Professional Documents
Culture Documents
Cars are symbols of money and power, two things everybody wants more of.
Barbie fit the ideal that Americans dreamed of.
CONGLOMERATES EMERGE
Conglomerates, major corporations that include a number of smaller companies in unrelated fields, emerged in the 1950s One conglomerate, International Telephone and Telegraph (ITT), bought rental car companies and hotel chains
FRANCHISES EMERGE
Another strategy for business expansion was franchising A franchise is a company that offers similar services in many locations Fast food restaurants developed the first franchises in America
SOCIAL CONFORMITY
American workers found themselves becoming standardized Called the Organization Man, the modern worker struggled with a loss of individualism Businesses did not want creative thinkers, rebels or anyone that would rock the boat
Despite their success, some workers questioned whether pursuing the American dream exacted too high a price, as
By the mid 1950s, blue-collar jobs no longer employ the majority of Americans. American business expands by diversifying and franchising. Conformity replaces individuality among workers.
A Changing Workplace
Automation:
1947-1957 factory workers decreased by 4.3%, eliminating 1.5 million blue-collar jobs. By 1956 more white-collar than blue-collar jobs in the U. S.
Corporate Consolidation:
By 1960 600 corporations (1/2% of all U. S. companies) accounted for 53% of total corporate income.
A Changing Workplace
New Corporate Culture: The Company Man
1956 Sloan Wilsons The Man in
RISE OF CONSUMERISM
By the mid-1950s, nearly 60% of Americans were members of the middle class Consumerism (buying material goods) came to be equated with success and status
Consumerism
1950 Introduction of the Diners Card
All babies were potential consumers who spearheaded a brand-new market for food, clothing, and shelter. -- Life Magazine (May, 1958)
Consumerism
Consumerism Unbound
Americans buy more consumer goods in the 1950s than ever before. To encourage spending, manufacturers create new products planned to become obsolete in a short time. To increase sales of consumer goods, advertisers appeal to Americans desire for status and conformity.
NEW PRODUCTS
One new product after another appeared in the marketplace Appliances, electronics, and other household goods were especially popular The first credit card (Diners Club) appeared in 1950 and American Express was introduced in 1958 Personal debt increased nearly 3x in the 1950s
Ad in Context Example
Ads from the 1950s reflected consumers fascination with scientific discoveries
(do you see any subliminal messages here? ) (Clue=there are none)
PPT 3-8
21
Suburban life
Frontier Land
Main Street
Tomorrow Land
Drive-In Movies
1956 Interstate Highway Act largest public works project in American history!
After the rationing of WWII, inexpensive and plentiful fuel and easy credit led many to buy cars By 1960, over 60 million Americans owned autos
Anytown, USA
Our new roads, with their ancillaries, the motels, filling stations, and restaurants advertising eats, have made it possible for you to drive from Brooklyn to Los Angeles without a change of diet, scenery, or culture.
John Keats, The Insolent Chariots
1958
DOWNSIDE TO MOBILITY
While the car industry boom stimulated production, jobs, shopping centers, and the restaurant industry, it also had negative effects Noise Pollution Accidents Traffic Jams Stress Decline of public transportation
C. Wright Mills criticizes corporations Jack Kerouac, Beat artists promote counterculture
Traditional feminism discouraged Entrance of more women into workplace stimulates new feminism
Suburban Living
Levittown, L. I.:
The American Dream 1949 William Levitt produced 150 houses per week.
Levittown
Suburban Living
SHIFTS IN POPULATION DISTRIBUTION, 1940-1970
Central Cities Suburbs Rural Areas/ Small Towns 1940 31.6% 19.5% 48.9% 1950 32.3% 23.8% 43.9% 1960 32.6% 30.7% 36.7% 1970 32.0% 41.6% 26.4%
Suburban Living:
The New American Dream
k 1 story high k 12x19 living room k 2 bedrooms k tiled bathroom
k garage
k small backyard k front lawn
Population Shifts
Middle-class families move to the suburbs.
First Computers!
In 1946 two engineers from the University of Pennsylvania developed the earliest electronic digital computer (it was as large as 2 small houses). By 1959 transistors replaced bulky unreliable vacuum tubes, and it became a reliable system to store data. As they shrank in size, record keepers, such as librarians and tax collectors.
