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0:31
today we're going to talk about power that's our topic for for this week and in a way we can get into it by reminding the last time we met we were talking about race and ethnicity and in a way and and caste although I don't think I use that word hardly very much at all but the point is is that those are ways that people have concepts ideas that people have utilized to explain why it is that there are problems in the world and why there are particular kinds of problems and particular kinds of
1:13
inequality and then the question is what do you do about that and we talked a little bit about various ways of intervening that have been suggested and it one of them we didn't talk about very much and that is the idea of we really shouldn't do anything because the market after all is here and the marketplace the economic system especially one like the ours here in the United States will solve those problems just as really it contains the capacity to solve any kind of problem that it
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really is the best kind of system that we can possibly have and that any country could possibly have and that if you just leave it be you'll have the best consequence and later on we'll be talking in the course about the the environment and ecological difficulties that we appear to be in and the the same strong answer would would be we really should do nothing that if we just leave it to the marketplace because we already have that and once you have a free market then you're all set and you
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really don't need to intervene now I've just put it in very strong terms but that I that orientation of the world is widely held especially here in the United States where the idea of the marketplace as the zoo solution to problems looms larger than I think certainly in any of the other modern industrial countries maybe indeed more than any country on earth so it's worth taking up seriously and that's what we're going to do we're going to take it up seriously now this idea of
3:06
leave it to the markets it also goes by the that by the term I'll let a fair and for those of you who who know French know it well because it just means let it be let it work itself out and if you just leave the market alone you'll be okay and our great formulator sometimes considered to be the founder of economics and all the way through to contemporary economics is another very famous dead person the man is Adam Smith and Adam Smith was our elegant formulator of really the
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miracle of the market and how the market operates and everybody here who's had even a glance at introductory economics understands the concept the concept is is that if we are competing with each other to produce goods and services we will tend to specialize in those things that each of us can do best and so if I can bake the best cookies and you can produce the best shoes then I will use my cookie talents to produce great cookies you will use your your shoe's
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talents to manufacture the best shoes I then will exchange my terrific cookies for your terrific shoes I will now have terrific shoes and you will have terrific cookies and in that way we'll have a wonderful world of the best cookies and the best shoes and we will all be better off in the end a phrase that used is the greatest good for the greatest number there are other ways that theorists have thought to achieve that but the market is the best way to do that according to people like Adam
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Smith we will optimize we will have an optimal solution it maybe there'll be problems here and there along the path but those two will work themselves out because the whole system because of its being a dynamic system will force out those who are inefficient compared to those who are efficient will a force or cause those who are less good at doing something to do something that they are better at and in the end you see everyone will be doing what they do best and as a collective in terms of our
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collective well-being or a term that economists actually use our collective welfare there will be the greatest good for the greatest number and we will all rise all our ships will rise on the rising sea so that is the idea that then relies on the notion that there is such a thing as a market that is autonomous something that can be left alone something that exists on its own and that idea is where sociology enters the fray because that's the concept the idea that sociologists don't accept so in
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other words before you get to the empirical problem of whether or not this really the system leads to the greatest good for the greatest number whether it really has this idealized outcome of creating the best stuff and each person gets involved with doing that which they can do best their talents go to what the zone in which you can be best fulfilled before we even get to that and then the worries of inequality and whatnot that that we all know to exist before we even get to that we
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can stop at a very at a more fundamental point and ask the question is there such a thing as a marketplace in the way that Adam Smith at least in the version of Adam Smith and I'm giving you and I put that footnote on because Adam Smith was far wiser than he is ordinarily interpreted as being and far more sociological than he is interpreted as being but I'm just using now the popularized notion of Adam Smith because he can then get us get that position out there
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okay returning to my conversation here the question is is there such a thing as a market in itself apart from the society the nature of the changing nature the contextual nature of human beings as they participate in and are affected by that market now I think I've started to tip my hand for the sociologists the answer is no there is no such thing as a free market in that sense and so before we can even get to the point of thinking about how we might want to regulate that market we have to
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in fact understand and realize that markets are inherently social are inherently political are inherently structured and that's why there's an opening not only just an opening but a demand for something that we call economic sociology the sociology of the economy we've in a way the whole course is a move from the sociology of the self to the sociology of government to the sociology of the environment later on and now we're talking about the sociology of the economy you name it
