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Wednesday, January 13, 2010

Economy and Society

Economy and Society


  • Economic Development
  • Economic system of simple societies
  • Some forms of Simple Economic Exchange
  • Economic system of complex societies
  • Market Economy
  • Planned Economy
    • Features of Planned Economy
  • Social determinants of Economic Development
  • Concept of property
  • Points to remember
  • Some Theoretical Concepts
  • Man, Nature and Social Production
  • Indian type of Market Economy

  • Main Features of Indian Planning
  • Books and their Authors


Economic Development


Economic development is the development of economic wealth of countries or regions for the well-being of their inhabitants. Public policy generally aims at continuous and sustained economi growth and expansion of national economies so that developing counries become developed countries. The economic development process supposes that legal and institutional adjustments are made to give incentives for innovation and for investments so as to develop an efficient production and distribution system for goods and service.


Economic system of simple societies


Herbert Spencer has defined simple society as one which forms a simple working whole unsubjected to any other and of which the parts cooperate for certain public ends. Simple societies have low division of labour.The occupational differentiation being limited primarily to birth, sex and age. These societies have no specialized economic organization.

The productive skills are simple and productivity is low therefore these societies cannot sustain large population size. Most of the adult members are engaged in food gathering activities.

There is little or no surplus so the social inequalities are not significant and economic interaction takes place within egalitarian frame-work.

The production system is simple but exchange of goods and services assume a complex form. The forms of exchange are reciprocal and redistributive type.


Some of the simple societies inhabiting regions having abundant food and other resources indulge in conspicuous consumption.

The members lack high degree of achievement motivation as there is neither any intense preoccupation on generation and accumulation of economic surplus.Infact most economic activities emphasize on giving rather than storing or accumulation. Private ownership of means of production is non-existent.

There is no clear separation between domestic economy and community economy as they overlap to varying degrees.

The economic system is dominated by sacred consisting of magic-religious ideas.

The innovation is rare and change is slow. The customary practices and norms regulate production and exchange of goods and services.


Economic system of complex societies


The complex societies have high degree of division of labor and consequently structural differentiation. Thus economic activity constitutes a specialized activity taking place in special institution framework and distinguishable from other types of social activity e.g. factories, banks and markets are some of the distinct economic activities.

High division of labor implies advanced skills which help in high productivity. The economic organization can easily sustain a large population.

Complex societies due to their high productivity generate huge surplus. They can support conspicuous consumption.

Market exchange is the pivotal form of exchange and money is the universal medium of exchange.

The members of the complex societies have high achievement motivation and the economic behavior is characterized by an intense preoccupation with generation and accumulation of surplus.


There exist a clear distinction between domestic economy and community economy. The domestic units are the units of consumption and supply the manpower to the community economy. The production of goods and services takes place in the larger units which form part of the community economy.

These societies are characterized by the high level of scientific and technological advancements. Economic activity is perceived in secular terms and is based on practical rationality.

High degree of specialization, rapidity of change, predominance of practical and excessive mechanization of production leads to a state of anomie in society and alienate the worker from the product of his labour.


Economic system of complex societies


The complex societies have high degree of division of labor and consequently structural differentiation. Thus economic activity constitutes a specialized activity taking place in special institution framework and distinguishable from other types of social activity e.g. factories, banks and markets are some of the distinct economic activities.

High division of labor implies advanced skills which help in high productivity. The economic organization can easily sustain a large population.

Complex societies due to their high productivity generate huge surplus. They can support conspicuous consumption.

Market exchange is the pivotal form of exchange and money is the universal medium of exchange.

The members of the complex societies have high achievement motivation and the economic behavior is characterized by an intense preoccupation with generation and accumulation of surplus.


There exist a clear distinction between domestic economy and community economy. The domestic units are the units of consumption and supply the manpower to the community economy. The production of goods and services takes place in the larger units which form part of the community economy.

These societies are characterized by the high level of scientific and technological advancements. Economic activity is perceived in secular terms and is based on practical rationality.

High degree of specialization, rapidity of change, predominance of practical and excessive mechanization of production leads to a state of anomie in society and alienate the worker from the product of his labour.