Economic Advance
Economic stimulation
increased space, defense spending informal wage and price guidelines
1962--U.S. Steel forced to lower prices 1963--tax cut spurs one of the longest sustained advances in U.S. history Kennedy's economic policies double growth, cut unemployment
Nixon in Power
Apparent success in first term Triumphs in foreign affairs Nixon cuts himself off from Congress, his own cabinet, and the nation
Nixonomics
Nixon and inflation
inflation spurred by Vietnam federal spending cuts interest rates forced up
Tax cut aids recovery 1979--Iranian Revolution causes second surge in oil prices
The Oil Shocks: Price Increases of Crude Oil and Gasoline, 1973-1985
Reaganomics
Reagans reductions in spending and taxes prompt conflicting expectations Supply-side economists expect economic growth Reagans critics expect massive deficits, economic stagnation
rise in consumer spending prices remain level worldwide decline in energy prices
1983--federal budget deficit $200 billion Spending caps on defense, services 1985--U.S. becomes a debtor nation
Losses of Reaganomics
high-paying manufacturing jobs decline increasing social inequality
Economic Recovery
Clinton abandons campaign promises
Federal budget transformed from deficit to surplus Political parties divided on how to spend
Republicans argue for tax cuts Democrats argue for shoring up federal programs
Although work became less labor intensive, Americans worked longer hours
The Computer
WORKERS IN TRANSITION
The trade union movement, always an integral part of American business, faltered as the economy changed to a service-based system
Increases in women and young people in the workforce eroded unions even more Also hurt by more forceful opposition to unions by managers Union organizing efforts fell off significantly Many companies, hit by hard times, sought to dissolve union agreements
Farmers were hurt by growing consolidation which resulted in fewer farms and more income concentrated in fewer hands
Farmers were caught in a cycle of overproduction, heavy indebtedness, and falling prices which often resulted in foreclosures
Economic conditions, especially for the middle and upper income ranges began to improve in 1983 and 1984
Tax cut encouraged spending and huge defense expenditures had a stimulating effect Reduction of restrictions encouraged business confidence while a voluntary Japanese quota on cars helped the ailing automobile industry Stock market climbed and inflation remained low Though unemployment declined, many of the new jobs were low paying
Long-term unemployment leads to long-term unemployment Weak housing lessens labor mobility Hiring intensity stays weak
Source: BLS
Source: FactSet Research System charts are use with permission.
Now the downside of the U.S. Economy: While real household incomes have risen since the 1960s, most of the increases have been in upper income households.
And Median income has grown the slowest among younger households in comparison to others. Younger households face rising child rearing expenses at a time when relative incomes are growing more slowly.
Slower growth in income among younger households translates in part to lower household equity, a key determinant in consumer spending.
If we exclude housing equity, the gap in median net worth by household age is even greater
With lower equity and income, younger households are experiencing a rising incidence of poverty, whereas older households have enjoyed a continuing decline.
In the aggregate, changes in income and household wealth are producing rising levels of inequality in the United States, surpassing those of the late 1920s before the onset of the Great Depression.
Economic growth that could reduce poverty and income inequality has been hampered by mismanagement in the financial sector, with nonperforming loans accounting for rising default rates on mortgages and other forms of lending. Moreover, current incentives portend a return to the excess leverage that unfolded in the financial collapse that began in 2008
In the short-run, fiscal policy stimulus often exceeds monetary policy expansion in an effort to offset a recession. Yet tax receipts that would fund a fiscal stimulus tend to fall as overall GDP either slows in growth or moves in contraction. All of this generates a regular debate on the optimal size of government in the economy, and spills over into any given election cycle.
For the United States, not only is the size of overall government in decline. It also is in a reversion to state and local government displacing the role of the federal government. This pattern has not been seen since the late 1930s when the Great Depression was still in force. Thus, nothing on the order of a federal government New Deal or Great Society is in the offing as a solution to the current recession.
What, if anything, is the relationship between the size of government and per capita income? If we look at a 2009 sample of 34 OECD countries, we find that the correlation between taxes and per capita GDP is weakly positive. That means that there is some positive association between the size of government and GDP. Yet the weak association suggests that incentives matter greatly as to the kinds of functions that governments undertake, with some governments doing much to foster economic growth while others create and prolong economic stagnation.
For the United States, it is clear that the overall size of government has been generally increasing since the 1920s, with revenues as a ratio to GDP reaching a peak in the late 1990s. Ironically, this took place at a time when the U.S. economy was growing at significant rates, whereas the smaller size of government today has emerged as economic growth has declined. The key here is not that more (or less) government is the answer to economic growth, but what kinds of government incentives are needed to produce robust and sustainable growth over time.
If governments engage in deficit spending that does not produce an economic base from which job creation can unfold, debt levels not only increase but they weigh heavily on liquidity, and ultimately, the solvency of sovereign governments. Today, Greece is the poster child of an insolvent government, but the U.S. faces a rising ratio of central government debt to GDP that is unsustainable for the future. Thus while size matters, more importantly is what kinds of incentives are being applied.
