The State of Working America - Assignment Example

?Order 671413 Macro & Micro Economics Economic History The years leading up to World War I were to become a major factor in how the United s treated foreigners that were residing within its borders when the war started and afterwards. Immigrants who had recently flooded into the country when the war started on April 6, 1917 were immediately brought under suspicion. On April 16 of the same year, all males older than 14 and still citizens of the German Empire were considered alien enemies. Under the Palmer Raids of 1920, the Department of Justice gathered thousands of foreigners who were alleged communists, anarchists, and labor reformers and forcibly deported them. (McElroy, 2002) The recession of 1920-21 declined as unemployment jumped from 4 percent in the beginning of the year to 12 percent at the end of the year. The GDP plummeted 17 percent the same year. President Harding took severe measures in 1920-22 and cut the budget in half. Tax rates were also drastically cut for all income sectors. The national debt was cut by one third, as quoted by one economic historian, “Despite the severity of the contraction, the Fed did not move to use its powers to turn the money supplies around and fight the contraction.” Therefore, by the summer of 1921 visible signs of recovery began to show. Unemployment was back to 6.7 percent and down to 2.4 percent by 1923. (Mataconis, 2009). According to Slichter high wage practices were adopted in the 1920s due to the threat of labor trouble, employers being unwilling to reduce wages in comparison to wholesale pricing, and realizing how important morale and efficiency had become to labor. (Slichter, 2005). Labor trouble threats began to peak in 1920, and the six-years prior saw a double of membership in trade unions. Unionism had established itself in the Chicago Packing Plants, the US Steel Corporation and the Pennsylvania Railroad as well. Employers seemed to have the belief that labor was in danger of becoming radical. (Slitter, 2005). New methods were used in industry to attempt to make workers more efficient and contented. 1. Helping employees acquire property, 2. Helping employees acquire a “stake” in the companies which employed them. 3. Protecting them from arbitrary treatment. 4. Rewarding continuous service with the company. 5. Giving them advancement opportunities and more responsibility. 6. Offering them security. These things resulted in a rise of around 11 percent in hourly wages for factory workers between 1920 and 1925. Thus, wage earners began to save money, which was encouraged by businessmen. (Slichter, 2005). The 1920s known as the “roaring twenties” gained its name from being pictured as a time of American prosperity and optimism. However, it is also seen as a time of cultural change, a decade of the Model T, $5 work days, airplanes, movies, and provocative dress. The nation shifted from urbanism to commercialism and brought with it prohibition, the Klu Klux Klan, strict immigration laws, and gangsters. Quoted by Jerrie Cheek from the Kennesaw University, “The powerful economy might of America from 1920 to October 1929 is frequently overlooked…the strength of America was generated and driven by its vast economic power.” (Cheek, 2005). The happening on October 1929 on a Tuesday, know as “black Tuesday” became the beginning of the Great Depression. Two months after the stock market crash stockholders had lost more than $40 billion dollars in investments. Economists and historians both believe that the economic downturn that showed up in early 1929 lead to the crash. The market did improve somewhat by the end of 1930; however, it was not enough to keep America from entering the Great Depression. (Kelley, 2012). By 1933 11,000 of America’s 25,000 banks had failed, and because deposits were uninsured, funds were simply lost. Banks, being unsure of the economy, stopped issuing new loans, which contributed to the situation. (The Great Depression, 2012). Since money became tight from fear, purchasing became less and less from all classes, and production slowed and the workforce slowed. More and more people lost their jobs and unemployment rose to 25%. Tariffs were placed on foreign imports and trade between America and other countries slowed as a result. The extreme drought conditions in the Mississippi Valley in 1930 caused many people to lose their farms because they could not pay taxes and other debts. While this was not a direct cause of the depression, it did have a direct effect on the already extreme economic conditions. (Kelley, 2012). The depression ended in 1941 with preparations of World War II. (The Great Depression, 2012). There has been debate as to when the Keynesian Revolution occurred. In 1933, during the great depression, it was hard to balance the surplus labor and ineffectiveness of price reduction in product markets. Which if balanced would have restored consumer spending to levels that would expand production once again. Keynes became prominent in the late 20s as an economist and his first publications in 1942 (Keynesian Economics) and 1945 (The White Paper on Reconstruction) brought his policies into public view in Canada and Britain. (The Keynesian Revolution, 2012). He died in 1946 recognized as the greatest economist of modern times. However, the Keynesian