Daily Class OutlineDaily Class QuestionsDaily Class Web LinksDaily Class Notes


Question for Discussion: How did the growth of a global economy and Reagan's economic policies affect Americans' standard of living and economic future in the 1980s and 1990s?

Reading: , "The Short ,Happy Life of the Yuppie" ; Reagan's Economic Strategy ; Economic Demands made by TNCs ; Kevin Phillips, "Graph of Growing Economic Inequality" ; "A Rising Economy that Lifts only Yachts : Great Graphs of Increasing Income Inquality" ; "How Unequal are We Anyway?" ;

Daily Class Web Links

President Reagan's Economic Programs

The Decline of the American
Dream in the 1980s

The Global Economy and the
Decline of the American Dream

Daily Class Outline

1 .The Reagan Revolution as a response to the challenges of Globalization in the 1980s.

  1. Yuppie - Wikipedia:

    Yuppies are made fun of for their conspicuous personal consumption and obsession over social status among their peers, which is seen as vain and materialistic

  2. Newsweek, The Year of the Yuppie (1984)

  3. Former Hippies and Yippies sellout and become Yuppies

  4. Are you a Yippie or a Yuppie?

    Repudiating activism, he became a stockbroker and then organized Jerry Rubin's Business Networking Salon in New York (1982). He and former compatriot, Abbie Hoffman, staged about 40 Yippie-versus-Yuppie debates nationwide (1985–6) before Rubin turned to selling vitamins in major newspapers (1990s).

  5. 1980s TV Show: Family Ties (1982-1989)

  6. Yuppies and Yuppie Culture in the 1980s

  7. Friedman on Globalization (from The Lexus and the Olive Tree)

  8. Yergen: What is Globalization?

  9. Globalization - An Overview of Globalization

  10. The Rise of the New Global Elite - Magazine - The Atlantic

  11. The World Top Incomes Database (See Graphics)

  12. How Did Inequality in America Get so Bad?
    (See 2011 Graph for top 1 percent share)

  13. 2011 CBO Study on Income Inequality
    (See Share of Income 1979-2007)

  14. CBO Graph of Income Inquality
    (Share of Income going to top 1 percent)

  15. Top Earners Doubled Share of Nation's Income, C.B.O. Says

  16. Striking it Richer: The Evolution of Top Incomes in the United State

  17. Top one percent gains in Income
    (Share of Income going to top 1 percent 1920-2007)

  18. Daily Kos: The Top 1 Percent got 93% of the Gains

  19. Noah, The One Percent Bounce Back

  20. It's the Inequality, Stupid | Mother Jones (See graphs)

  21. Corporate Profits Up, Workers Income Lags

  22. Productivity Graphs from Leopold Book

  23. What is the overall Trend in Workers Wages
    (See pages 1 and 2)

  24. Long-Run Changes in U.S. Wage Structure

  25. Kevin Phillips,"Graph of Growing Economic Inequality"


  26. Causes of this growing Inequality:

    1. Offshoring

    2. Downsizing

    3. Replacing workers with machines

    4. Decline of Unions

    5. Making workers do the work of two or more workers.

    6. Falling wages

    7, The rise of McJobs, increasing low-paying jobs

    8. The rise of temp jobs. Don't hire real workers, but
    hire temporary workers from ManPower

    9. Decline of Manufacturing Jobs

    10. Decline of jobs that pay good wages, jobs that
    allow American to remain middle class

    11. Increased immigration puts downward pressure
    on wages.

    12. Decline of industrial cities and rise of the suburbs and exurbs

    13. Increasing cost of higher education

    14. The increasing failure of America's high schools,
    high dropout rates


  27. Plutocracy defined:

    The term "plutocracy" is formally defined as government by the wealthy, and is also sometimes used to refer to a wealthy class that controls a government, often from behind the scenes. More generally, a plutocracy is any form of government in which the wealthy exercise the preponderance of political power, whether directly or indirectly.

  28. Plutocracy Now: It's the Inequality Stupid (See Winners Take All Graphs)
    (Great Graphs on Increasing Inequality)

  29. Plutocracy Reborn: U.S. Wealth Inequality Gap Largest since 1928

  30. Bill Moyers: "Welcome to the Plutocracy!"

  31. Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class by Paul Pierson and Jacob S. Hacker

    The authors continue to pound away with economic data to prove the old saw that the rich get richer, with a nuanced twist that it is the über rich who are doing surreally well: “The share of [national] income earned by the top 1 percent of Americans has increased from around 8 percent in 1974 to more than 18 percent in 2007.... The only time since 1913 ... that this share has been higher was 1928.” That, of course, was the year before the Great Depression commenced.

