1 / 10

History of American Political Economy

History of American Political Economy. Markets need government to maintain order, enforce contracts, create currency, provide other public goods Government deeply implicated in economy

kaipo
Download Presentation

History of American Political Economy

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. History of American Political Economy • Markets need government to maintain order, enforce contracts, create currency, provide other public goods • Government deeply implicated in economy • Tension between capitalism (economic system of profits for few) and democracy (political system of democratic rights for many) depends on outcome of political struggles • More expansive role during 1930s (New Deal) – 1970s • Reagan revolution (1980s-2000s) power shift to market • Present = massive government action to bailout private financial sector (2007-)

  2. Competitive Capitalism • Expansionary phase (1840s)  revolution in transportation (roadways, canals, railroads) • Era of competitive capitalism = small firms competed in local markets • Federal government’s role limited; state governments more active • Downturn (1870s) initiated emergence of large corporations and organized political movements (e.g., farmers, workers) opposed to market dominance by corporations • Believed in equality; labor created wealth; big business captured political power; majority could tame corrupting influence of capital • Radicalism basis of later Progressive reforms

  3. Rise of Corporate Capitalism • Progressive era (1900-1916) marked profound change • Rise of large corporations  demands for government action • Federal government assumed increasing responsibility for regulating business activity • World War I (1917-1919) government intervention • Tripartite committees (business, labor, and government) coordinated production; disbanded at business insistence • Boom (1920s) marked by increasing inequality • “Roaring Twenties” ended with market crash (1929) • Great Depression increasing unemployment, wage cuts, strain on government relief; undermined faith in capitalism, business, and government; demands for change

  4. A New Deal • FDR (1932) promised New Deal = end depression, provide relief, manage economy/restore growth • Keynesianism= depression caused by inadequate consumer demand • Government should run budget deficits to increase money in circulation and increase demand • Preferred by business to more radical proposals • Welfare state offers citizens protection from swings of business cycle • Unemployment insurance, social security creates safety net • Labor market regulated to outlaw child labor, impose minimum wage • Labor unions grew increasing worker power relative to management • Federal expenditures and number of federal employees increased

  5. Conservative New Deal • No push to nationalize industries • (Keynes) Full employment necessary to increase demand • Conservatives opposed Truman’s Full Employment Act (1945) • (Keynes) Redistribution of income necessary • Welfare spending lower, less redistributive • Deficits driven by cutting taxes rather than increasing government spending • Demand stimulated through private consumption rather than promoting public goods • Government spending increases geared toward military rather than welfare state spending • Conservative Keynesianism • Symbolic commitment to full employment • Economic stimulation through military spending (not redistribution) • Deficit spending through tax cuts not public investment

  6. Rise and Fall of Golden Age • Golden Age of Capitalism(1950s-1970s) • Consumer demand soared; businesses expanded; labor relations improved; government spending climbed; emergence of global dominance • Bargain between business and government  strategic decisions left to corporate capital; government encourage corporate investment and job creation • (1970s) Stagflation(unemployment and inflation) • Slower productivity growth squeezed profits • Workers asked to work more for less • Businesses engaged in union busting • Conservative Keynesianism collapsed (1970s) • Unemployment, inflation, lower productivity growth, rising trade deficits

  7. Rise of Extreme Market Capitalism • Extreme market capitalism = markets rational, self-correcting, beneficial • Reagan (1980) = Conservative Keynesianism  Extreme Market Capitalism • Prosperity no longer dependent on welfare of workers whose wages drove demand • Supply side economics = prosperity depends on welfare of affluent whose savings supply capital for investment • Insufficient investment capital (not insufficient demand) • Boost investment capital through tax cuts, especially for rich • Tax cuts reward wealthy, bind them to the party; impose fiscal restraint on government • Policy of Deregulation • Environmental standards, consumer protections rolled back in name of global competitiveness • Cut regulatory agencies’ budgets, reduce effectiveness

  8. Effects of Extreme Market Capitalism • Large budget deficits due to tax cuts • Growing inequality (see Table 3.1) • Biggest losers under Conservative Keynesianism biggest winners under Republican Extreme Market Capitalism • Tax cuts for rich, spending cuts for poor • Unions in decline, wages/living standards for working class stagnated • Wealth created by increasing productivity captured by corporations in form of increasing profits, not rising wages • Shift from industrial capitalism to finance capitalism • Banks “too big to fail,” politicians reluctant to challenge financial industry • Financial sector = influence over policy creating new profits for banks but increasing risk, debt, and instability • Debt-fueled consumption contributes to trade deficits

  9. Crisis of Extreme Market Capitalism • Great Recession (2007-present) • Driven by Housing Bubble • Low interest rates set by Federal Reserve Board • Banks gave out loans to generate fees and interest • Lowered lending standards; subprime lending increased • Banks bundled loans and sold them as securities • Securities bought and sold with AAA ratings • Housing bubble burst • Investors became skeptical of housing values • Prices began to fall, more houses put up for sale, many foreclosed • Highly leveraged banks with debts exceeding assets • Banks collapsing, commerce ground to halt • Crisis in housing threatened entire economy • Government stepped in to bail out banks; passed stimulus bill to ward off recession, guarantee loans, reorganize auto industry

  10. A New Foundation (?) • Extreme market capitalism discredited • Markets not rational, self-correcting, nor beneficial • President Obama (2008- ), rescued failing banks but minimized government influence • Regulatory proposals weak • Banks “too big to fail” not broken up; derivatives go unregulated; taxpayers not protected from excessive risk taking • Aggressive fiscal policy • Used federal budget to stimulate economy; deficit spending • Federal spending increased toward economic recovery (stimulus, jobs bill), social welfare programs, and defense • Unclear whether government will be used to restore and stabilize economy or push beyond to include “social democratic surplus” that redistributes power and rewards to those at the bottom • Depends on political struggle: politics of power will determine who benefits and where new frontier of public power of government and private power of capital is set

More Related