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we've got a sociology of it and how do we then start thinking about what economics sociology might be well one place to begin is the historical picture of how it is that what we think of as markets as we now encounter them came to be how they were in fact created where did capitalism come from well there are different versions of that and the most critical and the most sociological in a way the the most oppositional is from our friend Karl Marx his name I think I
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no longer need to put on the board and Marx in effect regards the rise of this thing we call the market economy as to put it in a simplistic lingo a capitalist plot that is there came to be a way in which human beings were able to band together and oppress other human beings through the mechanism of control over the means of production now that is no simple story right there as you I'm sure know and could well imagine one of the things that Marx did was to do a
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history of capitalism embedded in his theoretical orientation is a concrete exposition of how capitalism emerged and in its birthplace England how did that come to be Great Britain more generally because Scotland is a pretty important part of the story and when when the curtain rises in the feudal era on the pre capitalist order otherwise known as feudalism England is up set up in a way in which there is what today looking back we would probably the word cast
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comes to mind as a way of understanding how things were organized and cast means that people are born into a certain segment of the society they are presumed to always remain in that segment of society there are specific roles rights privileges and oppressions that go with that specific spot that you're born into the feudal order is a Greek ultra Li based of course it's based in the land and the way in which it works is that each person is attached to a specific Gentry a particular no
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piece of nobility a particularly powerful Lord who for whom that person has a subsidiary dependent relationship with the fruits of their own labor in part go to support the Lord up but also in return they have permanence that is that is the land on which their people lived it is the land in which they live and it is the space in which their descendants will live and they are engaged in a livelihood accordingly and so life goes on from one generation to the next under this kind of system their
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physical protection is also provided by their betters by those who are above above this peasantry of people who we might call today the the elite of of the times and of the region now an interesting thing starts to happen which is as industrialization begins in in the what was to become the textile industry very heavily you needed to have a lot of sheep yes just plain old sheep and sheep became the core element the raw material of the textile industry and hence of
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industrial production this is pre cotton it's all about wool and for wool you need sheep and for sheep you need pasture and pasture needs to be large and scale in terms of the amount of land that you use but not very large in terms of the number of people that it takes to do it and you all know the story of Little Bo Peep not much of a large-scale labor force but one little bo-peep can handle a flock of sheep and she just needs a lot of land the problem is is that the land
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at the moment this curtain rises on the industrial era the land is divided the land is divided among all sorts of people who have particular rights to the land the peasants and the problem becomes what are you going to do with them and the answer is is that you force them off the land and the enclosure laws and that's a phrase that maybe some of you have run into but the great historical transformation was worked through the enclosure laws of parliament and the enclosure laws accomplished this
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elimination of the peasantry from the land and the conversion of the land to herds to our flocks whatever they come in of sheep and this then forced enormous numbers of people out of the land and urbanize them into the factories that are also being established at the same time so we have a kind of complementarity of what's going on people are being forced off the land and but their labor is in demand it's in the textile factories to just keep it to that one sector for now their
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labor is needed in the textile factories and so a peasantry is converted into and this is of course Marx's famous words or words the peasantry is converted into the proletariat the industrial working class and that's accomplished through this a forced transformation of the countryside another way of putting it is that land is commodified and the history of capitalism is the history of commodifying more and more of what life can be this was resisted of course and
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there were battles of all sorts it was not a completely man violent transformation there was resistance as people did not want to be forced off what they regarded as the inherent right they had to this land which now became private property to be manipulated in markets like any other the only the best example I can think of is it would be if today it was a would be announced that NYU was selling air that is the air that you're breathing is something no longer
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that is just something you can breathe for nothing after all the the government of New York is or maybe it will all be privatized to clean the air great machines to prevent a pollution that will be fatal whether that happens or not somehow or other it's decided that you will have that we all will have to pay for air and if we have to pay for air were being deprived of something that we just presumed was our right of being a human being on earth well that kind of shift
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that kind of transformation from land being something that you are a part of and that is part of you took place and of course it didn't just take place in the hinterlands the countryside of England it took place all over the world where market economies grew and where the peoples who were already on that land were considered completely unnecessary and indeed of course enslaved or subject to some kind of of mass death and die off each way any way you look at it in