What the U.S. now faces is a set of difficult fiscal policy adjustments, with the Congressional Deficit Reduction Committee looking to make over $1.2 trillion in reductions before mandatory formula-driven reductions take place. The question is whether any of these reductions will result in job-creating incentives that will revive the housing market, bank lending, and consumer an investment spending at rates that will bring the U.S unemployment rate back to historical levels while at the same time avoiding rising inflation. Unfortunately, the level of partisan politics in Washington is not likely to lead to an informed debate on these choices.
Long-term in the sense that debt/GDP will rise alarmingly after the 2020s
unless entitlements are put on a sound footing:
Social Security & Medicare are due to run big deficits
as the baby-boomers retire (predictably) and the cost of health care rises rapidly (less predictably).
Federal
Not sustainable
The debt problem is also long-term in the sense that we have known about it a long time.
E.g., when Ronald Reagan, took office:
"For decades we have piled deficit upon deficit, mortgaging our future and our children's future for the temporary convenience of the present We must act today in order to preserve tomorrow. And let there be no misunderstanding: We are going to begin to act, beginning today.
Inaugural address, Jan. 20, 1981
The US public discussion is framed as a battle between conservatives who philosophically believe in strong budgets & small government, and liberals who do not.
Democrats, Republicans, & the media all use this language.
[1]
(1) The right goal should be budgets that allow surpluses in booms and deficits in recession. (2) The correlation between how loudly an American politician proclaims a belief in fiscal conservatism and how likely he is to take genuine policy steps < 0.
[1] Never mind that small government is classically supposed to be the aim of liberals, in the 19th century definition, not c onservatives.
My point is different: those who call themselves conservatives in practice tend to adopt policies that are the opposite of fiscal conservatism. I call them illiberal. Republican & Democratic Presidents Have Switched Economic Policies Milken Inst.Rev. 2003.
Reagans actions: sharp tax cuts & rise in defense spending. The claim: budget surpluses would result.
The reality: record deficits that added to the national debt a 2nd trillion in his 1st term a 3rd trillion in his 2nd term a 4th trillion when G.H.W. Bush initially continued the policies. (Read my lips, no new taxes.)
Just like Reagan, he claimed budget surpluses would result. Just like Reagan, the result was record deficits: The national debt doubled.
I.e., GWB incurred more debt than his father + Reagan + 39 predecessors
That spending minus tax revenue left a budget deficit of $1.1 trillion in FY 2012,
down from $1.4 trillion in 2009.
How much would we have to trim non-defense discretionary spending to balance the budget?
Next imagine zeroing out all federal spending on agriculture, science & environment, education & transportation,
which includes programs too popular for congressmen to vote for.
That is a total of $364 b = 1/3 of the 2012 deficit. Conclusion: Domestic discretionary spending is not where the big bucks are. Would would also need to eliminate either all of defense,
or all medicare payments or all social security payments while still collecting the social security taxes that are supposed to pay for it!
$92 b $86 b
Total deficit
$61 b $59 b $56 b
$35 b
$30 b
$17 b $6 b
Outlays: $3.5 trillion Deficit $1.1 tr. Tax revenue $2.5 tr.
12 years ago, if the country thought it important enough to protect any single category against belt-tightening in the long run -- say military or social security or tax cuts for the rich -it would have been arithmetically possible, by making the cuts elsewhere.
But we no longer have the luxury of such choices after the legacy of the last decade
after the effects of mammoth tax cuts (2001 & 2003), two wars (2001, 2003), the Medicare prescription drug benefit (2003), and the severe financial crisis & recession (2008).
Starting from our current position, each of the 5 components must play a role, along with taxes.
If there were no political constraints What steps should be taken today to lock in future fiscal consolidation?
Not by raising taxes or cutting spending today (new recession); nor by promising to do so in a year or two (not credible).
Spending.
Examples:
Eliminate agricultural subsidies.
Cut manned space program. Trim National Guard & Reserves, Close unwanted military bases Cut unwanted weapons systems
A rare success: the F22 Raptor fighter. Now F-35 Joint Strike Fighter? ($600b/10 yrs.) Global Hawk Block 30 drone program? The C-27J Spartan cargo aircraft? Upgrades to the M1 Abrams tank
Virginia-class submarine? ($2.6 b)
How to reduce the budget deficit The only way is both reduce spending & raise tax revenue, continued.
$128 b
$305 billion
$93 b $84 b
Social security
Raise retirement age just a little,
perhaps exempting low-income workers.
Health care
Encourage hospitals to standardize around best-practice medicine.