Market Economy


Market or Free economy is characterized by a system in which the allocation of resources is determined by supply and demand in the market. Both the production and distribution is determined by the market forces to ensure competition and efficiency .It has an effect on the traditional families as a result of monetisation and market economy the different members of the family contribute to the family income and increased the avenues for social mobility. Their is rapid growth of industries in which the employee-employer relations are based on contractual relations. Work has become the commodity which is exchanged for wages. Expansion of markets has increased the volume of trade and commerce facilitating the integration of the country. Growth of economy leads to occupational diversification and increasing specialization of occupations which in turn has created a demand for educational institutions to provide specialized training. Due to industrialization and expansion of market economy in urban areas leads to consumption oriented life-style. Market economy governed by supply and demand is inherently unstable. This leads to anomie which is characteristic of urban life. Inflation also poses constant threat to instability in the urban markets.

Planned Economy


A planned economy is an economic system in which decisions about the production, allocation and consumption of goods and services is planned ahead of time, in either a centralized or decentralized fashion. Since most known planned economies rely on plans implemented by the way of command, they have become widely known as command economies.The government takes the initiative and set the goals and targets to be followed by the market forces. The state intervention is limited to formulation of plan and adoption of indirect controls. The private sector becomes partner in the formulation of a plan and responsible for its implementation.

Features of Planned Economy

Features of Planned Economy


Target settings for different sectors of economy that determine the supply. It is a type of economy in which some central authority makes a wide range of decisions pertaining to production and wages. The government can harness land, labor, and capital to serve the economic objectives of the state (which, in turn, may be decided by the people through a democratic process). Consumer demand can be restrained in favor of greater capital investment for economic development in a desired pattern. For example, many modern societies fail to develop certain medicines and vaccines which are seen by medical companies as being unprofitable, but by social activists as being necessary for public health. The state can begin building a heavy industry at once in an underdeveloped economy without waiting years for capital to accumulate through the expansion of light industry, and without reliance on external financing. Second, a planned economy can maximize the continuous utilization of all available resources. This means that planned economies do not suffer from a buisness cycle.

Under a planned economy, neither unemployment nor idle production facilities should exist beyond minimal levels, and the economy should develop in a stable manner, unimpeded by inflation or recession. A planned economy can serve social rather than individual ends: under such a system, rewards, whether wages or perquisites, are to be distributed according to the social value of the service performed. A planned economy eliminates the dependence of production on individual profit motives, which may not in themselves provide for all society's needs.

Social determinants of Economic Development


Economic development implies two things: Economic growth which leads to increase in production and generation of income and equitable distribution of this income among the population to improve the quality of life. Although economic development does not necessarily imply industrialization there is no historical precedent for substantial increase in percapita income without diversion of both capital and labour from agriculture. Economic development is synonymous with industrialization. Economic development is very much influenced by various social factors. Nation states are created with common language and culture. Economic development of any country hinges on the efficient employment of factors of production such as labour, land, capital and organization. There is commercialization of production with monetization of economy. The employment of factors of production is conditioned by cultural and social factors. The people must have the required ability, experience and knowledge to make the best use of the facilities that are made available. There is decline of the proportion of the working population engaged in agriculture. The technology plays very important role when appropriate social conditions are present.

There is trend towards urbanization of society with growth of scientific knowledge. A new value system emerges which emphasis individual initiative and responsibility and enables the individual to function without any control. The exclusiveness of clan, kin or caste breaks down and provides norms of behavior suited to the secondary group type of relationship characteristic of an industrial society. There is widespread spread of education. The social stratification emerges based on achievement criteria and permitting occupational mobility.


Concept of property


Property refers to the rights that the owner of the object has in relation to others who are not owners of the object. Property rights are backed by the state and enforced through its legal institutions. According to Morris Ginsberg property may be described as the set of rights and obligations which define the relations between individuals or groups in respect of their control over material things or persons treated as things.Kingsley Davis defines property as consisting of rights and duties of one person or group as against all other persons and groups with respect to some scarce good. It is thus exclusive for it sets off what is mine from what is thine but it is also social being rooted in custom and protected by law.

