Political Economics Three sectors of American Political Economy APE 1st sector Corporate Banking Sector CBS aka Big Business BB o Really big corporations that together have concentrated power and control over the o Interlocking directorates interlocking boards of directors one person can sit on the board of multiple corporations Board of directors run things decide how money is spent economy o Implications Ability to write own economic laws Ability to reshape APE In class ex Big Pharma and the increasing popularity of the cars when they first came out 2nd sector The Competitive Sector small business BB enjoys privileged position in APE o Small size and competition are its key characteristics o Inability to influence government policies consistently In class examples defense spending can be manipulated to help BB but small business is unable to influence it in their favor 3rd sector The governmental sector o Similar in size to the corporate banking sector o But more an ally of rather than an adversary of the CBS NOT a conspiracy theory Creating and maintaining an economic infrastructure structure below the structure Regulatory things that helps business to operate Promote and protect individually owned private property beyond what any other country allows Research and development are largely funded by the government Direct financial assistance In class example the bank bailout Interpenetration of public private domains strong influence of private elites on public policy Revolving door Heads of business going into government to help along policies that will benefit their business Goes both ways with people from government going into businesses because of their knowledge of how the government works The American Political Economy An institutional model of policy making Stage 1 Resources Comes from o Individuals such as those on the Forbes 400 list o Corporations o Foundations Stage 2 Research Done by o Universities Stage 3 Opinion making o Mass media The power of foundations comes from having enough money to fund research in new directions or can keep money away from funding certain research Universities get private funding from foundations for the type of research the foundations want o Think tanks Just do research Get a lot of funding from corporate America BB In class example oil industry brought people from their companies to a rally to show support for policies to help oil industry mass media bought it o Government advisory committees blue ribbon panel Appointed by a public official to advise them on specific issues Stage 4 Law making o Legislative executive judicial Outputs of the public policy process things the government controls directly The economy is much more government central o Used to be more local and state but is now greatly federal o More and more spending on mandatory things o The US spends less than the average of the other OECD23 modern industrialized democracies Understanding the Social Security System o Supposed to be the third leg of income o People were getting more out of SS than they were putting in now people aren t o It is the opposite for Medicare Defense spending and economic growth o US spends a lot more than other countries of defense spending o Defense spending diverts resources to non productive uses o With other spending areas cut defense is now the major source of pork or money for member of Congress The federal budget deficit surplus o There are three things we know about taxes We pay way too much in taxes Taxes are lower than they were in the past but people still think we pay too much government is the primary tax taker State and local tax takers have grown Federal Our taxes just keep going up Federal income is lower than in 1955 o What has changed is who pays Taxes are much more regressive Lower income people are taxed at a higher rate than higher income people Individual income taxes are cut most for the wealthiest Investment income capital gains and inherited wealth are treated more favorably than earned wages from work income Taxes favor rich wealthy people over the middle class The burden has been shifted relatively speaking Outcomes of the public policy process Things government doesn t have direct control over but are affected by their decisions Distribution of wealth o The income gap is growing The rich vs the rest In 2012 the top 10 took home more income than the bottom 90 Us is the most unequal than any other modern industrialized democracy o Poverty especially deep poverty is growing Employers vs workers Most jobs lost are the ones in the middle Wages profits are going to the bosses Old vs young Young people have the highest rate of poverty old people have the lowest o US has the highest child poverty rate o Government does a lot less for children o Implications of the growing inequality squeezing of the middle class We are in a new Gilded Age Government should act as a counter weight but doesn t for various reasons o Relationship between inequality and economic growth Higher economic inequality less economic growth Less economic growth less social mobility