    Now there is rich, and then there’s filthy rich. The top 1/10th of 1 percent of Americans has done even better: In constant 2007 dollars, the 15,000 American families in this rarified bracket enjoyed an average income in 1974 of about a $1 million – and $7.1 million in 2007. Want richer? The top .01 percent of us, or one in 10,000 households, soared in annual income from $4 million in 1974 to $35 million on average in 2007

  32. Hacker, How the Rich get Richer

  33. Kroll, The New American Oligarchy:

    That story begins in the late 1970s and continues through the Obama years,
    a period in which American policy has been so skewed toward the rich that we're now living through the worst period of income inequality in modern history. Consider the statistics: 50 years ago, the wealthiest 1% of Americans accounted for one of every 10 dollars of the nation's income; today, it's nearly one in every four. Between 1979 and 2006, the average post-tax household income (including benefits) of the wealthiest 1% increased by 256%; the poorest households saw an increase of 11%; middle class homes, 21%, much of which was due to the arrival of two-job families.

    Tax guru David Cay Johnston recently crunched new Social Security Administration data and discovered an even starker divide. On the one hand, the number of Americans earning a steady income declined by 4.5 million between 2008 and 2009, and the average wage in the U.S. dipped by 1.2%, to $39,055. On the other hand, the average wage among Americans earning more than $50 million per year was $91 million in 2008 and $84 million in 2009. 

  34. See Piece of the Pie:

  35. According to the Federal Reserve, the total net worth of U.S. households was approximately $56.8 trillion dollars. To put that number into perspective, if you were to make a pile of 56.8 trillion $1 bills, it would make it to the moon and back over 8 times. That is really “movin on up” and up and up.

  36. So what is the size of your piece of pie? How do we move up to get a larger slice? According to a working paper by Edward Wolff , the top 5% of U.S. households control 62% of all net worth. In fact, the top 20% of households control 85% of all net worth. This leaves the remaining 80% of all households to fight for the 15% of left over pie. Not much of a piece. So what are households to do?

  37. Top Marginal Tax Rate, 1916-2010

  38. Frank, "Plutonomics": Rise of a Plutonomy in the United States:

    The nation’s top 1% of households own more than half the nation’s stocks, according to the Federal Reserve. They also control more than $16 trillion in wealth — more than the bottom 90%.

    Ajay Kapur, global strategist at Citigroup, and his research team came up with the term “Plutonomy” in 2005 to describe a country that is defined by massive income and wealth inequality

  39. Plutonomy Definition:

    Economic growth that is powered and consumed by the wealthiest upper class of society. Plutonomy refers to a society where the majority of the wealth is controlled by an ever-shrinking minority; as such, the economic growth of that society becomes dependent on the fortunes of that same wealthy minority.  

  42. Fix income inequality with $10 million loans for everyone!

  43. Sheila Bair's Fabulous Idea: $10 Million Loans for Everyone! | MyFDL

  44.  



2. President Reagan's Economic Program

3. The Growth of the National Debt under
the Conservative Era: 1980-2008

4. The impact of Reagan's Programs on Americans

5. The Third Worldization of the U.S.


6. Debating Globalization after the 2008 Financial Collapse



Daily Class Questions

1. What does President Reagan mean when he declares that he wants to create "a Second American Revolution of hope an opportunity"?

2. Why does Reagan think that cutting taxes will actually increase government revenues?

3. What role does economic growth play in President Reagan's program to "renew America"?

4. According to Kevin Phillips, did the 1980s provide new "hope and opportunity" to all Americans as President Reagan claims?

5. According to Phillips, what caused the redistribution of income from the working- and middle-classes in the 1980s to the wealthiest of Americans?

6. According to Phillips, what does the growth of private and public debt from 4.2 trillion to 10 trillion tell us about America's economic well-being in the 1980s?

7. Do you agree with Phillips that President Reagan's economic and political programs favored the rich at the expense of the working- and middle-classes?

8.  Do you agree with conservative supporters of Reagan who argue that the success of the very wealthy in the 1980s in no way reflects badly on the health and well-being of the American economy and society in the 1980s?



