In theory, this is used to calculate the number that is sufficient to maintain a stable population Developed vs. developing nations Fertility is declining on every continent, but the world average of 2.56 disguises wide variation o Lowest at 1.65 in 44 developed nations o Highest at 2.73 in 148 developed nations Hong Kong has the lowest fertility rate at 1.02 Niger has the highest fertility rate at 7.15 Aging population The global median age rose from 24 years in 1950 to 28 years now and is projected to be 38 by 2050 In developed nations where mortality rates are the lowest, aging will grow more rapidly Global age masks the extremes o In Japan, the median age is 45 and the life expectancy is 82 o In Zambia, the median age is 17 and the life expectancy is 45 Migration Today migrants constitute 3.1 percent of the world population, or roughly 214 million people. o Between 2010 and 2020 the United States will take in ore immigrants than any other nation with 11.6 million people o Mexico and China will lose the most, 3.7 million and 3.3 million, respectively - Technology o New technologies and devices have fueled commerce and reshaped societies The printing press reshaped Europe Usurped the Catholic Church’s dogmatic teachings Martin Luther’s Protestant Reformation Galileo’s astronomical findings and subsequent house arrest The steam engine o New technologies foster the productivity gains that sustain long-term economic progress, and they promote human welfare. However, like the printing press, they also agitate societies An example being trans-Atlantic voyages on sailing ships. Took a month to travel, cost a year’s wage for European workers and 5- 10 percent of passengers died. Steamship technology slashed the price by 90 percent and reduced travel time to one week and mortality rates were less than 1 percent. As a result, European immigrants flocked to the American East, creating labor gluts that led to wage depressions and fueling political movements against big companies, financiers, and gold standard - Globalization o Globalization is the creation of networks of human interaction that span worldwide distances o Occurs when networks of economic, political, social, military, scientific, or environmental interdependence grow to span worldwide distances In the economic realm, globalization occurs when nations open themselves to foreign trade and investment, creating world markets for goods, services, and capital Such a system rose after World War II, when victor nations lowered trade barriers and loosened capital controls o Seize territory vs. wealth (Economics) - Culture o Ideology: a set of reinforcing beliefs and values that constructs a worldview o Culture: a system of shared knowledge, values, norms, customs, and rituals acquired by social learning. No universal culture exists, so the environment of a transnational corporation includes a variety of cultures, each with differing peoples, languages, religions, and values Country, business, organization o The Industrial Revolution in the West was facilitated by a set of interlocking ideologies, including capitalism, but also constitutional democracy, which protected the rights that allowed individualism to flourish; progress, or the idea that humanity was upward motion toward material betterment; Darwinism, or Charles Darwin’s finding that constant improvement characterized the biological world, which reinforced the idea of progress. o Postmaterialist Values – valuesr based on assumptions of security and affluence, for example, tolerance of diversity and concern for the environment - Leadership o Leaders have bought both beneficial and disastrous changes to societies and businesses Alexander the Great imposed his rule over the Mediterranean world, creating new trade routes on which Greek merchants flourished Hitler and Stalin were great leaders, but they both unleashed unspeakable evil that retarded industrial growth in Germany and the Soviet Union, respectively. Two views about the power of leaders One, leaders simply ride the wave of history o John D. Rockefeller grew up from humble beginnings in Cleveland to become a titan of industry and had a heavy influence in changing the world through the oil business o Would the world not have progressed as fated if Rockefeller continued to sell his produce in Cleveland? Two, leaders themselves change history rather than being pushed by its tide o John Jacob Astor and the American Fur Company o James B. Duke of the American Tobacco Company who, through sheer marketing genius, turned cigarette smoking into a nationwide activity previously isolated in the American South that has now become a global health hazard - Chance o Niccolo Machiavelli observed that fortune determines about half of the course of human events and human beings the other half 6 key External Environments Government Nature Culture Law Economy Technology - Economic Trends o Interest rates, inflation, currency fluctuations, financial crisis, etc. - Government o Government activity has greatly expanded Spending & regulation Think about social programs, entrepreneurship, highly regulated industries, protecting stakeholder groups Think about social programs, entrepreneurship, highly regulated industries, protecting stakeholder groups o MNCs – laws in multiple countries - Natural Environment o Economic activity is a