Chapter 10: industrial SOCIETIES: technologies and economies

the technological foundation of industrial societies

The best way to appreciate the dramatic difference between an agrarian society and an industrial one is to look at the measurable changes that have occurred as a result of the shift from the older technology to the new, and agricultural productivity is a good place to begin. The basic cause of this remarkable trend has been the harnessing of new energy sources (273).

Not only have energy sources changed, but the quantities used have multiplied enormously. In 1850, all the prime movers in the US had a capacity less than 10 million horsepower; today it is about 35 billion—a 3,500-fold increase in only a little more than a century, and a 350 fold increase in per capita terms. According to recent figures, when all energy sources are totaled, the US consumed, in a single year, the equivalent of 8.5 tons of oil for every person in its population (274).

This remarkable increase in the production and consumption of energy has been closely linked to enormous increases in the production and consumption of a wide variety of other things, such as iron and steel (275).

ECONOMIES OF INDUSTRIAL SOCIETIES

In modern industrial societies the impact of technological innovation is usually registered first in their economies (276).

The Urbanization of Production

Prior to the IR, agriculture was the chief form of economic activity, production was centered in rural areas, and farmers were a substantial majority of the labor force. The IR changes all this as new machines required the development of factories and large concentrations of industrial workers. The effect of these changes has been to shift the locus of production in societies from rural areas to urban (277).

Rise in Productivity in the Standard of Living

The most striking characteristic of the economies of industrial societies is their remarkable productivity. Because most of this increase in productivity has not been consumed by population growth, there has been an enormous increase in the size of the economic surplus in every society. Because per capita income in Britain and the US are more than 9 times what they were in 1830 and 1870, respectively, it has been possible for the incomes of elites and nonelites alike to increase (277).

The magnitude of the gains in the living standards of the masses is evident when we compare the lifestyle of the average member of the most industrial societies today to that of the typical peasant in agrarian societies of the past, or to that of workers during the early phases of the IR. Most members of industrial societies today enjoy a food supply that is larger, more dependable, and of higher quality and greater variety that was available in any agrarian society. Most live in superior housing, with an indoor water supply, plumbing, electricity, central heating, and sometimes even A/C. The majority of their homes and apartments are equipped with furnishing and appliances that are more than adequate for health and comfort, and some of them would have aroused envy in the elites of agrarian societies of the past. Widespread educational opportunities are available, and so is vastly improved health care. Modern transportation and communication systems broaden and enrich their lives and provide them with varied forms of entertainment (278).

The Shift from Labor-Intensive to Capital-Intensive Industries

The basis of the enormous productivity and affluence of modern industrial societies is their fantastic store of technological information. But most of this information would be useless unless it were converted into capital goods. Without the complex machines, factories, transportation facilities, power plants, and other capital goods essential to production in an industrial society, the output of its workers would not be much greater than that of workers in agrarian societies (279).

One of the chief reasons for the tremendous growth in per capita GNP in industrial societies has been the massive movement of workers away from small, capita-poor family farms and into capital-intensive industries during the last 150 years. Today, however, that flow has largely ended, and with it a major boost to economic growth. The small traditional family farm has been largely replaced by huge agribusinesses, state farms, and collective farms that are as capital-intensive as some urban-based industries. Although agricultural operations on this scale are still unusual, small-scale farming with minimal capitalization is becoming a thing of the past in a growing number of industrial societies (280).

Changes in the Labor Force

Shift from primary industries.

Growth of white collar jobs.

Increased employment of women outside of households.

Growth in the size of work organizations.

Increase in occupational specialization.

Formation of labor unions.

Change from a command to market economy.

The Rise of Market Economies

The origins of modern market systems can be traced back to the simple barter systems of prehistoric societies. But a full-fledged market economy was not possible until the use of money became widespread and most of the goods and services people valued had acquired a monetary value. In addition, the basic economic resources of land, labor, and capital had to be freed from traditional constraints on their use and transfer (285).

In short, individual economic advantage, as measured in monetary terms, had to become the decisive determinant of economic action (285).

