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  • Monopolies are anti-competitive and violate a core elite consensus of free competition in a free marketplace.

Chapter3 powerpoint Chapter3 powerpoint Presentation Transcript

  • The Irony of Democracy 15 ed. th CHAPTER 3 ELITES IN AMERICA
  •  Describe the evolution of elites in the U.S.Learning Objectives  Explain the New Deal and progressive Eras as elite self- interest.  Identify important types of organization in which national elites are found.  Differentiate governmental and private sector elites.  Explain the expanding role of government and governmental elites.
  • The Evolution of U.S. Elites
  • The Evolution of U.S. Elites Elite membership has evolved slowly.  Industrialization, technology, other new sources of wealth have produced new elites who have been absorbed into the system. Political conflict has centered on a narrow range of issues.  The Civil War was the only time elites were deeply divided over the nature of U.S. society.
  • Early Elite Consensus:Hamilton’s Financial Vision
  • Hamilton’s Financial Vision President George Washington’s Secretary of the Treasury favored a strong national government as a means of protecting property and stimulating economic and industrial growth.  Paid off the Revolutionary War debts (government bonds) at face value – providing a significant profit to investors, created a pool of capital available for investment in industrialization of the U.S.  Established a Bank of the United States. Created conflict between merchants and bankers who benefited from Hamilton’s policies and plantation owners and slaveholders who did not.
  • Early Elite Consensus The first transfer of power, where the “out” party peacefully replaced the “in” party illustrated the strength of the consensus among elites. In the 1800 elections, the Federalists were defeated and Thomas Jefferson won the presidency.  Allowed the plantation owners and other landed interests to gain power.  Majority of Americans earned their living from the land, elites mobilized the masses. The Democratic-Republicans made few changes to Hamilton’s policies, ultimately adopted them.
  • The Rise of the West
  • The Rise of the West Western settlers were mainly middle and lower class immigrants.  Hard work resulted in rapid upward social mobility and creation of new elites.  Ideal of individualism, self-creation, wealth and power won by competitive skill demands a more open elite system, greater opportunity to acquire wealth and influence. Andrew Jackson’s presidential victory in 1828 was one of new western elites.  Jacksonian’s became advocates of the principle that all (white) men should have the right to vote and hold public office.
  • The Rise of the West
  • Elite Cleavage: The Civil War CLEAVAGE, VIOLENCE, AND SECESSION LINCOLN AND SLAVERY
  • Elite Cleavage Southern elites could not profitably produce cotton without slave labor.  Cotton accounted for more than half of the value of all U.S. goods shipped abroad before the Civil War.  Wanted to expand cotton industry in the West. Northern elites had no direct interest in abolishing slavery in the South, yet opposed slavery in the West.  Wanted small farmers who produced food and raw goods for the commercial and industrial east.
  • Cleavage, Violence, and Secession Dred Scott v. Sanford (1857) – Supreme Court decided that Congress had no authority to forbid slavery in any territory - the Constitution protected slave property. In the 1860 presidential elections, Lincoln and the Republican Party won the Electoral College.  Many Southern leaders announced they would not accept the outcome if Lincoln won.  December 20, 1860, South Carolina seceded from the Union, followed by ten other states in the next six months.  Southern Confederate forces attacked the Fort Sumter U.S. military base in April 1861, beginning the Civil War.
  • Lincoln and Slavery Exclusive concern was halting slavery in the West.  Wanted to tie western territories to the northern system. Lincoln’s goal was to bring the South back to the Union, restore orderly government, and establish that the states cannot resist national authority with force. The Emancipation Proclamation was a political and military tactic to preserve the union and make foreign intervention in the Civil War less likely.
  • Rise of the New Industrial Elite
  • Industrial Elite Transformation from agricultural to industrial reached climax after the Civil War.  Homestead Act of 1862  Transcontinental Railroad Act of 1862  Rise of corporations and stock markets  Introduction of machinery in factories  Southern planters were removed from the national scene Business became increasingly competitive, little companies disappeared, production rose and resulted in the emergence of monopolies.