Pay health providers for value, not per medical procedure. Standardize around best-practice treatment:
evidence-based (to be facilitated by electronic health records). E.g., pursue the checklist that minimizes patient infections, and avoid unnecessary medical tests & procedures. That is not death panels.
136
The boom, not the slump, is the right time for austerity at the Treasury. - John Maynard Keynes (1937)
Collected Writings
During a period when some EM governments finally learned counter-cyclical fiscal policy (2000-12) , many Advanced-Country politicians forgot how to do it.
Most conspicuously, Greece & other euro members failed to reduce budget deficits during years of growth, 2001-08
and were then forced to cut spending & raise taxes during the euro debt crisis of 2010-12,
exacerbating recessions, even raising Debt/GDP.
1st cycle:
Recession: austerity.
1980-81: Reagans speeches pledging action to reduce the national debt beginning today came during a period of severe recession.
Boom: profligacy.
1988: As the economy neared
the peak of the business cycle, candidate George H.W. Bush was unconcerned about budget deficits:
continued
2nd cycle
Recession: austerity.
1990: The first President Bush summoned the political will to raise taxes & rein in spending (PAYGO) at precisely the wrong moment -- just as the US entered another recession.
Boom: profligacy.
1993-2000: Despite the most robust recovery in US history,
1993: all Republican congressmen voted against Clintons legislation to continue PAYGO etc. 2000: Even after 7 years of strong growth, with unemployment < 4%, G. W. Bush campaigned on tax cuts.
2003: After his fiscal expansion had turned the inherited surpluses into deficits, GWB went for a 2nd round of tax cuts & continued a spending growth rate > Clintons.
VP Cheney: Reagan proved that deficits dont matter.
3rd cycle
Recession: austerity.
2007-09: Predictably, when the new worst recession since the Great Depression hit, Republican congressmen suddenly re-discovered the evil of deficits, deciding that retrenchment was urgent.
They opposed Obamas initial fiscal stimulus in February 2009.
2011: Subsequently, with a majority in the House, they blocked further efforts by Obama when the stimulus ran out, despite still-high unemployment.
Thus, through 3 cycles, the efforts at austerity came during recessions, followed by fiscal expansion when the economy was already expanding.
Official forecasts are over-optimistic in periods of expansion, rationalizing the failure to act.
continued
continued
Copyright 2011 by Berch Berberoglu No part of this power point presentation can be used for any purpose without prior written authorization and permission obtained from the author.
Introduction
The U.S. and the global economy have been and continue to be in serious crisis, and the current global recession is the worst economic downturn since the Great Depression of the early twentieth century
The Dow Jones plunged more than 50 percent from its highs of 14,000 in late 2007 to below 6,500 in early 2009, with more than a trillion dollars of value lost in the stock market in little over a year Although the Dow rose to around 12,500 a little over two years after its worst decline, the recent turmoil on Wall Street over the past two weeks, which pushed the Dow down to the the 10,000 level could make things worse a double-dip recession turning into a depression
Clearly, the global capitalist economy is going through its deepest crisis since the Great Depression of 1929, and this signals serious challenges for global capital over the next decade, especially for the United States
The best example of this impact, and what is in store for us over the next few years, is what has been happening with the sovereign debt crisis in Greece, Portugal, Spain, Ireland, and Italy, as well as the United States (and with what has happened to the icons of U.S. big business General Motors, AIG, Citigroup, and other big corporations and banks) Lets take a brief look at these once-powerful icons of the U.S. economy to assess the magnitude of the damage
Figure 1. Lehman Brothers stock, 2007-2011 (in dollars and volume traded)
$80
$18
4 cents
Figure 2. General Motors Corporation stock, 2007-2011 (in dollars and volume traded)
$40
$5
$1 4 cents
Figure 3. Citigroup, Inc. stock, 2007-2011 (in dollars and volume traded)
$55
$26
$2.68
Figure 4. American International Group stock, 2007-2011 (in dollars and volume traded)
$1,450
$1,000 0
$600
$22
Figure 5. Fannie Mae stock, 2007-2011 (in dollars and volume traded)
$50
$22
20 cents
Figure 6. Freddie Mac stock, 2007-2011 (in dollars and volume traded)
$70 $63
$32
31 cents
Nature of the crisis The central problem of our present capitalist economic system is the recurrent business cycle which is now operating at the global level. It manifests itself in a number of ways, including: The problem of overproduction/underconsumption Increasing unemployment and underemployment Decline in real wages and rise in super-profits The sub-prime mortgage and credit card debt Speculative corporate financial activities Increased polarization of wealth and income
Table 1. Share of Aggregate Income Received by Each Fifth and Top 5 Percent of Households, 1975 to 2009 (in percentages) _____________________________________________________________________ Lowest Second Third Fourth Highest Top Year 20% 20% 20% 20% 20% 5% _____________________________________________________________________
1975
1980 1985 1990 1995 2000 2005
4.3
4.2 3.9 3.8 3.7 3.6 3.4
10.4
10.2 9.8 9.6 9.1 8.9 8.6
17.0
16.8 16.2 15.9 15.2 14.8 14.6
24.7
24.7 24.4 24.0 23.3 23.0 23.0
43.6
44.1 45.6 46.6 48.7 49.8 50.4
16.5
16.5 17.6 18.5 21.0 22.1 22.2
2009 3.4 8.6 14.6 23.2 50.3 21.7 ______________________________________________________________________ Source: U.S. Bureau of the Census, Current Population Reports, P60-235, August 2008; Statistical Abstract of the United States, 2012, Table 694, p. 454.