Daily Class Notes

The two best popular studies on the growing inequality and the decline of the middle- and working-class's standard of living in the United States since the 1970s are by Donald Bartlett and James Steele.  I will draw heavily on their arguments for this discussion. So if you want more specific examples and detailed arguments please go to these two internet sites to better understand my own argument. The larger argument both books make, and that I will make here, is that the federal government has created policies that have caused this increasing inequality and the declining standard of living for most Americans. Before we can look at these government policies we need to look at some of the major evidence that in fact Americans' standard of living has been declining since the 1970s.

Let's begin by looking at some of the results from a quiz from
America: Who Stole the Dream:

Test your economic IQ:

Which of the following are true?

Chapter 1

1. The richest Americans are accumulating more wealth these days at the fastest rate since the
robber-baron era.

True

2. The United States has the widest gap between
rich and poor of any industrialized nation.

True

3. The top one percent of households - the nation's
wealthiest -control almost a third of the nation's
wealth.

True

4. To be among the richest one percent of the
nation's households, your household income
would be at least:

(a) $60,000
(b) $154,000
(c) $182,000
(d) $249,000
(e) $353,000

5. Among the richest one percent of the
nation's households, the average income is
about:

(a) $109,000
(b) $143,000
(c) $465,000
(d) $532,000
(e) $729,000

6. Between 1980 and 1992, the average
income of the wealthiest 1percent of
households in the U.S.

(a) decreased slightly
(b) increased slightly
(c) more than doubled
(d) more than tripled
(e) quadrupled


7. The richest ten percent of U.S. households
control

(a) less than one third of the nation's wealth
(b) one third of the nation's wealth
(c) one half of the nation's wealth
(d) two thirds of the nation's wealth
(e) more than two thirds of the nation's wealth

8. Over the past twenty years, average earnings
of the nation's top executives

(a) did not keep up with inflation
(b) grew at the inflation rate
(c) grew at three times the inflation rate
(d) grew at four times the inflation rate
(e) grew at five times the inflation rate

9. Over the past twenty years, average earnings
of blue collar and white collar workers in private
industry

(a) did not keep up with inflation
(b) grew at the inflation rate
(c) grew at twice the inflation rate
(d) grew at three times the inflation rate
(e) grew at four times the inflation rate

14. In the last 40 years, overall, the local and
state tax burden has

(a) declined
(b) stayed the same
(c) risen slightly
(d) doubled
(e) tripled

15. You can earn more than $200,000 a year
and owe no federal income tax at all.

True

16. In a recent year, you could earn $25,000 - $30,000, and owe federal income tax at about

(a) half the rate
(b) a slightly lower rate
(c) the same rate
(d) a slightly higher rate
(e) double the rate paid by thousands whose
incomes are more than $200,000

17. American manufacturing workers earn a lower
average hourly compensation than those of
workers across most of the industrialized world.

True

18. Americans are nearly $2 in debt for every $1
they receive in their paychecks.

True

20. As the number of U.S. manufacturing jobs
declined, Washington rewrote immigration laws
to let a record flow of immigrants enter the
US job market.

True

30. Some companies have lobbied for and
gained special exemptions - worth millions
of dollars - written into U.S. tax laws,
exclusively for them.

True

Chapter 4

1. Measured in constant dollars, the average
weekly wages of manufacturing workers are
the same today as in 1965.

True

10. The Department of Labor predicts that
the greatest job growth over the next ten
years will be in which of these categories?

(a) cashiers
(b) janitors
(c) retail salespeople
(d) waiters and waitresses
(e) computer programmers

Chapter 6

1. The U.S. government routinely grants
companies permission to bring in foreign
workers to do jobs such as auto mechanic, child
care worker, or cook at a hamburger chain,
agreeing that no qualified American workers
can be found to take them.

True

2. At a time when American companies are
downsizing and putting Americans out of work,
those same firms are recruiting workers from
abroad to work here.

True

4. Legal immigrants are entering the U.S. today
at an annual rate higher than at the turn of the
century when thousands landed at Ellis Island.

True

5. Legal immigrants are entering the U.S. today
at an annual rate higher than in any decade in
American history.

True

6. More immigrants arrived in the U.S. over
the past 16 years than in the previous half century.

True

7. Since 1990, at least 6 million foreign workers
have been thrown into competition for U.S. jobs.

True

8. No other developed nation in the world has
asked its labor force to absorb as many new
workers as America has.

True

9.There are more alien and immigrant workers
than out-of-work Americans in most states.

