Economics reading reflection

David Kotz, 《The Rise and Fall of Neoliberalism 》- Chapters 1 – 5

Answer all questions

1. Chapter 2 explains that neoliberalism was a planned and well-executed political strategy whose goal was to challenge the role of the government in the capitalist economy. Its primary aim was to remove the various watchdogs that had been set up in various government agencies to protect the public from monopoly power, negative externalities of pollution and congestion, alleviate the worst kinds of poverty and unemployment, and sound a warning bell when speculative behavior let to asset bubbles. This is all captured in Table 2.1, “The Ideas and Institutions of Neoliberal Capitalism”

In 300 words, explain WHY neoliberalism attempted to (i) alter the role of the government in the economy and (ii) break up the accord that had fostered conversations between labor unions and the management of large corporations.

2. Chapter 3 looks back at what Kotz calls the golden era—the era of regulated capitalism which ushered the post-war growth and development of the US economy from 1945 – 1970.

In 300 words,

(i) explain Kotz’s claim that the largest of the US corporations supported regulated capitalism during 1945-70 but later dropped its support and advocated for its overturn. In your answer, explain how the oligopoly sector benefited from the policies of regulated capitalism and what happened during the 1970’s which convinced the oligopoly sector to advocate for the end of regulated capitalism.

(ii) Using the videos “America’s Time 1976-80 and “Decline of the Labor Union, add more information or analysis to what you have written in (i). What did these videos bring out that amplify Kotz’s points, adds a new dimension, and/or challenges Kotz’s analysis?

3. The theme of Chapter 4 is that neoliberalism capitalism has failed to deliver on its promise to deliver even faster economic growth with enhanced opportunities for all in society to benefit from the opportunities of the free market economy.

In 400 words,

(i) select at least 4 different arguments that Kotz provides to support his claim that neoliberalism is flawed and has actually created more economic insecurity and instability that its predecessor, regulated capitalism.

(ii) How does the Lowrey article add to this discussion of the impact of neoliberalism?

4. Chapter 5 discusses the roots of the financial crisis in 2007-09 and pins the blame on behavior that was encouraged by neoliberal institutions. The argument is supported by data and a schematic outline of the argument in Figure 5.4. (no words requirement)

a. What are the neoliberal institutions that Kotz is referring to?

b. How is rising income inequality linked to the era of neoliberalism? Why would unregulated competitive capitalism create such a huge gap between the average US employed worker and the owner class (those whose wealth comes not from labor but from holding financial assets)?

c. What are asset bubbles and why did they arise from the unregulated/neoliberal era of the 1990’s-2007?

d. Provide a definition and example of risky, speculative behavior on the part of financial institutions. Why weren’t banks more prudent and careful in lending money to corporations and individuals?

5. In Question 4 you traced the 3 developments of rising inequality, asset bubbles, and risky lending by financial institutions. In this question, explain the link between these 3 developments the following three “unsustainable trends”:(no words requirement)

e. rising household and financial sector debt

f. the spread of toxic financial assets

g. excess productive capacity? Explain the link.

6. In his video lecture, Joseph Stiglitz explains that income inequality imposes costs on the US economy and society.(no words requirement)

h. Who is Joseph Stiglitz and what are his credentials? Do a Google search

i. What are the myths about income inequality that he hopes to dispel?

j. What costs does income inequality impose on the US economy and society?

7. The “Crisis of Credit” video fills in detail about risky, speculative behavior on the part of banks and how and why banks used leverage to enhance their profits. What is leverage and how does it “turn good deals into great deals?” (no words requirement)