  • Reform as Elite Self-Interest: TheProgressive Era to the New Deal PROGRESSIVE ERA THE GREAT DEPRESSION AND THE NEW DEAL NOBLESSE OBLIGE
  • Reform as Elite Self-Interest First generation of U.S. capitalists had little sense of public responsibility.  Their success arose from natural selection, survival of the fittest – social Darwinist ideas. Mass discontent resulted in radical movements such as anarchism and socialism.  1901 assassination of President William McKinley was a catalyst for elites to adjust the system.
  • Progressive Era Industrialization and urbanization rose to a peak in late 1800’s.  Brought about social disruption and vast numbers of masses were left out of the economic boom. Elites in the U.S. witnessed similar events abroad, took action to pre-empt agitation and anger aimed at elites.  Implemented a variety of laws and regulations (Fig 3-1)
  • Progressive Era President’s Theodore Roosevelt and Woodrow Wilson criticized elites for lack of public responsibility.  Urged elites to value welfare of the masses as an aspect of its own welfare.  Programs aimed to preserve competition, individualism, enterprise, and opportunity.  Wilson’s Federal Trade Commission  Federal Reserve Act  Roosevelt broke up a number of monopolies  Government regulation required to see that elites function in the public interest.
  • Progressive Era
  • The Great Depression and the New Deal Following the stock market crash of October 1929, the U.S. economy virtually came to a halt.  By 1932, one out of four persons in the U.S. was unemployed, one out of five was on welfare. President Herbert Hoover intervened with the Emergency Relief and Construction Act’s public works programs, created the Reconstruction Finance Corporation to back loans.  Smoot-Hawley Tariff Act worsened the economy and made Hoover appear ineffective.
  • The New Deal President Franklin D. Roosevelt elected in 1932  Nation’s elites agreed that reform and regard for the public welfare were essential to maintaining the political system.  New Deal reformed the existing capitalist system.  A series of improvisations aimed at making government act humanely and compassionately toward those suffering hardship.  Transferred significant amounts of power from private sector to government.  Minimize the ups and downs of the business cycle, protect the masses.
  • Noblesse Oblige  Philosophy of elite responsibility for the welfare of the masses. FDR came from two of the oldest elite families in the U.S.  Personal philosophy became the prevailing one of the new liberal establishment.  Generated a belief among the masses that the elites had their best interests at heart.
  • The Growth of Government:The New Deal to the Cold War GLOBALIZATION
  • The Growth of Government Following WWII, federal spending settled at 18-20% of the economy, lasted through 2008. As money flowed to the federal government, power also moved from the private sector to the public.  An elite class of government, military, business, and political leaders were running the nation to their mutual benefit. No clear line of division between government and business enterprise.  Goals of government and corporate management have largely blurred together.
  • The Growth of Government
  • The Growth of Government 1960’s expansion of the role of government through social welfare programs and increased regulation of the economy.  President Bill Clinton reduced the size and cost of government.  President George W. Bush provided higher levels of spending and programming.  Size of government hit record high in President Barack Obama’s first year – purchased 2 automobile companies and taking over failing banks, though the process began under the Bush administration.
  • Globalization The United States is now a large player in a global economy.  Globalization’s affect on the power of elites is discussed in Chapter 14.
  • Finding the Elites in the United States
  • Finding the Elites in the United States Elites hold positions of power; two overlapping categories – political and economic.  Most elites can be found in government  Congress, presidency, bureaucracy, state and local government  Others are non-governmental  Media, political parties, interest groups
  • Economic Elites in the United States INDUSTRIAL CONCENTRATION FINANCIAL CONCENTRATION CORPORATE ELITES MANAGEMENT POWER INTERLOCKING DIRECTORATES
  • Economic Elites The people who hold positions of power in the small number of large corporations and banks.  Generally held to high levels of accountability. Pluralism views business interest as just another interest group, competing with all other interest groups. Elitism views economic elites as distinctly powerful in shaping government policy and making decisions that directly influence our lives.
  • Industrial Concentration Economic enterprise has consolidated into a small number of giant corporations.  The 500 largest U.S. corporations collectively take in about $10.6 trillion in revenues every year.
  • Industrial Concentration
  • Financial Concentration The nation’s 10 largest commercial banks control nearly half of all banking assets.  The financial crisis which began in 2007 resulted in partial government ownership of Citigroup and Ally Bank.  Recent banking mergers have resulted in greater concentration. Insurance companies and investment firms have immense power in the U.S. economy as well.