Points to remember


R.K Merton coined the concept of the Bureaucratic Personality. W.Rostow identified stages or the categories within which all societies could be placed economically. Berger and Luckmann hold that there is a reciprocal interdependence of individuals and society in creating social reality. Karl Marx and Frederich Engels have put forward materialist variant of the evolutionary theory. Parsons has given the theory of leisure class. He has given Functional Imperatives comprising of adaptation, goal attainment, integration and latency. Weber has given the concept of booty capitalism meaning a system in which wealth was acquired by the financing of wars in the expectation of booty.

Seeman isolated the concept of alienation into powerlessness, meaninglessness, isolation and self-estrangement. Lenin has said that state is a special repressive force of the proletariate by the bourgeoisie of millions of workers by handful of rich. Weber wrote the book- The Economy and Society. Veblen gave the concept of conspicuous consumption. Karl Marx wrote the book -First Indian War of Independence. Simmel wrote the book-the philosophy of money in 1900. Karl Polyani gave the concepts of embedded economy and the principles of exchange. Max Weber in his concept of protestant ethic wrote that it was the decisive factor in the emergence of modern capitalism. According to Emile Durkheim division of labour in modern society is the principal source of social cohesion or social solidarity. Mitchell remarked that both material rewards and prestige are accorded differentially so that both integrative and functions are served. Lambert and Hoselitz commented that the sum spent on marriage and death ceremonies in India could have increased investment by more 50%. Hobhouse observed that property is to be conceived in terms of the control of men over things. According to Mckee economic activity is closely involved in the distribution of status and prestige.


Some Theoretical Concepts


Karl Marx:

Karl Marx has distinguished between different types of societies on basis of economic system. These are primitive communism, ancient slave production, feudalism and capitalism, socialism and communism. A man is both the producer and product of society.Marx's analysis of history is based on his distinction between the means/forces of production literally those things, such as land, natural resources, and technology, that are necessary for the production of material goods, and the relations of production in other words, the social and technical relationships people enter into as they acquire and use the means of production. Together these comprise the mode of production. Marx observed that within any given society the mode of production changes, and that European societies had progressed from a feudal mode of production to a capitalist mode of production. Marx did not understand classes as purely subjective. He sought to define classes in terms of objective criteria, such as their access to resources.For Marx, different classes have divergent interests, which is another source of social disruption and conflict.Marx was especially concerned with how people relate to that most fundamental resource of all, their own labour power.Marx wrote extensively about this in terms of the problem of alienation. For Marx, the possibility that one may give up ownership of one's own labour - one's capacity to transform the world - is tantamount to being alienated from one's own nature; it is a spiritual loss.


Marx described this loss in terms of commodity fetchism, in which the things that people produce, commodities, appear to have a life and movement of their own to which humans and their behavior merely adapt. This disguises the fact that the exchange and circulation of commodities really are the product and reflection of social relationships among people. Under capitalism, social relationships of production, such as among workers or between workers and capitalists, are mediated through commodities, including labor, that are bought and sold on the market.According to Marx, a capitalist mode of production developed in Europe when labor itself became a commodity - when peasants became free to sell their own labor-power, and needed to do so because they no longer possessed their own land or tools necessary to produce. People sell their labor-power when they accept compensation in return for whatever work they do in a given period of time (in other words, they are not selling the product of their labor, but their capacity to work). In return for selling their labor power they receive money, which allows them to survive. Those who must sell their labor power to live are "proletariat. The person who buys the labor power, generally someone who does own the land and technology to produce, is a "capitalist" or "bourgeoise. The capitalist mode of production is capable of tremendous growth because the capitalist can, and has an incentive to, reinvest profits in new technologies. Marx considered the capitalist class to be the most revolutionary in history, because it constantly revolutionized the means of production.

Max Weber

Max Weber formulated a three component theory of social stratification with social clas,status class and party class (or political class) as conceptually distinct elements.Social class is based on economically determined relationship to the market (owner, employee etc.). Status class is based on non-economical qualities like honour, prestige and religion. Party class refers to affiliations in the political domain. All three dimensions have consequences for what Weber called "life chances".According to Weber there are two sources of power.One is derived from constellation of interests that develop in a free market and the other is from an established system of authority that allocates the right to command and the duty to obey.