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all of these different kinds of places a whole new social order a whole new way of thinking is imposed on populations that seems just inherently bizarre to those who now encounter it for the first time and have no stakes in it actually working out that for example the land becomes a commodity and we know that who benefits and who loses in this system is very skewed not only in England but in all the other parts of the world where the great nations of Europe have been
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coming through that some people are indeed cast aside and others who are not now all of this is handled through force and a lot of those knights in shining armor are about all of this stuff Robin Hood can be thought of as one of the people who was dislodged and that's why he is a vagrant remember that term vagrancy vast numbers of people are turned into vagrants and it is against the law to be a vagrant you're up to no good and so you'd better get a job in the textile factory and that will be a
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way you can eat and that will be also a way you can escape the law so the laws of vagrancy are very much here in operation and all of this order that I've been described is work is done through Parliament and so government the the system of gentry and the system of the royalty itself is being managed this way and by the way we misunderstand when we think that things like the Magna Carta and the first moves toward democracy in Britain and arguably the first moves
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toward democracy in the world was to give power to the people that's really not true because it was it was the royal family it was the king and queen who it the crown that was actually operating in a way most sympathetic to the peasants it was the lords of the manor who wanted to convert these spaces they could rolled into capitalist enterprises to take advantage of the emerging industrial opportunities and so the the crown lost as these rights were bestowed but its rights that the people in the
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high positions had visa vie the crown not rights the peasants had visa Viva Gentry that was that was won over anyway what I'm trying to get across is that government in this case the British government in its various forms is where all of this is being worked and these markets what we came to be markets are established up in this way through the through the the government now you're reading on your reading list you're reading a piece from Steve Weatherford's book and this chapter called pirate
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piracy slavery and the birth of the corporation because that allows us to see where the modern corporation came from as opposed to the end of feudalism where that came from and according to Weatherford it comes from a rather unsavory history an unsavory past first of all he takes us through piracy and some of the most honored names in our anglo-american heritage uh were were people whose fortunes were based on piracy and the one that's featured is Sir Francis Drake
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in your readings and Sir Francis Drake was a pirate and but not all on his own as indeed the Pirates were not all on their own in this case it is the the British who are sponsoring the piracy against the Spaniards so the Spaniards are busy in South America and in other parts of the world organizing the native peoples to produce gold and silver and creating magnificent wealth and then a piece of that wealth is wrecked off by the British under the sponsorship of the crown and a
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piece of that wealth then is returned home to the to the British aristocracy he also takes us through the creation of what some people say is the first modern corporation and that is the Hudson Bay Company the British crown the way corporations evolved is they evolved as creatures of the British crown that is the the government would give a charter to specific people to do specific things and syndicates would be put together in which people pulled their wealth which
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is one of the secrets or ways of thinking about what a corporation is in order to engage in some profit-making venture and the Hudson Bay Company still by the way there's a Hudson Bay department store in many Canadian cities which comes from this original Hudson Bay Company the Hudson Bay Company organized the exploitation of the Native Americans and the animals and engaged in the search for gold and silver which didn't work out in North America and in particular in a particular Canada what
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became Canada they struck it gold in the form not of gold but of trading in furs in a marketplace that was established by the British crown remember that initially which gave a which gave the Charter to these investors and to exploit the hinterlands of this British colony which is what Canada which is what Canada is in of course under constant dispute with which to the south with what became the United States and to French Canada in the in the centre of the country
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anyway we all know what happened and we know who won but the point is and the Astor's by the way if you if you look in the at Astor Place if you look at the tiles on the wall you will see that the symbol they use it Astor Place is a beaver and that's because the Astor's became I think the richest people in America based on their engagement with fur trading with trading for beaver pelts now that involved whether it was the Astor's who were located here in New York or whether it was Sir Frank the
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Hudson Bay Hudson Bay Company in the north they are operating to organize the local populations the Indians and they're operating as a base for immigrants from Europe who are engaging in the trade as well and out of that comes these vast riches now again the point is is that government isn't something outside this market government is intrinsic to its creation and to its continuation and of course the other thing that's going on which we've talked about when we talked about race is of
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course slavery slavery slavery and this is a it's not just an institution of the u.s. south but as an institution all over all over Europe that is that is the the trade routes the trading the establishing of the financing all sorts of pieces of it are carried out on the basis of the Dutch are active the Danes who we think of as lovely people today who only give health met good medical care to their people the Danes are engaged in setting up ports of slavery in Africa in present-day