Table 2. Distribution of Wealth in the United States, 2007, by Type of Asset (in percentages) __________________________________________________________________ Investment Assets Top 1% Top 10% Bottom 90% __________________________________________________________________ Stocks and mutual funds 49.3 89.4 10.6 Financial securities 60.6 98.5 1.5 Trusts 38.9 79.4 20.6 Business equity 62.4 93.3 6.7 Non-home real estate 28.3 76.9 23.1 __________________________________________________________________ Total for group 49.7 87.8 12.2 __________________________________________________________________ Source: Edward N. Wolff, Recent Trends in Household Wealth in the United States: Rising Debt and the Middle Class Squeeze, Working Paper No. 589 (March 2010), p. 51.
1859 69
79
89
99
1909 19
29
1939
1947
1955
1965
1975
1985
1995
2005
The large corporations made huge profits and had much money at their disposal They bought other corporations (mergers and acquisitions) and they put their money into banks The banks loaned that money (with interest) to workers who didnt have money to consume This was done to raise their purchasing power because their wages werent enough to buy things
Then What? Since employers no longer raised workers wages, the workers had to go into debt to survive Debt went up and up and things got out of control The banks continued to loan money through new loans (secondary mortgages) at high interest rates, and this was a profit bonanza for the banks As corporations increasingly began to invest abroad (outsourcing production and services), U.S. workers lost their jobs, and this led to greater unemployment and underemployment
Unemployed workers with a lot of debt were unable to make their mortgage and credit card payments, and this led to foreclosures and bankruptcies This, in turn, led to the collapse of the banking system, necessitating a government bailout of the banks It is only through the nearly trillion dollar stimulus funds that the U.S. government poured into the economy to save the banks from default that a financial collapse was averted
Heres a view of the housing bubble in 2006 by looking at the stock chart of one home builder Hovnanian Enterprises (HOV)
Stock price: $70 per share in 2006; $1.30 per share in 2012.
$ 70
With the steady decline of the manufacturing sector in the United States through outsourcing of production to cheap labor areas abroad, 2.9 million well-paying manufacturing jobs have disappeared in the period 2005-2008 alone. And thats on top of a loss of more than 3 million jobs in manufacturing from 1998 to 2003, with millions more lost in the entire postwar period.
Long-term Unemployment and Underemployment (as of January 2011) The mean unemployment duration was 36.9 weeks, and the median was 21.8 weeks. The share of unemployed workers who have been without work for over six months was 43.8%, one of the highest on record. A total of 6.2 million workers have been unemployed for longer than six months. There were 25.1 million workers who were either unemployed or underemployed.
Today, the labor market remains 8.1 million jobs below where it was at the start of the recession over three years ago in December 2007. This number vastly understates the size of the gap in the labor market because keeping up with the growth in the working-age population would require adding another 3.4 million jobs over this period.
Thus, with the above 9% unemployment rate today, the labor market is now 11.5 million jobs below the level needed to restore the pre-recession unemployment rate of 5.0% in December 2007.
So, to achieve the pre-recession unemployment rate in five years, the labor market would have to add 285,000 jobs every month for the next 60 months. But, more importantly than that, beyond the impact of the great recession and the slow recovery in the years ahead, the big issue is the impact of globalization on the labor force structure and job creation in the United States And that will depend in large part how the problem of outsourcing is addressed in conjunction with the role of the state in providing stimulus funds to create jobs in the public sector jobs that private industry is unable or unwilling to create in the era of neoliberal globalization.
