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: Hoffman, pp. 458-464; Gerster, pp. 198-204;
100 Harshest Facts (web); Reagan's Economic Strategy
(web); Econmic Demands made by TNCs (web)

Assignment: List the 10 most disturbing
economic and social statistics that
describe American society in the 1980s 
and 1990s?

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. President Reagan's Economic
Program

2. The impact of Reagan's Programs
on Americans

3. The Impact of the Global Economy
on the United States



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 are 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, and Clinton'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:

1. Ending Corporate Governance

2. When Corporations Rule the World: 
An Economic System Out of Control

3.Economic Democracy: The Political Struggle
   of the 21st Century

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."


© 2002 by Chris H.  Lewis, Ph.D.
Sewall Academic Program; University of Colorado at Boulder
Created 7 August 2002:  Last Modified: 3 Dec. 2002
E-mail: cclewis@spot.colorado.edu
URL:    http://www.colorado.edu/AmStudies/lewis/2010/decline.htm
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