Final Exam sosc2340

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Economics

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Jan 9, 2024

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Final Exam Stephanie Rampat 218058982 SOSC 2340 April 12th, 2023

1. Why did big business get bigger in the US than in other industrialized countries (e.g., Britain and Germany) during the 2d Industrial Revolution? How did the US differ from other countries such as Britain, Canada and Germany with respect to banking laws during the second industrial revolution period, and to what effect? There were many reasons why big businesses grew in the US throughout the industrial revolution. The first was the fact that they had a vast amount of natural resources like coal, iron and copper. This was a great benefit to them because companies could get these resources for a cheaper price than if they were to import them. The US was a leader when it came to technological advancements during the 2 nd industrial revolution. Some of the main areas that this was displayed were transportation, steel production and electrical power. This gave them an advantage in the entrepreneurial world because they were not afraid to take risks and invest in these technologies. The population in the US was also growing at this time so they were fortunate to have a large labour force. This gave them a competitive advantage over European countries because they were able to have larger production forces. Lastly, the US government policies at that point in time were very minimal which allowed the growth and expansion of businesses to speed up. During the 2 nd revolution, the US was very different from other countries in terms of banking laws. The US had more of a decentralized banking system which meant they had more control. There were many smaller banks operating during this time in the US compared to the few large banks in other countries. The US had limited regulations so they were able to develop more freely but this did make the banking system more vulnerable to crisis. Lastly, they had a strong system of credit so it made it easy to access capital. There were also ways to make money like bonds which help create a flexible financial market.

2. What is the efficiency argument for shareholder primacy and how does it differ from the property argument for shareholder primacy? What are the main criticisms of the efficiency argument for shareholder primacy? The two main arguments concerning shareholder primacy are efficiency and property. The efficiency argument poses the idea that by maximizing shareholder value, businesses will be more inclined to operate more efficiently. The backing behind this argument is the fact that the price of a company's shares helps predict the future economics of the company. This displays the importance of the utilization of assets provided by shareholders and how shareholders can feel confident in their decision. The property argument is based on the assumption that shareholders are the owners of the companies and have the right to act on what they think is best for the company. The main idea is that shareholders invest their money into companies and they should be able to have the final say with what is done with the money. There are a few criticisms when it comes to the efficiency argument. If shareholder profits are the main priority company boards could potentially be thinking with a short-term mindset. This could become an issue due to the idea that it could stunt the growth of a business because sectors like environmental impact, training and research could be neglected since they may not immediately turn a profit. They also might be ignoring stakeholder interests which could create negative relationships within the company. By making an effort to reduce costs boards may feel that extreme cuts could be beneficial and this could potentially lead to the downfall of a company. 4. Using week 24 materials, compare the 3 kinds of power that TNCs exercise, distinguish these kinds of power from authority. Why are TNCs “relatively autonomous”, and how does that autonomy relate to the shareholder theory debate?

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The three kinds of power that TNCs exercise are economic, political and cultural. These companies have immense economic power because they are large corporations that have strong market control. They use this power to influence many aspects throughout the company like wages, working conditions and prices in the markets. The way that they use political power is by influencing government policies and laws in favour of their company. They are able to do this because of their strong economic backing. They influence the public by using their political power throughout media coverage. Lastly, the cultural power that they have is displayed by being able to shape social norms. This is all due to their reputation in the eyes of the public. The autonomy of TNCs is related to the shareholder theory which questions the purpose of a corporation, they conduct themselves in a similar manner. They tend to go after the best interests of shareholder value without being held back for stakeholder interests. If a TNC chooses to conduct labor in foreign countries they are able to cut costs but it is not in the best interest of local employees. The autonomy of TNCs could potentially make it difficult for governments to penalize them based upon decisions. Overall, TNCs are large corporations that have a major influence on the public but they choose to neglect certain key players at times. 6. Why, according to week 19 materials, is mean household wealth higher in the UK than Germany, even though productivity is higher in Germany? Although Germany has a higher productivity rate there are many reasons why the mean household wealth in the UK is higher. In the UK, the household value is based on financial assets owned whereas in Germany they depend on private pensions to measure wealth. The housing markets are structured very differently and this is what could be impacting household wealth. In the UK, houses are considered an asset that rises in value. On the opposing side, Germany has higher rates for homes and a larger privately rented sector.

There is a larger financial sector in the UK which most likely contributes to the higher household wealth level. There are more individuals contributing to investments like stocks in the UK than in Germany. In the UK people tend to save more of their income than Germans which contributes to greater overall household wealth. In terms of working in these two countries, Germany tends to give labourers more control of corporate governance so there are lower profits and higher productivity levels. In the UK there are laborers who have less bargaining power, this allows profits and productivity to be equivalent. 7. Based on week 17 materials, compare and contrast platform capitalism with the previous stage of financial capitalism (“NOC”) There are a few similarities between platform capitalism and financial capitalism. These types both include global economic developments with overseas countries in order to use the opportunities posed. Both of these have a strong focus on efficiency where they are seeking high profits while reducing costs. These forms also rely heavily on technological advancements because the internet plays a large role in both. Although there are similarities there are also many differences. Financial capitalism is very focused on maximizing profits and shareholder value which often includes high labour expenses. On the other hand, platform capitalism depends on many individual contractors that in most cases lack the necessary labour protections and additional employee benefits. This form of capitalism also relies on distributed ownership. In contrast, financial capitalism’s control and ownership is usually spread out between a few wealthy individuals or institutions. Financial capitalism has had many regulations put into place in order to protect consumers. In platform capitalism, has had difficulty with having acceptable regulations within businesses. Overall, there are some similarities but the difference outweighs this scenario through ownership, labour relations and regulations.

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