thinking on American public policy was not officially recognized until the 1960s when President Kennedy endorsed them. (The Keynesian Revolution, 2012). Keynes is quoted in 1936, “If our central controls succeed in establishing an aggregate volume of output corresponding to full employment as nearly as is practicable, the classical theory comes into its own again from this point onward.” (TKR, 2012). The National Recovery Administration (NRA) was the main attack on the economic crisis between 1930 and 1940. Roosevelt called for stability and not stimulus and use of resources and plants that were already available. (The New Deal, 2012). The Agricultural Adjustment Administration (AAA) favored dumping surpluses into foreign markets; this attributed to the 50 percent rise in farm income by 1936. However, some black sharecroppers and tenant farmers were forced off the land in the South. Thus, some provisions of the AAA were considered unconstitutional. (The New Deal, 2012). The government was forced to grow. Scholars and economists have said that rising affluence, pressures of interest groups and bureaucrats have caused the growth. Sparrow’s article in 1997 contends that during a depression or war, the public demands government action. Therefore, programs are created and remain after the crisis. Government power is reduced after the crisis; however, it still remains more powerful than normal without the emergency. This is called the “ratchet effect.” (Sparrow, 1997). Women became more prominent in the workforce in the 1920s, which gave rise to the era of the white-collar worker. The concept known as “wage discrimination” on the basis of gender was seen for the first time in the 20th century. The two seemed to work hand in hand, the wage gap increased while the gender gap decreased. Young unmarried women saw dramatic wage increases when employment shifted earnings to women in relation to men in factory work. The next major increase in pay was attributed to a rise in clerical jobs among white female employees. The prospect of work in an office rather than a factory was more acceptable and to middle class women who were intelligent, it was advancement against their male classmates. (Wright, 1991). Golden contends that personnel departments and new policies allowed discrimination among women to exist. Married women were barred from employment in some jobs through the 1940s. In 1890 the married women workforce was a low 3 percent. A surge of working wives was seen right before World War II. (Wright, 1991). The practice of married women working outside the home was seen as a social evil, and compared to child labor. It was very clear that women did not have an equal chance for promotion and career advancement as men. As late as 1942, 87 percent of American schools would not hire married women, and 70 percent would not keep single women who married. Many offices also had rules against hiring or keeping married women. (Wright, 1991). Golden contends the feeling was that married women were less productive after married or that there was a general thought that they would quit soon anyway. Golden addresses the subject of women’s education by suggesting that the rise of wages and onset of more clerical jobs, that by the 1960s there was an explosion of discontentment among college-educated women. (Wright, 1991). She notes that through history girls have done better than boys in school, however, their public education limited their job opportunities outside teaching? (Wright, 1991). The GI bill was not signed until 1944, but it provided great benefits to soldiers returning home. The bill was accredited to preventing a post-war economic depression, and thus created a time of prosperity immediately following World War II. The policies created by the New Deal after World War II created a safety net that softened business downturns and the possibility of a repetition of a depression as seen after World War I. (New Deal, 2012). Since 1925 until now the income and wage distribution has changed due to the industrial revolution, labor movements and change in cultural movement of the roaring 20s. Between 1948 and 1979 the most wealthy 10% accounted for a third of the overall income growth. And between 1979 and 2007 the same 10% showed a 91 percent of average income growth. (State of Working America, 2012). Wage distribution changed radically in the 1970s due to policy commitments to low unemployment and low inflation. A much poorer global economy was present in the 70s as well as objections to minimum wage and union organizations. (State of Working America, 2012). The chief allied leaders during World War II were Winston Churchill, Joseph Stalin and Franklin Roosevelt, and later Harry Truman. These leaders met many times to discuss after war policies, however, a cold war developed between the western allies and the Soviet Union after the war. A cold war develops a state of tension in hospitality between allies at the end of a war. The cold war was responsible for a large development of military alliances as well as forming NATO, North Atlantic Treaty Organization to protect each other against another outside attack. It also brought about the Warsaw Pact to help each other out if any of the Eastern European nations were attacked. (WWI & the Cold War, 1990). As we moved into the 1960s with the campaign