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Ghana and that as well as of course is the British the Germans are involved the Dutch are involved it is a global trade and slavery from Africa to the Caribbean to South America far more slaves by the way were sent to Brazil than to what it than to what is now the United the American South and to the United States it's a global enterprise the largest scale maybe of all so this economy then the economy of the 17th 18th and 19th century much of the 19th century which
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is based in slavery is a government organized government sanctioned government regulated center a set of systems government protected set of systems that's not some small footnote to economic history on to the history of capitalism but is a built-in and critical and critical part of it one of my former students did a wonderful PhD dissertation on what she said was the creation of the first corporations in the world and she didn't think that the modern corporation had really been
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created at Hudson Bay or lovin boy by the way the German beer company that's another candidate that sometimes people say was the first modern corporation she says the first modern corporation and why not let her live on along with the dead Germans that we've talked about as the semester has gone on her name is Maureen young and what a marine was remarkable because she had been trained as a an accountant as well as an archivist and so was of just wonderful at attacking the history of the
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corporation and in particular the history of the corporation as it played out in the American West and she says that the first modern corporation were the gold and silver mining companies of the American West now this is a particularly lovely anecdotes more than an anecdote argument because our our orientation to what these people were is very different than what she says was going on we have a romantic orientation we have the old guy who's panning for gold and strikes it
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rich and what a bonanza and isn't that part of the Romantic Old West just like Robin Hood is a part of the collapse of the feudal order just as a Coonskin cap cap guys had no relationship to New York and the Astor's but were out there just having themselves a good time shooting animals and skin in them and that's and that was also part of our mythology of what our history looked like so what she says is going on in the American West in the gold and silver mines of California what
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became California and Nevada was an organization of of mineral exploitation by modern corporations which are being set up for the first time to do exactly that job so what is a modern corporation to her for her a modern corporation is a mechanism not only where people can pool their resources which is what the first ones were like the Hudson Bay community of Hudson Bay Company but but also a way in which they don't know each other so they can participate in investing their
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money and not know who else is investing their money in the same way and that's what we all do if you go to buy stock on the New York Stock Exchange you can now just do it in 30 seconds on the computer and at when you do that you have no idea who else is buying stock and say General Motors if that's what you've chosen to do and in fact you don't really care who else uh well you usually don't care sometimes there are good reasons to care but usually people do it
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naive - who else is taking part and it turns out there's a whole lot else that you don't know about as you buy stock in General Motors oh yes you can have the ratings you can have the evaluations that various advisors have given but there's a whole lot that none of us know about a corporation so according to Mauro in young the modern corporation is a way for people to invest their money who know nothing about other people who are doing it and have very limited knowledge really about
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anything that's going on you don't know these people you don't know if you can trust them who are running this thing you're just kind of having some kind of quasi faith in what the enterprise is all about well according to Maureen young that was a big mistake because she says that when you when you calculate the V are the all the gold and silver mining that was done in California and Nevada in the end of the 19th century and the very beginning of the 20th which is the the great
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bonanza of the production of gold and silver that it was done at actually a net loss that all of that happened and yet the corporations that engaged in it operated at a net loss when you aggregate it all up how could that possibly be well here's how it could be if you're going to mine for gold and silver you also need other things to happen so for example ago you need a lot of water as gold and silver mining evolved it became hydrological mining and that means that you spray vast amount of
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water on hillsides in order that you have the slurry go away and then you can look for the gold and silver you need to engage in separating the quartz from the gold itself because gold doesn't it just doesn't come to your attention as gold nuggets again that's only in the movies panning means you're trying to separate the gold from the other things that it is part of and large enterprises were set up to mill and that was the word mill like a like a lumber mill to
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mill the ore and get the gold and silver out of this great amount of Earth that is being processed in order to isolate it and turn it into something valuable you also needed a source of financing to invest to get these large-scale enterprises going you also needed lumber and large amounts of it in order to build the mines construct the mines and provide some element of enclosure for miners that to then go down and engage in that type of mining you need a transportation early railroads to get
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the stuff out and get this stuff in banks I took mention banks you need a lot of these auxilary organizations well it turns out that the people who were running the mining companies who had enough ownership to control them were able to sell the stock of the mining companies to the public at large but they also then set up other companies to do the milling to provide the water to provide the rail transportation to do the banking to do all the auxilary elements so they own the auxilary
