for Discussion: How did the growth
a global economy and Reagan's economic
policies affect Americans' standard of living
and economic future in the 1980s and
Reading: Hoffman, pp. 458-464; Gerster, pp. 198-204;
Harshest Facts (web); Reagan's Economic
(web); Econmic Demands made by TNCs (web)
List the 10 most disturbing
economic and social statistics that
describe American society in the 1980s
President Reagan's Economic
The Decline of the American
Dream in the 1980s
The Global Economy and the
Decline of the American Dream
1. President Reagan's Economic
2. The impact of
3. The Impact of
the Global Economy
on the United States
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
to the wealthiest of Americans?
6. According to Phillips, what does the growth
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?
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?
1. The richest Americans are accumulating more wealth these days
at the fastest rate since the
2. The United States has the widest gap between
rich and poor of any industrialized nation.
3. The top one percent of households - the nation's
wealthiest -control almost a third of the nation's
4. To be among the richest one percent of the
nation's households, your household income
would be at least:
5. Among the richest one percent of the
nation's households, the average income is
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
7. The richest ten percent of U.S. households
(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
(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
(b) stayed the same
(c) risen slightly
15. You can earn more than $200,000 a year
and owe no federal income tax at all.
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.
18. Americans are nearly $2 in debt for every $1
they receive in their paychecks.
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.
30. Some companies have lobbied for and
gained special exemptions - worth millions
of dollars - written into U.S. tax laws,
exclusively for them.
1. Measured in constant dollars, the average
weekly wages of manufacturing workers are
the same today as in 1965.
10. The Department of Labor predicts that
the greatest job growth over the next ten
years will be in which of these categories?
(c) retail salespeople
(d) waiters and waitresses
(e) computer programmers
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.
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.
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.
5. Legal immigrants are entering the U.S. today
at an annual rate higher than in any decade in
6. More immigrants arrived in the U.S. over
the past 16 years than in the previous half century.
7. Since 1990, at least 6 million foreign workers
have been thrown into competition for U.S. jobs.
8. No other developed nation in the world has
asked its labor force to absorb as many new
workers as America has.
9.There are more alien and immigrant workers
than out-of-work Americans in most states.
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:
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
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
8. Reduce and lower worker's wages
by keeping the minimum wage low or eliminating the minimum wage
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.
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
2. to reduce government regulations on the environment, worker-safety,
3. to provide billions of dollars in tax incentives and subsidies
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
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
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:
Corporations Rule the World:
An Economic System Out of Control
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."