American Dream - Midterm Flashcards
Describe Fordism - Post War to 1980s
- The embarked on the Marshal Plan, Nato, The World Bank, all which supported the American system
- US exited the war with its infrastructure intact (unlike Japan)
- The middle class, uneducated, could get well-paying jobs
- GI Bill of Rights lead to an increased labour force, as it promised returning soldiers training and education
- Attracted the best and brightest internationally
- Industrialism (Fordism) and Consumerism led to a growing middle class and the American Dream
Informatics Era
- Large globalized technological advancement
- Same products, at a lower price
- Motorboards over boards and mortar
- Increasing returns
Why is the American Dream Declining? - Intro
- Lack of trust in government
- Deep-seated angst of the future
- 47 % think the best is in the past
- Saying is Life, Liberty and the Pursuit of happiness
- A nations legal and philisopgical underpinnings have an effect on equality and social outcomes
How did the American Dream stay alive for so long?
- US was an enterprise of innovation while Europe stayed in economic and technological catch-up
- America doesn’t start the new, but shuts down the old with the largest of the worlds companies
Transformation from Fordism to Informatics Era
- Was needed as the Fordism era was not keeping up, what landed was the Thatcher-Regan transformation
- Easier to outsource than revitalize the local economy
Regan-Thatcher Transformation
- Invented Military Keynesianism, defence build-up and tax cuts
- Recapitalize capitalism, slashing taxes for the rich and corporations
- Increased US debt to 3 trillion
Off-shoring labour
- Firms look for the most cost-effective places for labour, internationally
- Challenged the lower middle-class as there is always an international, cheaper option
- If unskilled lower-class workers want to complete, they must increase their skills
- The West has welcomed China into the international market to be more equal, but the West has also embraced the social and environmental priorities of China
- For companies to survive, they need to use off-shoring labour
Winner-take-all Capitalism
1980, the difference between minimum wage and CEO wage was 78 times, it is now higher than 800 times
The Mortgage Debacle
-China matched its Yuen to the US dollar, making US pricing stable, so no need to raise Intrest Rates
-As inflation rose, the US interest rates did not match, Federal reserve needed to include asset pricing in its interest-rate decisions
-Asset boom in the US and a high demand for credit
-Bush, everyone should have a home
-Used Sub-prime mortgages as a way to meet demand, while using houses as collateral
-Lead to a large, inverted, financial pyramid, ARMS
-No down payments, no financial verification, interest only payments
-Credit Default Swap
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White House - Middle Class in America
- Middle-class families are defined by their aspirations more than their income
- Ex. Housing, cars, college
- The cost of these goods are rising more than incomes
- This leads to a disappearing middle class and the end of the American dream
- In ability of the 50th percentile to live in middle-class
The Spirit Level - Why equal societies always do better
- Common-law countries are more inequal than civil law
- Equality is definied as comparing the top 20% with the bottom 20%
- The US has 24% of the world’s prison populations
Fall of the 2008 US Economy
- Housing and Credit booms caused investments in US housing to boom as well
- MBS and CBO financial agreements increased
- As housing prices declined, so did their investments
- Faulting housing caused homes to be worth less than the mortgage loan
Why not Canada?
- Although inequality still plagues Canada, its not as severe as the US
- Canada has larger transfers to health, the poor, education than the US
- Canada had its lending processes cited as too conservative
- Integrated regulation of banks, insurance and investment
- OSFI meets to ensure that Canadian banks are stable
- Capital requirements for mortgages are high
- Most Canadian mortgages are held by banks, front-line
- Canada has long-term, fiscal and monetary policies
- Globalization must be considered
What is Twin Deficits?
- Growing Budget Deficit with Growing Account deficit
- Caused from importing more than exporting
- Increase in expenditures not matched by an increase in taxation