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elements privately but the the company that is the mining company is held publicly that means if they but they own enough of it to control it you know you can control it can control you can control a large corporation with only a minority share of its stock because everybody else owns just ass much smaller piece and they in fact in effect can't get together if you own just a slug you can you can control the corporation so do you see what's going on you can use your control of the
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corporation to have pay exorbitant fees to have the milling done exorbitant fees to pay for the water exorbitant fees to pay for the other things that go into the mining apparatus so the corporation is being built it's being robbed as it carries on its activities as some people are amassing great wealth but those who invest in the corporation are the losers in the end now of course implied version because these stocks in the mining corporations are going up and down and if you sell at
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the right point then you'll you'll get out okay but we can see from history that these inside people were manipulating that stock value they were buying newspapers to put out funky stories they were about about discoveries in order to jack the prices up at which point they would then sell and make churn it and make more money at that point they were buying united states senators one of the reasons for the creation of Nevada as a state was to get another two senators for these
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interests that were actually based in San Francisco and now they gained still more power in the American Congress for the purpose of manipulating the structure of corporations and the law around corporations so the the common phrase we will return we would use today is that the mining companies were being milked by these auxilary companies it was you're milking the corporation these people by the way who milked the corporation became the leaders of San Francisco society they became the
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richest people in what today we call the Bay Area they established charities numbers of them moved to New York because New York is after all then as now the place to be if you're a member of the elite and they're a Mills College is one of the places those of you from the Bay Area may recognize the name Mills College Mills himself was one of the people engaged in these auxilary activities and making their money that way and so on and so forth across the board and and so it goes for other kinds
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of companies in other parts of the world of the Guggenheim's for example as well the point is is that you know there's a there's a slogan that a truly radical slogan that property is theft and we that's Kropotkin do you want to know his name well here it is and we regard commonly Kropotkin as the kind of historical crazy man who is always ready to throw a bomb to destroy the destroy society Kropotkin said and that's the phrase property is theft and that just seems
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ridiculous doesn't it well uh my student Maureen young who I used to always call the last communist aa Marine young didn't think so she thought literally it's true that if you trace it back starting from now with anybody's wealth and where that came from and where that came from and where that came from you inevitably get to these acts of fevery and the way in which they were structured so I want to get back to that idea of the way in which they were structured and that word
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structured is the the cool word of the day as always as we go into macro sociology there is a structure a ssin process which I have in effect giving you just a kind of almost burlesque view of of how one piece leads to the next piece how motivated people are creating institutions and organizations which are then sustaining them in their fortune building as they convert those fortunes into other kinds of sectors other kinds of activities and indeed become our our
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leading figures and our most respect our most respected families one more venture into the cynical read of history and that is the founding of our own country and our founding fathers and what they were up to and after all might it be said that in this case surely all of these people including Kropotkin can't can't be right and again we have revisionist histories as we sometimes call them that say no wait a minute it's a similar kind of story so one of our most respected historians
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of the prior generation from prior to right now Richard Hofstadter was a professor at Columbia for many years I won't give you his name I won't spell his name out but when he speaks of the Constitutional Convention that led to the founding of the United States he said the convention quote I'm reading from him the convention was a fraternity of types of absentee ownership and the that what they were worried about was oppression from above meaning something like a royalty or an oligopoly that
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would be created in the British mould of which they were rebelling against but and we're we're all told about that how they needed to free themselves from the arbitrary power of the crown but they were also concerned equally about oppression from below so one of the leading thinkers this is a guy named juror Jeremy Belknap a signatory to the part of the Constitutional Convention quote let it stand as a principle that government originates from the people but the let the people be taught that
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they are not able to govern themselves and James Madison says the citizens who shared a majority a common majority interest quote must be rendered by their number and local situation unable to concert and carry into effect their schemes of oppression he's talking about ordinary people and the chief propertied interests would then be safer from and this is Madison again quote a rage for paper money for an abolition of debts for an equal division of property or for any other improper or wicked
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project close quote John Jay who we've got a college named after right here in New York and here's a quote from John Jay one of our founders the the people who own the country ought to govern it and Alexander Hamilton it very much in the same the same way merchants quote were the natural representatives close quote of their employees and he expected that Congress and I quote again with too few exceptions to have any influence on the spirit of the government will be