True

10. Which of the following businesses sought
to bring in foreign workers because they could
not hire qualified Americans?

(a) A Domino's Pizza in Virginia
(b) A Burger King in Maryland
(c) A 7-11 in Philadelphia
(d) The American Cafe in Washington
(e) all of the above

In addition to the above statistics, look at the economic and social statistics in the "100 Harshest Facts about Your Future" handout. Clearly, the middle-class, children, young families, and the poor have seen their standard of living go down since the 1970s. The only two groups who have seen their standard of living increase since the 1970s is the wealthy and the elderly. The larger question then is this: What is the relationship between government policies and the declining American standard of living?

In his essay, "Reagan's America: A Capital Offense," Kevin Phillips argues the President Reagan's policies in the 1980s helped the wealthy and large corporations at the expense of the majority of Americans. Phillips is right when he argues that "Reaganomics" caused declining standards of living for most Americans. However, Phillips is wrong to argue that this was mainly a Republican economic program designed to benefit the wealthy and large corporations. First of all, both the Republicans and Democrats supported Reagan's economic programs in the 1980s. In fact, even under a Democratic President, President Clinton, these conservative economic policies were still being carried out. I believe Phillips is wrong when he argues that these conservative economic programs to help the wealthy in the 1980s are just like those in the 1880s and 1920s. Unlike these earlier boom eras, when the Republicans help the rich get richer at the expense of the rest of America, in the 1980s and 1990s the United States increasingly found itself participating in a global economy. I will argue many of President Reagan's, Bush's, Clinton's and Bush Jr.'s economic policies are all designed to try to make America more competitive in this global economy. Tragically, however, both Republicans and Democrats alike since the 1980s have been supporting efforts to make America more competitive in this global economy by working to lower Americans' standard of living and quality of life. Needless to say, if the majority of Americans understood what their political leaders were doing they would feel betrayed and angry. So, of course, neither the Republican or Democratic parties dare level with the American people about their efforts to lower our standard of living and quality of life.

How did the growth of the global economy in the 1970s and 1980s force American political leaders to conclude that the only way for the American economy to be competitive was to lower our standard of living? Beginning in the 1960s and 1970s, American companies began to move some of their operations overseas both in order to be closer to global markets they were serving and to take advantage of lower wages in other countries. In addition, beginning in the 1970s European and Japanese companies began to challenge American companies for dominance both in the United States and throughout the world. Throughout the 1970s, the industrial economies were burdened with a massive increase in the price of oil. Faced with declining profits because of increasing energy costs at all levels of production and sales, American, European, and Japanese companies began to look for ways to cut their costs and restore their huge profit margins. In the 1960s and 1970s, throughout the industrial world, but especially in the United States and Europe, national and state government created all sorts of strict laws protecting the environment, worker's safety, and the consumer. Faced with the increasing costs of meeting these environmental and safety regulations, the dominant industrial companies began to look for ways to cut their costs and shore-up their sagging profits. Finally, faced with increasing inflation in the 1970s, industrial workers in the United States, Europe, and Japan demanded higher wages just to keep up with inflation. Burdened with workers' increasing demands for higher wages, these industrial companies were again faced with increasing costs and lower profits. As a result of these economic changes in the 1970s, many of the dominant industrial companies that did business in the United States, Europe, and Japan were faced with a growing crisis; their costs were increasing and their profits were flat and even declining. What could these companies do to shore up their profits and reduce their costs?

In the 1970s and 1980s, many of the industrial giants in the United States, Europe, and Japan became global companies; they no longer wanted to claim allegiance to any country in the world. By becoming global companies they could force nations to compete with each other to attract their companies to build factories in their countries. By the 1980s, these global companies, now often called Transnational corporations (TNCs) were aggressively using this strategy of globalization to blackmail countries into reducing their costs and increasing their profits. I believe that President Reagan's economic program, which Phillips and others have called Reaganomics, reflect the increasing reality of the global industrial economy and the power of TNCs to blackmail even the biggest and strongest countries and force them to create economic, political, and social conditions that will reduce their companies' costs and increase their profits. Let's now look at some of the major demands these TNCs imposed on industrial countries in the 1980s and 1990s:

Demands Made by Transnational Corporations to do Business in a Country under the Global Economy

1. Greatly reduce Corporate taxes and taxes on the rich.

2. Greatly reduce government spending in order to cut taxes.

3. Increase taxes on the middle-class and poor to pay for the necessary government services, such as support for TNCs.

4. Reduce environmental, work-safety, and product-safety regulations.

5. Provide millions and millions of dollars in tax incentives and subsidies to TNCs in order to convince them to locate in your country.