A boom in corporate profits, a bust in jobs, wages Economic disconnect: Corporate profits surge while jobs and wages remain at recession levels Paul Wiseman, AP Economics Writer, Friday, July 22, 2011. WASHINGTON (AP) -- Strong second-quarter earnings from McDonald's, General Electric and Caterpillar on Friday are just the latest proof that booming profits have allowed Corporate America to leave the Great Recession far behind. But millions of ordinary Americans are stranded in a labor market that looks like it's still in recession. Unemployment is stuck at 9.2 percent, two years into what economists call a recovery. Job growth has been slow and wages stagnant. "I've never seen labor markets this weak in 35 years of research," says Andrew Sum, director of the Center for Labor Market Studies at Northeastern University. Wages and salaries accounted for just 1 percent of economic growth in the first 18 months after economists declared that the recession had ended in June 2009, according to Sum and other Northeastern researchers. In the same period after the 2001 recession, wages and salaries accounted for 15 percent. They were 50 percent after the 1991-92 recession and 25 percent after the 1981-82 recession. Corporate profits, by contrast, accounted for an unprecedented 88 percent of economic growth during those first 18 months. That's compared with 53 percent after the 2001 recession, nothing after the 199192 recession and 28 percent after the 1981-82 recession. (For full text of this article, see the appendix at the end of this power point presentation).
All these would require a restructuring of the economy away from failed neoliberal corporate capitalist policies and toward a new set of priorities that promote the interests of working people Such restructuring requires the transformation of our current capitalist economic system and the existing social order in the direction of providing greater rights and benefits to working people And this would, in turn, benefit society greatly and set us on a prosperous course that would vastly improve living standards and pull us out of the economic crisis
US beliefs, values
We're NUMBER ONE, above reproach, moral authority History: pilgrims escaping oppression Did not want government to rule their lives Pride in individualism, and ability to pull selves up by bootstraps Took care of our own Founding fathers:SMALL WEAK GOVERNMENT Federalism (national, state and local gov'ts) Legislative, Judicial and Executive Vote limited to those with property
US beliefs, values
20th century direct primary elections took power from hands of party leaders
Presidential nominating conventions became meaningless as candidates chosen in primaries Campaigns became more candidate and less party-centered Polyarchy:
US beliefs, values
Party doesn't vote together as in other countries Public Policy: federal, state, local (cf Europe)
medical care transportation utilities welfare early life housing
Little gov't regulation, instead have day in court Litigious 1990: 20 times # lawyers/cap as Japan, 10 times as Sweden, 3 times as Germany
Tort costs 2.3% of GDP in 1991 cf 1.2% for Germany, 0.9% France, Canada, Australia, 0.7% for Japan, 0.6% for UK "There is hardly a political question in the US which does not sooner or later turn into a judicial one"
Tocqueville
US beliefs, values
Public Sector (federal, state, local) %GDP 1995 (including the military)
US 33% UK 43% Germany 50% Denmark 61% Sweden 66%
50% for all EU countries, and without US military gap would be even bigger
US beliefs, values
US beliefs, values
Liberty (but 1/4 world's prisoners) Equality of opportunity (not there, but belief is)
Poorer people are not able to compete
Migrants seeking escape, economic advancement Never had a democratic socialist movement US states with own power to tax & spend resist national initiatives Labor unions only interested in their own and not for ambitious welfare state as in Europe Frontier "land of opportunity," could always go west WWII disrupted US much less than Europe
US beliefs WHY?
Reich: Supercapitalism
Reich: Supercapitalism
US female
Canada male
Canada female
Norway male
Norway female
50 40 30 20 10 0
Hard Work
Responsibility
Religious faith
Poverty Attitudes
US male US female Canada male Canada female Norway male Norway female
60
50
40
30
20
10
Beliefs in equality WB2005 World Development Report 2006 Fig 4.2 Ingelhart World Values Survey representative samples of 69 countries
CULTURE OF FEAR
"It is always simply a matter to drag the people along, whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist dictatorship. The people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked, and denounce the peacemakers for lack of patriotism and exposing the country to danger. It works the same in any country."
Herman Goering Hitler's propaganda chief said to Gustav Gilbert during an Easter recess in the Nuremberg Trials on April 18, 1946
"The short answer to why Americans harbor so many misbegotten fears is that imminent power and money await those who tap into our moral insecurities and supply us with symbolic substitutes.
(Barry Glassner) The Culture of Fear pg xxviii
CULTURE OF FEAR
"Our job is to give people not what they want, but what we decide they ought to have."
Richard Salant, former President of CBS News
'I know the secret of making the average American believe anything I want him to. Just let me control television.... You put something on the television and it becomes reality. If the world outside the TV set contradicts the images, people start trying to change the world to make it like the TV set images.....'