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composed of landlords merchants and men of the learned profession close quote now there are I have to say there are other occurrence that are going on and indeed Madison was one of those people John Adams there could be no free government without a democratical branch in the Constitution and that democratical branch is where the House of Representatives comes from it is to balance out the elite branch which is the United States state Senate and of course you know there were property
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requirements only males were eligible to vote needless that you all know of course only white males were eligible of up to vote and a substantial amount of property had to be owned the first ten amendments to the Constitution are put in place as a kind of antidote to the kind of what we would call elitism that is otherwise so pervasive in these founding documents and in the founding ideology but ten amendments to the Constitution are a kind of afterthought that's why there are amendments and
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Thomas Jefferson of course was the blowing in the other direction and had and interest in something other than this emerging properties a property what we would call ruling class I guess today okay so what I've given you is the kind of dark side of the way in which the capitalism emerged the way it emerged in the world the way it emerged in the form of the modern corporation and the really the way it emerged right in with the creation and the emergence of the United
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States itself as a as a democracy as a as a country could it have been any different can it ever be any different I think that the takeaway point the fundamental point is not that capitalism is inherently a an evil trick that anyone who's ever built a corporation or participated in it as a is a conniving opportunist who never created any real value or anything actually useful those are specific arguments that indeed I think person like my PhD student Maureen Ewing would readily
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agree with but you don't have to buy all of that to get to the idea of that I started the class with that there is no such thing as a market in the way most economists would like us to think and instead that this market is inevitably social that the it is inevitably linked into organization it is inevitably linked into government and we can't separate these spheres out now why is that now I want to be concrete without being so necessarily cynical or oppositional to capitalism and the way
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it was created well what what does a first of all what is government I mean government is basically some kind of organization of human beings at a large scale so that they can engage in things that they otherwise wouldn't be able to engage in as separate people and everybody I think thinks that government is necessary in some way for people on the right a government is a dastardly thing that intrudes in this free market for people on the left starting with Marx government is merely
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a tool of the ruling class and hence we shouldn't be at all surprised that that the Pirates were working for the crown that the founders of America were working for those who were the rich that should just automatically be taken for granted but it's somehow someway people getting together and organizing themselves to get things done that otherwise can't be done why is government necessary even in capitalism maybe even especially with capitalism well first of all government guarantees
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contract so in that little little story I told about I give you my chocolate chip cookies and you give me the the and you give me my shoes that is a whole system based on a kind of security it means that if I what it's really based on is a contract I promise that if you give me those shoes I'll give you my chocolate chip cookies and that means I'll be motivated to produce my cookies and you'll be motivated to produce your shoes and furthermore we can do it in
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such a way that we don't ever actually have to physically meet in the same room with a pile of cookies and a pile of shoes it can stead be handled through the market and a series of an effect promises that each of us makes to the other and we have to believe that those promises will be honored one way of believing it is to think that we're dealing with actually upstanding people the other way of believing it will happen is to think that government we'll enforce it and make sure it
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happens and the law is a whole lot about that is guaranteeing contract unless you have a government therefore you can't have contract if you don't have contract you don't have a market and so the law and government is intrinsic to their being any kind of market whatsoever you also need coordination for the setting of standards across a whole range of things the simplest is for example which side of the street you'll you'll drive on do we drive on the right or do we drive on the left it is as we
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know when we go to Britain utterly arbitrary as to which choice is made the key thing is that everyone makes the same choice and the people who get that ball rolling is something like a government and then that happens across the board we need to have standards in order to have trade and commerce we needed to have standards for the railroad tracks to all be the same all over the United States and all over the world all over Britain or within at least each country and there have been
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fights over that because someone is invested in one size of track one gauge and the other person is invested in the other gauge now who's going to win well the government has to set a standard and that standard not only gives benefits to one team and not to the other team the team that lost but it generates vast resources for a whole lot of people because it makes possible a system of railroads that are interconnected with one another and you can use the railroads to understand the development