6. Build and support modern industrial factories for TNCs to use rent-free.

7. Create tax-free export processing zones so that TNCs can produce products without paying any taxes at all.

8. Reduce and lower worker's wages by keeping the minimum wage low or eliminating the minimum wage altogether.

9. Reduce the costs of hiring workers by reducing or eliminating workers' compensation taxes, social security taxes,and health insurance taxes.

10. Allow child-labor at almost any age and under any conditions.

11. Do not enforce maximum work-day hours, such as the eight hour day or the 40 hour week.

12. Use government power to crush and weaken labor unions. Allow companies to hire security firms to harass and intimidate workers and unions.

13. Allow TNCs to freely take their money and profits out of your country.

14. Reduce government support for health-care, education, and anti-poverty and anti-hunger programs, forcing workers to work for any wage just to take care of and feed their families.

15. Support global free trade and work to prevent countries from denying companies the right to sell their products despite the brutal conditions, environmental destruction, and exploitation of their workers.

16. Don't restrict or limit immigration and encourage high levels of unemployment in order to force workers to compete by working for lower and lower wages.

17. Limit and restrict local and national government control over their economies. Encourage global bodies to set economic standards that will benefit TNCs.

18. Limit the ability of workers and citizens to challenge the TNCs and their own government's economic programs which help the TNCs at their expense.

19. Create massive national debts in order to bankrupt governments and force them to be even more at the mercy of the TNCs. Governments can thus say they have no choice but to accept these conditions.

20. Force your citizens to accept lower standards of living and quality of life in order to guarantee higher profits for TNCs.

Reagan's Economic Strategy

If we look at Presiden Reagan's economic policies in terms of the above efforts by the TNCs to blackmail countries in order to reduce their costs and increase their profits, Reaganomics makes a whole lot of sense. Let's look for a moment at some of Reagan's major economic policies:

1. to cut taxes on the wealthy and large corporations

2. to reduce government regulations on the environment, worker-safety, and product-safety

3. to provide billions of dollars in tax incentives and subsidies to TNCs

4. to crush labor unions and keep the minimum wage low

5. to support massive increases in immigration to the United States

6. to support American companies in moving their factories to Mexico and China

7. to bankrupt the government by creating a massive national debt

8. to reduce government support for healthcare, children, the poor, and the disabled

9. to work closely with TNCs to create "global free trade" and weaken national governments' ability to manage their economies

10. to reduce the standard of living and quality of life of most Americans

But the larger conclusion isn't that it was President Reagan or President Bush or the Republicans that are responsible for these disastrous policies. Clearly, both the Democrats and the Republicans have supported these policies that have caused the standard of living and the quality of life for most Americans to decline. We can't blame Reagan or the Republicans or even Clinton and the Democrats for what both American political parties are responsible for. As a result of these policies, as Phillips argues, the wealthy and large corporations got richer. With this increasing wealth and success, large corporations, the wealthy, and TNCs are in an even stronger position to blackmail countries into supporting their continued success and profits at the expense of their peoples' standard of living, the health and safety of their environments, and their quality of life.

Many students after listening to this depressing argument about the impact of the global economy on their lives demanded an answer: What can we or should we do about the growing power of TNCs and the wealthy to blackmail countries into reducing their standards of living and quality of life? There are a number of national and global movements that are attempting to directly address this question. For a brief look at some of their proposals for reform, see these internet sites: Debating Globalization. We will further address the problem of reforming the global economy when we talk about the end of the Cold War and what President Bush called "the New World Order."


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© 2000 by Chris H.  Lewis, Ph.D.
Sewall Academic Program; University of Colorado at Boulder
Created 1 June 2000:  Last Modified: 25 April, 2012
E-mail: cclewis@spot.colorado.edu
URL:    http://www.colorado.edu/AmStudies/lewis/1025/index.htm


American History 1025