Emile Durkheim

Emile Durkheim sees division of labour in terms of social process.He has tried to determine the social consequences of the division of labour in the modern societies.He has made a fundamental difference between pre-industrial and industrial societies and also made difference between two types of solidarity- mechanical solidarity and organic solidarity.Mechanical solidarity prevails in simple folk societies where division of labour is restricted to family,village or small region.Here individuals do not differ much from one other and follow the same set of norms,beliefs etc.Organic solidarity holds the moden societies together with a bond.Here societies are large and people are engaged in variety of economic activities.They hold different values and socialize their children in varying patterns.The conditions of the modern society compel division of labour to reach the extreme level.This extreme form of division of labour leads to feeling of individualism or anomie.Anomie according to Durkheim refers to a state of normlessness in both the society and the individual.It is a social condition characterised by the breakdown of norms governing social interaction.People feel detached from their fellows having little commitment to shared norms people lack social guidelines for personal conduct.They are inclined to pursue their private interests without regard for the interests of society as a whole.

Karl Polyani: According to economist Karl Polanyi, the three principles of exchange are market principle, redistribution, and reciprocity. The market principle describes the buying and selling of goods and services based on the laws of supply and demand (things cost more the scarcer they are and the more people want them), and often involves bargaining. It is associated with industrial societies and involves a complex division of labor and central government. In redistribution, products move from the local level to a hierarchical center, are reorganized, and sent back down to the local level. Redistribution is the main form of exchange in chiefdoms and some industrial states, and works with the market system. Polyani identifies reciprocity of three kinds: generalized, balanced, or negative. Generalized reciprocity involves an exchange between closely related people in which the giver expects nothing concrete or immediate in return. It is not necessarily classified as altruism, but resembles sharing by social contract. Generalized reciprocity is demonstrated by most egalitarian forager groups including the !Kung people, who do not say thank you upon receiving gifts because it is expected that at a later time, the act of goodwill will be reciprocated. It is also shown in most cases between parents and children. Another form of reciprocity is balanced reciprocity, in which the social distance between giver and recipient increases relative to generalized reciprocity. It involves an exchange outside the immediate family, and the giver expects something in return in the future, but not immediately. If there is no reciprocation, the relationship between the two parties will be strained. The third kind of reciprocity is negative reciprocity, which is an exchange relationship in which parties do not trust each other and are strangers. The giving must be reciprocated immediately and there is very little communication, if any, between groups. Each group is trying to maximize its economic benefit, but eventually friendly relationships between the groups may develop. An example of negative reciprocity is the Mbuti Pygmy foragers of Africa, who exchange with villagers in neighboring groups in silent trade in which they place the items for exchange on the ground, then hide at a distance and wait for the other group to make an offer of their goods. Bartering may continue back and forth, but no direct contact is made between groups. Potlatching among the Kwakitul of Washington and British Columbia can be classified in the category of redistribution.

Indian type of Market Economy


Planning Commission advocates the continuance and effectiveness of Public sector and people participation. Some of the industries and sectors are open to private sector giving greater autonomy. Economic reforms pushed the nation from the planned economy to market economy. New Economic Policy came up in 1991. There is disinvestment of the PSUs, liberalization, privatization and globalization. Still India is not full market oriented economy as some key sectors are still with Govt. Planning in India derives its objectives from Directive Principles of State Policy.



Main Features of Indian Planning


Indian model between capitalist and socialist. Indian is the mixed economy where the emphasis is on macro-economic planning. Democratic socialism Social gain as the main criterion rather private profit. India is signatory of WTO and also has some commitment with some regional groups like European Union, ASEAN,APEC ,SAPTA etc.


Books and their Authors


The working class in India - R.K Mukherjee Caste, class and occupation - G.S Ghurye Jajmani System - MSA Rao Hindu Jajmani System - Harold Gould Sociological aspects of economic development- Moselitz Wealth of Nations - Adam Smith The stages of economic growth - W Rostow

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