  • Financial Concentration
  • Corporate Elites Through the 1930’s, the nation’s largest corporations were controlled by the tycoons who’d created them. By the 1930’s, control of most had passed to professional managers.  Theory of “managerialism” – general management skills are more important than detailed production-specific knowledge – became the conventional wisdom about corporate governance.
  • Corporate Elites
  • Management Power Corporate power rests in the hands of the top managers of the nation’s large industrial corporations and financial institutions.  Theoretically, stockholders have ultimate power over management, but really have little control over the actions of the corporations.  Most sign over “proxies” so top management can cast votes for them at annual meetings of stockholders. Formal division of power in a corporation is between the board of directors and the company executives.
  • Management Power
  • Management Power
  • Interlocking Directorates A director of one corporation also sits on the boards of one or more other corporations.  Further concentrates power
  • Government and Corporate Elites: Revolving Doors
  • Revolving Doors Politicians may know how to run for office, but may not know how to run the government – some turn to experienced executive elites to staff key positions in their administrations. Elitist model expects a “revolving” door, elites move from power positions in banking, industry, law, etc. to power positions in government and back again.  An exception are the members of President Obama’s cabinet, nearly all of whom are career politicians (former governors, senators, etc.)  Executives from Goldman Sacs have held numerous key government positions.
  • Revolving Doors
  • Elite Policymaking Institutions PUBLIC POLICY AS ELITE PREFERENCE THE FOUNDATIONS AND UNIVERSITIES THE THINK TANKS THE MEDIA THE WASHINGTON INSIDERS
  • Elite Policymaking Institutions U.S. elite are also found in foundations, policy-planning organizations or think-tanks, mass media, and universities.  These are a kind of “third force” in U.S. society. Most influential institutions include the Ford Foundation, Rockefeller Foundation and Carnegie Corporation, Brookings Institute, the RAND corporation, American Enterprise Institute, Cato Institute, etc. – called the Establishment. Elites communicate with the masses and each other through Washington Post, New York Times, Wall Street Journal, etc.  President Obama’s chief economic advisor had previously been with the U.S. Treasury Department, D.E. Shaw Group, and Harvard University (as president).
  • Public Policy as Elite Preference Pluralist model of the policy process views policy as the product of competition, bargaining, and compromise among many diverse groups.  Interest groups viewed as principle actors. Elitist model views public policy as determined by a relatively small group of like-minded individuals, reflecting their own values and preferences.  Initial resources for research, study, planning, etc. comes from corporate and personal wealth which is channeled into foundations, universities, policy-planning groups.  Corporate presidents and directors, top wealth holders also sit on the governing boards of foundations, universities, and policy-planning groups to oversee the spending of their funds.
  • The Foundations and Universities Foundations provide a link between wealth and the intellectual community. Universities must respond to the policy interests of foundations.  University intellectuals working independently occasionally have impact on policymaking, though intellectuals on the whole respond to policy direction set by foundations, corporations, government agencies
  • The Foundations and Universities
  • The Think Tanks Policy-planning groups are central coordinating points in policymaking process.  Review relevant university and foundation-supported research with the goal of developing policy recommendations.  At the same time, endeavor to build consensus among corporate, media, financial, civic, intellectual, and government leaders. Of the most cited think tanks, 47% are centrist, 37% are conservative, and 16% are progressive (left of center)
  • The Media Play a vital role in preparing public opinion for policy change.  Media define the “problem” as a problem, setting the agenda for policy making.  Encourage politicians to assume new policy stances by allocating valuable network airtime to those who speak out about new policy directions.
  • The Washington Insiders White House staff, congressional committee staffs, top executive administrators maintain close contact with policy-planning groups.  These groups often help prepare legislation.
  • Power in the United States: An Elitist Interpretation
  • Power in the United States Power is organized into large organizations, private and public:  Banks and financial institutions  Corporations  Universities  Law firms  Religious institutions  Military and government bureaucracies
  • U.S. Political Economic History: An Elitist Interpretation
  • U.S. Political Economic History Movement of nonelites into elite positions must be slow and continuous in order to maintain stability. Potential elite members must demonstrate commitment to basic elite consensus. Changes in public policy must be incremental rather than revolutionary.