Hal Becker, media 'expert' and management consultant, the Futures Group, in an interview in 1981
EDUCATION
Schools as an indoctrination system Curriculums tolerated as long as perform institutional role Today: Commercialism in schools eg. vending machine contracts in Seattle schools, Channel 1 Derek Bok: former president of Harvard writes in 2003 Once confined to athletics (paying coaches $500,000, recruiting students only for athletic ability), now booming in medical schools and research labs "commercialization threatens to change the character of the university in ways that limit its freedom, sap its effectiveness and lower its standing in society" "Company officials regularly insist that information concerning the work they support be kept secret while the research is going on and for a long enough time thereafter to allow them to decide whether to file for a patent" (Universities in the Marketplace: The Commercialization of Higher Education) Courses, passing exams, imposing discipline rather than fostering independent thinking Encouragement to get credit ratings in middle school, Medical Harm, population health in medical school, public health school
EDUCATION
William E. Simon, Secretary of the Treasury under Presidents Richard M. Nixon and Gerald R. Ford [and President of the conservative Olin Foundation]. "Why should businessmen be financing left-wing intellectuals and institutions which espouse the exact opposite of what they believe in?" he asks, referring to the fact that many corporations give grants to universities or institutions whose scholars may be critical of business.
Ann Crittenden, "Simon: Preaching the Word for Olin," New York Times, July16, 1978
"The business community needs peace to see economic growth. They need kids to be educated to be consumers and workers." Carol Bellamy director of UNICEF quoted in NYT September 3, 2000
"The child exerts a certain amount of pressure, the effectiveness of which depends on his (or her) ability to argue sensibly with an adult. The toy advertiser can help the child by providing him (or her) with arguments which will satisfy mother."
report to Mattel on how to sell Barbie to mothers (who hated the doll)
Targets- now birth to 3 years--hot demographic - "if you own this child at an early age, you can own this child for years to come. Companies are saying, 'Hey, I want to own the kid younger and younger.'"
Mike Searles president of Kids R US
83 percent of all U.S. stocks are in the hands of 1 percent of the people.
61 percent of Americans "always or usually" live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.
66 percent of the income growth between 2001 and 2007 went to the top 1% of all Americans.
36 percent of Americans say that they don't contribute anything to retirement savings. A staggering 43 percent of Americans have less than $10,000 saved up for retirement. 24 percent of American workers say that they have postponed their planned retirement age in the past year. Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.
Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975. For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together. In 1950, the ratio of the average executive's paycheck to the average worker's paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.
As of 2007, the bottom 80 percent of American households held about 7% of the liquid financial assets.
The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nations wealth. Average Wall Street bonuses for 2009 were up 17 percent when compared with 2008. In the United States, the average federal worker now earns 60% MORE than the average worker in the private sector.
The top 1 percent of U.S. households own nearly twice as much of America's corporate wealth as they did just 15 years ago. In America today, the average time needed to find a job has risen to a record 35.2 weeks. More than 40 percent of Americans who actually are employed are now working in service jobs, which are often very low paying. or the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.
This is what American workers now must compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.
Approximately 21 percent of all children in the United States are living below the poverty line in 2010 - the highest rate in 20 years. Despite the financial crisis, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million in 2009.
The top 10 percent of Americans now earn around 50 percent of our national income.
U.S. housing policies are the root cause of the current financial crisis. Other players-greedy investment incompetent bankers; rating foolish
investors;
imprudent
bankers;
agencies;
irresponsible housing speculators; short sighted homeowners; and predatory mortgage brokers, lenders, and borrowers--all played a part, but they were only following the economic incentives that government policy laid out for them.
- Peter J. Wallison
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Housing prices were relatively stable during the 1990s, but they began to rise toward the end of the decade. Between January 2002 and mid-year 2006, housing prices increased by a whopping 87 percent. The boom had turned to a bust, and the housing price declines continued throughout 2007 and 2008. By the third quarter of 2008, housing prices were approximately 25 percent below their 2006 peak. Annual Existing House Price Change
20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0%
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19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08
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19 79 19 80 19 81 19 82 19 84 19 85 19 86 19 87 19 89 19 90 19 91 19 92 19 94 19 95 19 96 19 97 19 99 20 00 20 01 20 02 20 04 20 05 20 06 20 07
Source: mbaa.org, National Delinquency Survey.
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19 79 19 80 19 81 19 82 19 84 19 85 19 86 19 87 19 89 19 90 19 91 19 92 19 94 19 95 19 96 19 97 19 99 20 00 20 01 20 02 20 04 20 05 20 06 20 07
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As of mid-December of 2008, stock returns were down by 37 percent since the beginning of the year. This is nearly twice the magnitude of any year since 1950. This collapse eroded the wealth and endangered the retirement savings of many Americans.