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of radio the development of shipping of air travel the FAA of all of them require massive intervention of government in order to create standards and what the sometimes those standards are utterly arbitrary as in the case I just gave of the railroads or excuse me maybe the railroads aren't arbitrary but the in the case I gave of the which side of the street but sometimes they are not arbitrary because for example if you if you give preference to the Japanese system of
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videotape which was considered superior the Betamax of Sony to the American system of VHS you will create vast wealth not for Sony but for somebody else because beta was disfavored and was then undone in effect by American regulatory systems it's one of the ways in which American aircraft have come to dominate the world from Boeing because it is Americans who were doing the standards an American power American Authority so it isn't just that the the great powers of Western Europe and of
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North America are no longer in play because we don't have the kind of colonialism and imperialism in which the flag leads the money and sets up the terms on which under which money can be made which is the history of the colonial empires but something like that continues on in various subtle ways and it's necessary that it carry on in that standards are necessary government also provides infrastructure like for example public health and our health is really based in sewers
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that's the unromantic thing from our television shows and speeches that people make and the advertisements that the NYU Medical Center runs in the newspapers it's all about great doctors and great hospitals have given us our wonderful health well that's not true its sewers it's what you do with the that determines whether people will live and die and because we were able as urbanization occurred to separate ourselves from our own waste and sewers are the magic answer here that the great
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gains in life expectancy occurred and it's why in other parts of the world like sub-saharan Africa so many people die it's because they don't have access to sanitation and a water supply that is sanitary so it's sewers that gave us that and it's sewers that are public facilities public infrastructure then by extension police protection fire department protection libraries education itself all of these things are the internet which was developed by the Defense
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Department something called DARPA and our currency getting getting back to this whole issue of what makes an economy possible we all have an economy we all participate in economy because of the fact that we just believe from one minute to the next that this $20 bill that I have is going to be worth approximately the same thing tomorrow that it's worth today and by believing that you know in sociology we have a famous saying if if men because it was written but when there were only men if
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what men perceive as real is real in its consequence if we all believe that our currency has value our currency does have value if we stop believing our currency has value and in other some parts of the world people just stop and if they stop believing than the currency has value it has no value in actual fact which brings us then to the other big deal of what it takes for there to be a market and that is a kind of belief in the legitimacy of the society that
55:48
you're participating in a belief that it is stable a belief that what leaders say is true enhanced that contracts will be honored that the money will be worth something and that people are watching over all of this to make sure that it happens in something like that kind of that kind of way now all of this is maybe academic and of course it's not academic at all because one of the reasons why the people who are graduating this year from NYU are facing a job market that is one
56:26
of the most dismal that we've had in many many years is because of the fact that we've just come off a period in which this ideology that I began with the class that the market is the best solution and that the best thing that government can do is to keep its hands off we've just come through a very strong period of that kind of belief which then itself became institutionalized and it meant that there was a decrease in regulation of the financial world and that began by
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the way prior to President Bush the winds of deregulation had begun at least as far back as President Clinton President Bush of course did everything he can could to intensify all of this you know that in positing these two models what we're going with is the fault line in American politics between the Republicans in a rough sort of way and the Democrats in another sort of way the Democrat the Democratic Party is the more sympathetic to regulation and indeed more sympathetic to the whole
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sociological orientation to the world and the Republican Party is more sympathetic to the idea that and the phrase is the government that governs least governs best that's an old slogan the government that governs least governs best and then one of the ways in which you govern least is that you leave it to the entrepreneurs themselves to run the financial system of the United States now we have a counter example and that is the Federal Deposit Insurance Corporation you do
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know that your deposits in an ordinary Bank I think up to $100,000 right now are protected by the government and that means that if tomorrow all of us decided to take our money out of the banks we would not lose our money because the federal government will just give the banks that money and make it up and there will therefore be solvency in our own lives there might be some other negative consequences in terms of inflation and other certain issues but but none of us will end up with nothing
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and because we know that we don't go to the bank in the first place and take all our money on in a panic and so the kind of panics we had in the United States in the depressions of the late nineteenth century or even during the Depression the Great Depression of the 1930s can't happen in that way because government has regulated the system and regulated it in particular ways there were other regulations that were in place that would have prevented or at least
