The Triumph of Capitalism: From Ancient Rome to Modern Times

1. Professional and Business Ethics Prof. Peter Hadreas Spring, 2014 Course Website: http://www.sjsu.edu/people/peter.hadreas/courses/ProfandBusEthics/ 1

2. ANSWER KEY FOR MIDTERM 2

3. LETTER GRADE EQUIVAlENCE FOR MIDTERM SCORES 3

4. What is Capitalism? An economic system in which capital goods and owned, for the most part, (>50%) by private parties.1 Privates parties may be individual people, companies or corporations. 1. Samuelson, Paul E. and Nordhaus, William D., Economics, 13th edition, (New York: McGraw Hill, 1989), p. 967. 4

5. What are capital goods? Definition: Goods and services, which are not land or labor, and which produce other goods or services. For example: A steel mill. Question: Why is the social network, ‘Facebook,’ a capital good? 5

6. Capitalism was not always the dominant economic system. It emerged in England and Holland in the 1700s. Why? 6

7. Story told of the Roman Emperor, Tiberius (42 BC- 37 AD) 7

8. As the story goes, a man -- historically he’s remained nameless -- invented unbreakable glass. The man brought his invention to the Roman Emperor Tiberius, expecting Tiberius would grant him a great reward. But that’s not what happened. The emperor asked if anyone else knew of the secret of making unbreakable glass. The inventor said he was the only one who knew the secret process. Assured that the secret would die with him, Tiberius ordered the poor man’s head to be chopped off, else, so the ancient writers tell us1 Tiberius thought, the value of gold would be reduced to mud, for unbreakable glass would become the stuff from which the coin of the realm was made. 1. The ancient historians: elder Pliny, Petronius and Dio Cassius. 8

9. The triumph of capitalism Two ways to think about the use of money. 9

10. The triumph of capitalism Use of Money I The age-old, and prehistoric use, of money as a medium of exchange. It’s more efficient than bartering. So let C: Commodity. M: Money. C ➔ M ➔ C ➔ M ➔ C . . . (Until money – as silver, gold, paper certificates, electronic data – or cattle, cigarettes, brandy -- etc. -- wears away). 10

11. The triumph of capitalism Use of Money II M ➔ C ➔ M’ ➔ C ➔ M’ . . . That is someone accumulates money (M) to invest in a commodity (C) to make more money (M’) 11

12. What’s the difference between C ➔ M ➔C and M ➔ C ➔M’? 12

13. It’s the difference between money as a convenience over bartering versus money as the opportunity for investment. 13

14. Why did capitalism begin to take hold and evolve first in England and Holland in the 1700s? • A mercantile class was relatively free of political control. • England and Holland had abundant waterways that made for an easy transportation of goods. • Religious beliefs accommodated and supported investment. 14

15. The History of Capitalism in a Nutshell. 15

16. Capitalism I: Manufacturing (1760-1848) 1. Size of typical firms: small scale, proprietorships, 2-12 workers. 2. Typical Inventions: power loom, steam engine, cotton jenny. 3. Engineering of capital goods: Manufactured by hand, consequently replacement of parts were managed, slowly and irregularly, by craftsmen, i. e., hand working blacksmiths or potters. 4. Shifts in styles of labor: greater efficiency through a division of tasks. 16

17. Adam Smith (1723-1790) 17

18. James Watt’s Steam Engine developed from1763 to 1775, 18

19. James Hargeaves invented the ‘Spinning Jenny’ (1770) 19

20. Capitalism II: ‘Machinofacturing’ (1848-1893) 1. Size of typical firms: moderate scale, multi-building, single product, family corp. 2. Typical Inventions: railroads, telegraph, Bessemer process of making steel. 3. Engineering of capital goods: ‘American system’--machines produced by machines, 4. Shifts in styles of labor: ‘homogenization of tasks,’ assembly lines, factories have as many as 5,000 to 10,000 workers. 20

21. Capitalism II: ‘Machinofacturing’ Assembly line 21

22. Capitalism II: ‘Machinofacturing’ Remington Typewriter (1873), interchangeable parts 22

23. Capitalism II: ‘Machinofacturing’ Springfield Armory Flintlock (1840), interchangeable parts 23

24. Capitalism II: ‘Machinofacturing’ Singer Sewing Machine (1883), interchangeable parts 24

25. Capitalism III: Financial (1893-1941) 1. Size of typical firms: national scale, multi-location, multi-product. 2. Typical Inventions: combustion engine, automobiles, electric powered appliances. 3. Style of management: managerial bureaucracy. 4. Shifts in styles of company organization: ‘vertical’ monopolies, trusts, mergers, oligopolies, defines period as ‘financial.’ 25

26. 26

27. Internal Combustion Engine 27

28. Early Oil Well (Pump Jack) 28

29. Capitalism IV: State Welfare (1941-1989) 1. Size of typical firms: multi-national, multi-industry. 2. Typical Inventions: laboratory based products, for example, plastics, electronics, aerospace. 3. Development of capital goods: state intervention through a) development of many regulatory agencies, and b) economic theories making state intervention part of economic stability. 4. Typical solution of period’s overproduction: mass consumption promoted by mass media. 29

30. John Maynard Keynes (1883-1946) 30

31. Some Main Regulatory Agencies established since 1941 Centers for Disease Control and Prevention (CDC) 1942 Central Intelligence Agency (CIA) 1947 Small Business Administration (SBA) 1953 National Aeronautics and Space Administration, NASA (1958) Equal Employment Opportunity Commission, EEOC (1964) Housing and Urban Development Agency, (HUD) (1965) Administration on Aging, (AOA) 1965 Consumer Protection Agency, CPA (1975) Alcohol and Tobacco, Tax and Trade Bureau (TTB) 2002. Homeland Security Department, DHS, (2003) 31

32. Print media 32

33. Electronic media 33

34. Plastics 34

35. Aeronautics 35

36. Capitalism V: Informational (1991, collapse of Soviet Union, - to present) 1. Size of typical firms: network-based global with hubs of short-range and long-range portal control. 2. Typical Inventions: telecommunication through Local Area Networks (LANs) and Wide Area Networks (WANs) by fiberoptics and wireless communications (Wi-Fi). 3. Development ‘informational capital’ as data-based stores of value, internet commerce and internet social networking. 36

37. Fiber optic cable 37

38. Outdoor Wi-Fi Access Point in Minneapolis 38

39. ‘First’ Geometric Atlas of the Internet (as of September 09, 2010) 39

40. SUMMARY • All Five Epochs of Capitalism: • Manufacturing • Machinofacturing • Financial • State-Welfare • Informational • may be still encapsulated by the basic formula: • M ➔ C ➔ M’ 40

41. Questions • How does the formula for capitalistic development, M ➔ C ➔ M’, apply to • State University Systems such as San José State University? • The growing of marijuana in California • Google • Walmart & Costco 41

42. Questions Facebook was founded by Mark Zuckerberg in 2004. In January 2011 its value was estimated to be around $50 billion. Mark Zuckerberg owns 25% of the company. How does the development of Facebook fit into the M ➔ C ➔ M’ pattern? 42

43. slide #37: first geometric map of the internet: http://www.drdobbs.com/architecture-and-design/first-geometric-atlas-of-the-internet-cr/227400098 43