Moves Toward Mixed Economies

It was not long, before it became evident that the new market economy was not the unmixed blessing its enthusiasts made it out to be. In their pursuit of profits, businessmen often adopted practices that were harmful to others. Protests soon began to be raised by social reformers. None of these reforms would have come about, however, without the efforts of workers themselves. By the latter part of the 18^th century, small groups of workers and already begun banding together to negotiate with their employers on wages, hours, and working conditions. Before that date, however, another major defect in the market system had become evident. There was a tendency for it to lose its competitive character and evolve in the direction of monopolies. This danger was greatest in older, established industries in which there was little technological innovation and in which fixed costs were a significant part of total costs (287).

In an effort to prevent the growth of monopolies, the US passed the Sherman Antitrust Act in 1980. Although it has not been vigorously enforced, this act has served as a deterrent (289).

The situation in which an industry is dominated not by a single firm but by a very few of them is known as oligopoly. This has become common in capitalist societies (289). Where oligopoly prevails, the law of supply and demand often stops functioning, primarily because collusion between firms is so easy.

Another development which has weakened the role of the market forces has been the increase in what is known as vertical integration, the process by which a company gains control of companies in other industries that either supply it with materials or buy its products.

Finally, the market system has been weakened by the nature of military technology. Modern warfare requires the mobilization of all of a nation’s economic resources. Obviously this effort must be planned and implemented far in advance of the outbreak of hostilities. In societies that wish to maintain a strong military position, this inevitably leads to the development of a military-industrial complex from which most elements of the market system are eliminated (290).

We can summarize most of the foregoing by saying that the experience of the last 200 years has revealed 3 basic flaws in the market system.

1. Not only do they fail to protect the weaker members of society, such as workers and consumers; they compel the strong to act ruthlessly if they wish to remain strong.

2. The market system has what might be called a built-in tendency to self-destruct, which causes most free competitive markets to evolve into oligopolistic or monopolistic markets unless checked by governmental intervention.

3. The market system cannot respond adequately to many or most of the needs of society as a whole, as contrasted with the needs and desires of individuals (290-291).

Government has repeatedly stepped in to prevent or reverse these flaws. A measure of the increased power of government in the economic life of all western industrial societies is the growth in the percentage of gross national product that their governments control through taxes and use to support various activities (291).

Evolution of the Modern Corporation

The origins of the modern corporation lie in the 16^th century, when English and Dutch merchants, trading in remote areas, banded together in what came to be known as joint stock companies. This form of organization had several advantages over family enterprises and partnerships. Above all, it permitted people to pool capital and thereby spread their risks. During the next several centuries, the joint stock company, or corporation gradually spread to new field of enterprise, and a series of changes made it safer and more attractive to investors. The most important change was the adoption of the principle of limited liability (292-293).

In industrial societies today, nearly all of the largest and most powerful private enterprises are corporations. As corporations have grown, there has been a large change in their character, especially with respect to control. The largest ones are rarely controlled by the people who own them; they are controlled by employees who have been hired to manage them. This shift is a consequence of the fragmentation of stock ownership which has accompanied the enormous growth in size of these organizations. As a result, the owners of the largest corporations have become in most cases merely investors: real control of lies in management and government (293).

Increasing economic integration of the world system

To be complete, our survey of the economies of modern industrial societies has to take note of one further development: the growing web of economic ties among societies, industrial and nonindustrial, throughout the world.

With advances in technology, the volume of international trade increased. By 1850, the volume of goods exchanged was 6 times what it had been in 1750, and in 1950 it was 20 times. During the last 40 years, the dollar value of international trade has been growing at a rate that would be equivalent to a 400-fold increase if it lasted a century (294).

The result of this trend has been a substantial increase in the division of labor among societies, and a growing economic integration of the world system. The other side of the coin, is that societies are steadily declining in economic self-sufficiency (294).

The societies of western Europe have moved further in this direction than other industrial societies and have formed the EEC, whose goal is the complete integration of the economies of the member societies (294).