of 1964, Lyndon Johnson campaigned on a “war on poverty.” He fought to build a “great society” that would eliminate poverty in America. In 1964 he signed the Economic Opportunity Act which aimed at getting to the root of the creation of poverty within the United States. From this venture came the Job Corps, which provided vocational training. (Ushistory.org, 2008-2012). The 70s and the Great Inflation of the 70s have been described as, “the central monetary event of the latter half of the 20th century.” (Hall, Hart, 2010). In 1962 the inflation rate was 1.2 percent, by 1970 it was 5.84, and by 1980 it had more than doubled to 13.5 percent. (Hall, Hart, 2010). Economist named it the “misery” index at the time, which is the sum of the unemployment rate and the annual rate of inflation. By 1980 the inflation rate had climbed to a historical 20.8 percent. (Hall, Hart, 2010). This phenomenon persisted for 20 year and the notion of the Phillips’ Curve has been blamed for the accelerated rate. The theory was founded in the 1950s when it was thought that inflation could generate economic benefits. (Hall, Hart, 2010). Recapping the 1960s and 70s, the Bretton Woods system of fixed exchange rates overvalued the dollar. A huge increase in domestic spending was seen in Johnson’s Great Society programs. Especially a rise in military spending because of the Vietnam War which gradually overvalued the dollar. The system ended between 1968 and 1973 with a suspension of the dollar’s convertibility into gold. Prices adjusted after 1973 when the more expensive oil prices suddenly started up. Floating rates have adjusted with external shocks every since that time. (IMF, 2012). When the Reagan administration took office he proposed supply-side economics to cut inflation and increase employment. In August of 1981 the Economic Recovery Tax Act was passed which cut personal income tax by 25 percent over three years. He also lowered the capital gains tax as well as cut $30 billion from social programs such as housing, job training and school lunches. However, this maneuver was a failure. To fight inflation the Federal Reserve raised interest rates, which did help as world oil prices were falling at the same time. In early 1982 the unemployment rate had climbed to 10 percent, and the economy did not begin to see an improvement until around 1983 when interest rates fell and inflation dropped. (The Reagan Administration, 2000-2012). Reduction in the size of government was one of Reagan’s key policies. Deregulation of certain sectors of the economy such as airlines, savings and loans, and communications was done because he contended that competition would benefit the consumer through service and lower costs. Reagan was a politician from the old school and his fight against the Great Society did not infringe on his beliefs in the New Deal. He still viewed the Soviet Union as an “evil empire” that promoted communism around the world. This only increased Reagan’s commitment to strengthen the military of the United States. Military spending grew to over $100 billion in his first term. Reagan’s popularity declined during his second term due to the Iran-Contra arms scandal. Although he was not implicated in the arms sales, it did have a direct effect on his popularity. References Boom Or Bust Cycles, The New Deal, Financial Crisis of 2008. 2012. Web. 20 April 2012. http://hyperhistory.com/. Cheek, Jerrie S. 01 August 2005. The Roaring Twenties. Web. 20 April 2012. http://webtech.kennesaw.edu/. Economic Policy Institute – The State of Working America. 2012. Web. 20 April 2012. http://stateofworkingamerica.org/. Franklin D. Roosevelt – The New deal in action. 2012. Web. 20 April 2012. http://presidentprofiles.com/. Hall, Thomas E; Hart, William R. October 2010. The Samuelson-Solow “Phillips Curve” And the Great Inflation. Web 20 April 2012. http://fsb.muohio.edu/. Kelley, Martin. 2012. Top 5 Causes of the Great Depression. Web. 20 April 2012. http://americanhistory.about.com/. Mataconis, Doug. 09 October 2009. The Great Recession of 1920-21, and What it can Teach Us Today. Web. 20 April 2012. http://unitedliberty.org/articles/. McElroy, Wendy. 04 2002. World War 1 and the Supression of Dissent, Part 1. Web. 20 April 2012. http://fff.org/freedom/. Politics from Camelot to Watergate. 2008-2012. Web. 20 April 2012. http://ushistory.org/. Slichter, Sumner H. 2005. The Current Labor Policies of American Industries. The Quarterly Journal of Economics, Vol. 43(3) May 1929. Sparrow. Bartholomew. 1997. From the Outside In: World War II and the American State. Web. 20, April 2012. http://independent.org/publications/. International Monetary Fund. 2012. The end of the Bretton Woods System (1972-81). 2012. Web. 20 April 2012. http://imf.org/. The Great Depression Causes and Effects. 2012. Web. 20 April 2012. http://thegreatdepressioncauses.com/. The Great Depression Timelines. 2012. Web. 20 April 2012. http://thegreatdepressioncauses.com/. The Keynesian Revolution. 2012. Web. 20 April 2012. http://homes.chass.utoronto.ca/. The Reagan Administration. 2000-2012. Web. 20 April 2012. http://cliffsnotes.com/. WWII & the Cold War. 1990. Web. 20 April 2012. http://fresno.k12.ca.us/. Wright, Gavin. 09 1991. Understanding the Gender Gap: A review Article. Journal Of Economic Liternature. Vol 29 (3). Web. 13 April 2010. Read More