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inhibited its very controversial to what degree it would have completely prevented the meltdown on Wall Street that began about two years ago but virtually all agree that it had to do with the deregulation in certain ways and that additional new or restored regulations have to be put into place or we will we will be headed down the same kind of slippery slope and things will operate in the same way once again how is it that we got in this trouble that is one version is is that no one saw it
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coming that version is utterly implausible that no one saw the current financial catastrophe coming it is true that lots of people participated and I don't think they intended for the entire economy to collapse on the basis of their manipulations and profiteering but as a result of their individual actions that's the way accumulated especially as they created these institutions and some of you know about the the default swaps and the pooling of mortgages to the
1:00:32
point where no one knew what they were buying and the selling of these invest mints on a large scale the creation I talked about if you looked at today's New York Times I talked about milking the corporation and the way in which the mining companies actually were connected to these other companies that were actually drawing out the profits and paying off their executives at very very in very very massive ways and generating these large returns in today's New York
1:01:11
Times you will read the same thing about the American companies that participated in the recent collapse that is I think the story today is about Citibank anybody see it that created a kind of shadow company in order to hold the liabilities off the books of them of the corporation itself so that the corporation looked like it was profitable when in fact it was not profitable and we later then learned that it wasn't profitable so the possibility then is that the same thing
1:01:49
that the same kind of format that was going on in 19th century gold and silver mining is going on here and economists do worry about these kinds of things in ways I haven't acknowledged in class today and indeed Adam Smith was worried about it as well an economists use the word opportunism to speak of some of these mechanisms through which individuals will spot opportunities for amassing private wealth quite apart from the good or bad it does to the corporation itself and so um critics of
1:02:36
capitalism as when I was a boy we all condemned the corporations and said that as per Marx that they were exploiting the workers later on exploiting the environment and they were up to no good because all they wanted was profit but now we see and indeed Maureen young set saw a good while ago that it was in a way always that case going on that you have these corporations engaged in mining and silver they're losing money and they're losing money because the people who
1:03:15
actually control them are operating privately they're not trying to advance the corporation but they see opportunities for profit that they can make by manipulating the corporation the larger story here is that individuals and their dreams and schemes are always at large and so you can set up a formal apparatus like a corporation but there will always be people who are engaged in that corporation who will be looking for alternative ways of stacking up resources and making gains for
1:03:55
themselves and they will be joining together on the side as side deals like these milling corporations were to the mining corporations and so it is that there are side deals that are going on all over Wall Street in the recent history in which auxilary enterprises are being set up and auxilary moves are being made up to the end and people are making vast amounts of money out of it and so yes eventually the whole thing collapses which maybe they never imagined what happened that they could
1:04:31
think it could go on forever maybe they did maybe they didn't but even as the vast enterprise goes under they have amassed vast amounts of money which they have laundered into other things including great charities and beneficiaries of all sorts of probably nyu has benefited a wild guess but I don't know the details be interesting to find out NYU's linkages with these financial activities and how it is that they've gained or they haven't gained well what I've tried to
1:05:11
do today is to in effect open up the possibility that the economy does not stand alone and in fact really I've insisted that the economy does not stand alone that instead there are all sorts of mechanisms of some of which we think of as completely benign in which the economy has to be regulated in which there are linkages between the economy and the other social mechanisms of society whether they're individual up acts of opportunism and banding together in cabal's to by the way in in the gold
1:05:58
and silver mining era these people the word was used crowd's CRO UCR owd that they were the connivers were specific crowds and ended of course it's a small group of people but they were called the crowd because they forget that like honor among thieves they organized it among themselves that there are ok so returning to my larger story and my larger point what I'm trying to show is the way in which the economy cannot exist apart from the systems of social organization of individuals banding
1:06:38
together for one purpose as opposed to another cannot exist outside of their being government and some system of regulation if it's nothing more than driving on the right or driving on the left it gets much richer and much more complicated than that as complex societies do and then it becomes a matter of how can you build in a kind of institutional apparatus a system of protections a system of regulations that will actually win that will actually gain control of this crazy thing which
1:07:20
has so many propensity to go off course so many propensity for people to band together in a crowd or in a conspiracy create dummy corporations that don't really exist in order to rake off the profits what and how can you do that the first step to being able to do that or to get close to it is to understand that the economy is not separate the the Clinton people when they were running the the campaign for Clinton's re-election one of the strategists is quoted as having said and it's become
1:08:01
quite famous it's the economy stupid in other words Clinton is not going to win or lose on gay rights on abortion or anything it's just the economy stupid and what today's message is is that it's not just the economy because the economy is not just the economy and if you think that that is the case then you are massively inviting abuse and for the whole thing to run into chaos and for everyone to suffer and there won't be the greatest good for the greatest number there's no way that that outcome
1:08:36
could be approached so that's it today we'll continue talking about economics in this way when we meet again
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