geophysical force with power to change the natural environment. Just as it has strained the ability of human institutions to adapt, so also has it sometimes overwhelmed the ability of ecosystems to cleanse and regenerate. o Spectacular economic growth has come at a high cost to the planet. Mineral resources have depleted, reduced forest cover, killed species, released artificial molecules, and unbalanced the nitrogen and carbon cycles - Internal Environment o How firms manage external contingencies o The internal environment consists of 4 groups: Managers Owners/Shareholders Employees Boards of Directors o Human capital (and other intangibles…) o Tangible resources Week 3 Chapter 3 (Business Power) - Power is a relational concept. You gain power over others when they are dependent on you (Emerson, 1962) - Power: the force or strength to act or to compel another entity to act - Business Power: the force behind an act by a company, industry, or sector - Legitimacy: the rightful use of power. Its opposite is tyranny, or the exercise of power beyond right - Individual Bases of Power: o Legitimate o Reward o Coercive o Expert o Referent - Levels and Spheres of Corporate Power o Surface level: business power is the direct cause of visible, immediate changes, both great and small. Corporations expand and contract, hire and fire; they make and sell products. o Deep level: corporate power shapes society over time through the aggregate changes of industrial growth. At this level we encounter an intangible realm of social networks, time, and physical space, a realm crossed by complex chains of cause and effect that converge and interact, shaping and reshaping society. - Exercising Business Power Examples come from the railroad industry o Economic: the ability of the corporation to influence events, activities, and people by virtue of control over resources, particularly property. Revolutionized capital markets and centralized them in New York City o Technological: the ability to influence the direction, rate, characteristics, and consequences of physical innovations as they develop. Facilitated innovation o Political: the ability to influence governments Nationalized political participation; facilitated the dissemination of ideas (Susan B. Anthony) o Legal: the ability to shape the laws of society Pioneered regulations o Cultural: the ability to influence cultural values, habits, and institutions such as the family. Shifted values from local to national; imposed business on Sundays o Environmental: the impact of a company on nature Transformed the landscape. Centralized corporate power in cities o Power over Individuals: exercised over employees, managers, stockholders, consumers, and citizens Brought jobs, changed how people lived - Perspectives of Business Power o Dominance Theory The view that business is the most powerful institution in society, because of its control of wealth. This power is inadequately checked and, and therefore, excessive According to the dominance theory, business abuses the power its size and wealth confer in a number of ways. The rise of huge corporations creates a business elite that exercises inordinate power over public policy. o Countervailing Forces (Pluralist Theory): Pluralist Society: A society with multiple groups and institutions through which power is diffused In this form of society no entity or interest has overriding power, and each may check and balance others. American society supports this thesis of pluralism: Democratic values America encompasses a large population spread over a wide geography and engaged in diverse occupations The Constitution Chapter 4 (Critics of Business) - Two underlying sources of criticism of business: o The belief that people in business place profit before more worthy values E.g. honesty, truth, justice, love, piety, aesthetics, tranquility, respect for nature o The strain placed on societies by economic development - Critics of Business: Historical o Greeks and Romans Agrarian Society: a society with a largely agricultural economy Both civilizations were based on subsistence agriculture. Economic activity by merchants, bankers, and manufacturers was limited Wealth was fixed Plato believed that every person harbored an insatiable appetite that could only be controlled by inner virtues painstakingly acquired through character development. The pursuit of money was such an appetite, and Plato thought that when people engaged in trade they inevitably succumbed to the temptation of excess and became grasping. Plato believed that wealth spawned evils, including inequality, envy, class conflict, and war. “Virtue and wealth are balanced against one another in the scales” Aristotle believe there was a benign form of acquisition that consisted of getting the things needed for subsistence. Aristotle also believed that happiness is the ultimate goal in life. It comes to those who develop character virtues such as courage, temperance, justice, and wisdom o Religious During the Middle Ages, the prevailing theology of the Roman Catholic Church was intolerant of profit seeking. During the rise of Christianity, its early practitioners were persecuted by the wealthy and corrupt ruling class of Rome. Later on the theology changes and the church believed that the love of material things pulled the soul away from God. The Protestant ethic