The topic of economic inequality is not a new one as it has been the basis of judging how a particular nation is doing regarding economic growth. Furthermore, financial inequality has been in persistence for the longest time possible due to various factors. These factors which are economic have been used to place people in different categories based on their economic abilities. In the United States, for example, a lot of historical occurrences, monetary policies as well as political ideologies have been vital in shaping the economic agenda of the population. Consequently, over the last half-century, there have been shifts in the number of the rich, the middle class and the poor based on the choices made by the government and the people in general. Additionally, an analysis of specific historical events, transformations, ideas will reveal that they have worked together to exacerbate inequality within the U.S.
Issues, Ideas, and Occurrences That Have Contributed To Increased Economic Inequality in the US
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As mentioned, there has been an increase in economic difference, especially in the United States. The increase can be attributed to various factors which are historical, economic, social or political. Consequently, these factors have consistently shifted the balance between the haves and have-nots in that there is a constant increase in the number of poor people. The situation is far from what Stein envisioned where the poor would be less as the US economy grew. The reason for the shift in inequality levels according to Stein is to be found in the following factors:
U.S. Trade Policy in a Cold War Setting
The US is usually viewed as a land of opportunities owing to its vibrant economy and policies which in turn create an avenue for conducting business. However, during the Cold war era, this nation came up with trade policies which in turn destabilized the balance it had achieved in reducing economic inequality. The reason for this destabilization which had been obtained during the ‘great compression’ was caused by its focus to compete with other developed nations such as the Soviet Union. The idea of ‘liberal consensus’ has been very pivotal on how economic growth is to be achieved 1 . The proponents of this idea found themselves doing away with the philosophy of growing their GDPs and instead focused on class warfare. Consequently, most of the resources were devoted to competing with the Soviet Union in a show of supremacy which saw it adopt trade policies with devastating effects. According to Stein, the US was spending so much of its revenue on supporting the war in Vietnam, Korea, and Japan 2 . As a result, the economic equality which had been achieved in the 1940s where the poor were less than 10 percent was forgotten. More so the indulgence in Cold War by the US gave other nations to flourish economically taking up the market share that the US was enjoying. A case to reckon with here is the growth of Japan between 1966-1970 while at this time the US was spending heavily on the Vietnam War 3 . These nations created more industries thus creating wealth for themselves while denying the US an opportunity to flourish. Consequently, the United States spent much of its revenue to acquire weapons from the foreign companies at the expense of its population future.
The Changing Structure of Business Ownership
Business organizations and enterprises are responsible for increasing the economic growth in any nation. However for this to be a reality, the business structures, as well as the environment for conducting businesses, must be right. In the last half of a century, there have been challenges in how businesses are done in the United States thanks to the increased immigration by minorities. The reason for this is the fact that the US government according to Wodtke, has not allowed the minority groups to operate large-scale businesses for fear of losing their footing 4 . This fact proves what Lichenstein, refers to as ‘merchant capitalism’ where minority workers find themselves trapped in poor working conditions and remuneration packages which reduce their status 5 . Consequently, the minority groups continue to wallow in poverty forcing the federal government to use a lot of avenues to bail them out. Additionally, the minority groups do not have access to better jobs or schooling meaning that their chances of economic mobility are reduced significantly. These groups of people have not been fully integrated into the economic sphere of the US meaning that they cannot contribute adequately to economic growth.
International Competition among Firms and Nations
There has been a gradual increase in economic growth across the globe thanks to technological advancement and industrializations. As a result of this progress, more corporations and countries are increasing their industrial production to serve the needs of growing populations. As such, there has been a shift of power from former powerhouses such as the United States. Consequently, the change in control has meant a change in the way trade is done. People no longer rely on the United States to get industrial goods as it was in past centuries. Currently, the Asian and the European continent have proved to be a worthy competitor to the United States. As a result, the accelerated economic growth that the US had envisioned has instead dwindled meaning that companies are finding themselves with no alternative but to cut down costs. It is against this background that businesses are laying off individuals as they cannot manage to continue paying them. What this means that more people are losing their livelihood and thus cannot maintain the high cost of living. It is through this kind of competition that this nation is finding itself grappling with increased inequalities between the rich and the poor.