19 50
19 53
19 56
19 59
19 62
19 65
19 68
19 71
19 74
19 77
19 80
19 83
19 86
19 89
19 92
19 95
19 98
20 01
20 04
Source: www.standardpoors.com
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20 07
Why did the mortgage default and housing foreclosure rates begin to
increase more than a year before the recession of 2008 started? Why are the recent default and foreclosure rates so much higher than
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19 90
19 91
19 92
19 93
19 94
19 95
19 96
19 97
19 98
19 99
20 00
20 01
20 02
20 03
20 04
20 05
20 06
20 07
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20 08
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Subprime (FRB)
Subprime (JCHS)
Source: Data from 1994-2003 is from the Federal Reserve Board while 2001-2007 is from the Joint Center for Housing Studies at Harvard University
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1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Subprime (FRB)
Subprime (JCHS)
Subprime + Alt-A
Source: Data from 1994-2003 is from the Federal Reserve Board while 2001-2007 is from the Joint Center for Housing Studies at Harvard University
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19 95 19 95 19 96 19 96 19 97 19 97 19 98 19 99 19 99 20 00 20 00 20 01 20 02 20 02 20 03 20 03 20 04 20 04 20 05 20 06 20 06 20 07 20 07 20 08
Federal Funds
Source: www.federalreserve.gov and www.economagic.com
1 year T-bill
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20%
15%
10%
5%
0%
19 90
19 91
19 92
19 93
19 94
19 95
19 96
19 97
19 98
19 99
20 00
20 01
20 02
20 03
20 04
20 05
20 06
20 07
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20 08
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Source: The Rise and Fall of the U.S. Mortgage and Credit Markets: A Comprehensive Analysis of the Meltdown, Milken Institute
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Source: www.economagic.com
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19 53 19 55 19 58 19 60 19 63 19 65 19 68 19 70 19 73 19 75 19 78 19 80 19 83 19 85 19 88 19 90 19 93 19 95 19 98 20 00 20 03 20 05 20 08
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Source: www.economagic.com
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19 80 19 81 19 82 19 83 19 85 19 86 19 87 19 88 19 90 19 91 19 92 19 93 19 95 19 96 19 97 19 98 20 00 20 01 20 02 20 03 20 05 20 06 20 07
Total Debt Mortgage
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19 98
19 98
19 99
19 99
20 00
20 00
20 01
20 01
20 02
20 02
20 03
20 03
20 04
20 04
20 05
20 05
20 06
20 06
20 07
Fixed
Adjustable
Source: Liebowitz, Stan J., Anatomy of a Train Wreck: Causes of the Mortgage Meltdown, Ch. 13 in Randall G. Holcombe and Be njamin Powell, eds, Housing America: Building Out of a Crisis (New Brunswick, NJ: Transaction Publishers, 2009 (forthcoming) We would like to thank Professor Liebowitz for making this data available to us.
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20 07
19 98
19 98
19 99
19 99
20 00
20 00
20 01
20 01
20 02
20 02
20 03
20 03
20 04
20 04
20 05
20 05
20 06
20 06
20 07
Fixed
Adjustable
Source: Liebowitz, Stan J., Anatomy of a Train Wreck: Causes of the Mortgage Meltdown, Ch. 13 in Randall G. Holcombe and Be njamin Powell, eds, Housing America: Building Out of a Crisis (New Brunswick, NJ: Transaction Publishers, 2009 (forthcoming) We would like to thank Professor Liebowitz for making this data available to us.
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20 07
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Depression?
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At the end of January 2009, the unemployment rate was 7.6 percent and it will surely go higher. This is not unprecedented. The unemployment rate rose to 9.6 percent during the 1974-75 recession, and to 10.8 percent during the 1980-1982 recession. Even during the relatively short recession of 1990-1991, the unemployment rate rose to nearly 8 percent and it remained at, or near, 7 percent for almost two years.
Peak Monthly Unemployment Rates in Recent Severe Recessions
12.0% 10.8% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 1973-75
Source: www.bls.gov
1980-82
1990-91
2007-?
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24%
9%
Source: Bureau of the Census, The Statistical History of the United States from Colonial Times to the Present (New York: Basic Books, 1976)
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Both the Great Depression and the current crisis are the result of
perverse policies. During the Great Depression era, disastrous policies led to a huge
expansion in the size and role of government. Will the same thing
happen this time? The answer to this question will determine the future economic status of Americans.
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