arose in the sixteenth century and its belief was that work was a means of serving God and that if a person earned great wealth through hard work it was a sign of God’s approval In the colonial era, wealth was accumulated through the trading of goods o U.S. Historical Perspectives “God gives all things to industry” – Benjamin Franklin After gaining independence in 1783, the U.S. economy consisted largely on agriculture, approximately 90%. Alexander Hamilton believe that industrial growth would increase national power. However, Thomas Jefferson thought that rather than focus on industry America should aspire to spread farming over its immense, unsettled territory - Critics of Business o Populist Movement (Late 1800s) A political reform movement that arose among farmers during the 1870s. populists blamed social problems on industry and sought radical reforms such as government ownership of railroads. This led to a national political party called the Populist Party. To solve agrarian ills, the populists advocated government ownership of railroads, telegraph and telephone companies, and banks, a policy dagger that reveled their fundamental rejection of capitalism. The movement was a diverse, unstable coalition of interests, including farmers, labor, prohibitionists, anti- monopolists, silverites, and suffragists. o Progressive movement (1900-1918) A turn-of-the-twentieth-century political movement that associated moderate social reform with progress. Progressivism was less radical than populism and had wider appeal. Fueled by wide moral indignation about social problems caused by industry, it had strong support from the urban middle class and professionals. A prominent figure for the Progressive Party was Theodore Roosevelt who ran and lost the presidential race of 1912. Progressives broke up trusts and monopolies, outlawed corporate campaign contributions, restricted child labor, passed a corporate rate income tax, and regulated food and drug companies and public utilities. o Socialism The doctrine of a classless society in which property is collectively owned and income from labor is equally divided among members. It rejects the values of capitalism. When wealth is shared, want and conflict are eliminated. - Issues o Child labor was widespread in America o Factories injured and wore down workers o Wealth and power were concentrated in great banks, trusts, and railway systems o Inequality between rich and poor seemed obscene o Urban slums o Low wages, long hours - Unions o Protect the interest of workers o Wages, hours, working conditions, child labor, benefits, etc. o Local craft unions > National o Nation Labor Union - Recent Waves of Approval/Disapproval o 1920’s – the idea that American capitalism would bring perpetual prosperity was widely accepted o 1929 – the prosperity of the 1920’s came to a screeching halt with the stock market crash and the subsequent depression that came after o World War II – patriotism and support for business rebounded o Mid-1960’s – civil rights, consumer rights, environment, corruption, war profiteering o Great Recession o New Progressives Leftist movement Members of contemporary left-leaning groups who advocate more radical corporate reform than did old time Progressives. New Progressives seek to avoid being branded liberals and try to take advantage of favorable connotations in the word progressive Three basic beliefs Corporations have too much power Corporations have inordinate legal rights Corporations are inherently immoral Bernie Sanders can be thrown into this party o Neoliberalism A word denoting both the ideology of using markets to organize society and a set of specific policies to free markets from state intrusion Beliefs: Government regulation infringes on individual freedom Need markets to counterbalance government Maximize market’s role - Summary: o Populism Time: 1870s Perspective: broad coalition of workers lobby for government takeovers of railroads and other companies; argue that society’s ills stem from businesses’ greed o Progressivism Time: early 1900s Perspective: a less radical perspective on populism, with broader appeal. Broke up trusts, introduced regulatory agencies, and curbed child labor o Socialism Time: 1700s Perspective: an anti-capitalist doctrine that promotes a classless society, where all labor and property are shared o Keynesianism Time: 1930s Perspective: an economic movement arguing that government interventions can stabilize economies as a complement to free market systems o New Progressivism Time: 1980s Perspective: more radical than old progressivism, with a focus on curbing corporate power through direct action. Argues that businesses are too powerful, have too many legal rights, and are inherently immoral o Liberalism Time: 1500s Perspective: a focus on freedom and individual rights, originating in France o Laissez-Faire Capitalism Time: mid-1700s Perspective: an economic philosophy that argues for limited government intervention in business. Exemplified by Adam Smith’s Wealth of Nations o Neoliberalism Time: 1940s Perspective: the rise of old liberalist ideals, with a focus on free market economies o Chicago School Time: 1940 Perspective: synonyms with neoliberalism. Names after Milton Friedman and like-minded faculty at the University of Chicago
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