The “Fissuring” of the US Industries and Economic Sectors
The US workplace has changed in the last half of century with increased fissuring which has seen the low wage workers get low deals. The fissuring has been enhanced by the fact that the concerned labor authorities have not been able to enforce laws and regulations concerning employment procedures. According to Weil, the agencies and bodies which have been given the mandate to implement employment policies tend to have limited budgets as well as insufficient staff to carry out their duties 6 . Consequently, they are not able to access all the employment agencies to enhance compliance requirements. As a result, the employment channels take advantage of this scenario to exploit their workers creating room for increased economic inequalities. The conditions are worse in the industries which employ large numbers of low wages workers as it is here that workers are paid whatever wages the industries deem fit without following employment policies. More so, this kind of companies operate in a highly competitive environment which creates room for noncompliance 7 . It is against such background that workers’ rights are violated as they are subjected to weak labor laws which limit their economic mobility thus creating economic inequalities
The Federal Reserve’s Monetary Policy Effects on Interest Rates and the Value of the Dollar
The Federal Reserve monetary policy usually sets the stage regarding how much money circulates in the US economy. Additionally, this financial agency has the mandate of regulating other financial institutions such as banks when it comes to interest rates. In this regard, the decisions that it makes can shape the US economic field either positively or negatively. If the Federal Reserve Bank reduces interest rates the banks can borrow from it easily and thus lend to the customers cheaply and vice versa. However, it is important to note that when the Federal Reserve reduce the cost of borrowing, there is a great likelihood of inflation. This is so since many people will have access to money meaning that the money becomes less valuable. Consequently, the value of the dollar decreases meaning that exports will be cheaper while imports will be more expensive. The situation eventually affects the economy of the nation meaning that the poor will suffer as they will be suspended from employment opportunities. While this may seem discouraging, it is true to say that the Federal Reserve may reduce the value of the dollar to make US exports cheaper. In this way, the exports become affordable meaning that more job opportunities are created fostering economic growth. It is from this kind of observation that it becomes clear that Federal Reserve’s monetary policy has a role of either increasing or reducing economic inequalities.
In conclusion, there has been a rise in economic inequalities in the US especially in the last half of the century. Sadly this surge in economic inequality is a far cry from what was witnessed in the previous times where America had succeeded in compressing economic disparities as discussed by Stein 8 . In the 1940s this nation had less poor people and was more prosperous than most countries. However various factors have come at interplay in the last half a century which has translated to increased social inequalities. Some of these factors include US trade policy in the wake of Cold War, the changing structure of business ownership, and “fissuring” of the U.S. workplace in particular industries and economic sectors. Other factors include international competition among firms and nations and the Federal Reserve’s monetary policy effects on interest rates and the value of the dollar among others. These factors as noted have had a significant influence when it comes to shaping the US economic field regarding promoting or reducing economic disparities. In spite of these milestones, one thing is clear; there exists a danger of continued economic differences if the right policies are not implemented. The United States will instead find itself lagging behind other countries which are determined to be the ultimate global economic powerhouses.
Bibliography
Lichtenstein, Nelson. “The Return of Merchant Capitalism.” International Labor and Working-Class History, no. 81(2012): 8– 27.
Phillips-Fein, Kim "If Business and the Country Will Be Run Right: The Business Challenge to the Liberal Consensus 1945-1964.” International Labor and Working-Class History, no 72 (2007): 192-215.
Stein, Judith. Pivotal Decade: How the United States Traded Factories for Finance in the Seventies. London: Yale University Press, 2010
Weil, David. “Enforcing Labor Standards in Fissured Workplaces: The US Experience.” The Economic and Labor Relations Review 22, no. 2 (n.d): 33–54
Wodtke, Geoffrey, T. “Continuity and Change in the American Class Structure: Workplace Ownership and Authority Relations from 1972 to 2010.” Research in Social Stratification and Mobility , no, 42 (2015): 48–61.
1 Kim Phillips-Fein, "If Business and the Country Will Be Run Right: The Business Challenge to the Liberal Consensus 1945-1964.” International Labor and Working-Class History, no 72 (2007): 193.
2 Judith Stein, Pivotal Decade: How the United States Traded Factories for Finance in the Seventies , [London: Yale University Press, 2010], 6.
3 Ibid, 6.
4 Geoffrey, T. Wodtke, “Continuity and Change in the American Class Structure: Workplace Ownership and Authority Relations from 1972 to 2010.” Research in Social Stratification and Mobility, no, 42 (2015): 48-49.
5 Nelson Lichtenstein, “The Return of Merchant Capitalism.” International Labor and Working-Class History, no. 81(2012): 8.
6 David Weil, “Enforcing Labor Standards in Fissured Workplaces: The US Experience,” The Economic and Labor Relations Review 22, no. 2 (n.d): 37
7 David Weil, “Enforcing Labor Standards,” 40.
8 Judith Stein, Pivotal Decade, 8.
