American Political Economy

1. American Political Economy • Political economy = interaction between economy and government; state and markets • Democratic political system/capitalist economic system • Capitalism = capital is privately owned and controlled/business decisions driven by profits • Markets = decentralized and “self-regulating” • Never wholly free or self-regulating • Require rules, regulation by government

2. Market Capitalism • Promotes efficiency, productivity • Externalities (socializing cost; privatizing gain) • Contradiction between private interests and community (public) interests • Expansion/growth and ecological crisis • Instability (recession, depression, unemployment, inflation); boom and busts (cycles) • Undemocratic

3. US Market Capitalism • Markets freer, less regulated • Corporate capitalism = small unrepresentative, unelected group controls economy, possesses immense political power • Whether to invest, where to invest, what to invest in, and how to produce • Campaign contributions, lobbyists, lawyers, media • Private government = fundamental impact on people’s lives and communities • Considered nonpolitical, private (not political) • Enormous pressure to offer inducements to business • Mobilization of bias = political advantage business enjoys due to economic power • Not all-powerful (competing interests; democratic politics)

4. Changing Landscape • Structure of American economy has changed • Competition intensified due to globalization and technological innovation • Mergers have created huge corporations • Production more concentrated, control more centralized in fewer hands • Threat to democracy = concentration of economic power tends to promote concentration of political power

5. Who Owns Private Government? • “Share-holder” democracy? • Half of households do NOT own stock • Wealthiest 1%, 37% • Next wealthiest 9%, next 42% • 10% of households own 80% of stock • Corporate elite = white and male • Capitalist class cohesion • Social clubs, interest groups/peak associations, corporate boards • Small group (vast income and wealth) own America’s private government, situated to shape political system to serve their interests

6. Changing Employment • Industrial occupational order (blue-collar factory jobs) replaced by postindustrial order (professionals, service employees, and white-collar workers) • Good and bad jobs grew at expense of middle; huge growth in financial sector • Service and sales jobs poorly paid, few benefits, require menial and routine labor, and rarely union protection • Income inequality in U.S. • Top 20% captured 50% of all income; bottom 20% got 3.4% (2007) • Political choices shape inequality • Markets generate inequality, pay unskilled labor with poverty-level wages unless checked by political/public forces • In U.S. these forces weak = labor movement tiny; parties skewed to the right; government unresponsive to interests of low-income groups

7. Extreme Market Capitalism • Public sector quite small • Public employees only 15% of workforce • Low proportion of GDP collected in taxes • Government spending as share of GDP low • Few public services • Few constraints on business firms • Government regulation of workplace thin • Lowest proportion of unionized employees of any industrialized democracy • Helps account for income inequality • Caused by: failure to unionize in South; restrictive labor legislation placed obstacles in way of union-organizing; opposition to unions by corporations • Supercapitalism= roles as consumers and producers increased at expense of importance of public sphere and role as citizens

8. Capitalist Instability/Crisis • Great Recession (2007-present) • High unemployment – hardest on low income groups • Decline in stock market – now booming again • Bursting of housing bubble • Three time bombs: Sub-prime mortgages, Leverage, Securitization • Government’s “hands-off” relationship to capitalism shelved when system in jeopardy • Socialism for the rich, capitalism for the poor = losses socialized and profits privatized (Stiglitz) • Key question: Will huge public monies used to shore up financial system be followed by reforms to minimize chance of a similar future crisis? Answer = NO!