The Price of Civilization Chapters 5-6

Detroit

Where Sachs grew up

Home of a lot of riots during the Civil Rights movement

Lead to a huge flight of whites to suburbs and out of Detroit

Dozens died, city up in flames, mass poverty and abandonment

Gave George Wallace (Alabama governor) ability to run third party and win a primary

Civil Rights Movement

Lead to :

1. Attempting to end discrimination through affirmative action

2. Desegregation of neighborhood schools

3. White evangelical Christians congregating into one party (split before, but the desegregation of religious schools made a push into a bloc of opposing racial background)

Came with a lot of political backlash, but also economic and social victory for many African American communities

Surge of Immigration

Immigration and Nationality Act of 1965- ended quotas on national origin, leading to a sharp rise in immigration

Dates:

1970 – 10 million immigrants

1990 – 22 million immigrants

2009 - 48 million immigrants

Proposition 13, a piece of tax legislation in California, lead to mass tax revolts because it required taxes to help lower grade schools where that these new immigrants were filling

Sunbelt vs. Snowbelt

Industry and better education in the North used to mean the North controlled political power along with wealth

Between 1900-1960, the Snowbelt provided all but one U.S presidents, between 1960-2008, the Sunbelt provided every one. This represents the gradual rise of economic power in the South.

The rise of anti-governmental political power created new Sunbelt power without a nationwide swing in values due to demography

Sunbelt Values

Very anti-government

Highly valued Christianity 37% Evangelical protestants (13% in North)

65% Protestants (37% in North)

Pro-life

Anti-gay marriage

Anti-Evolution curriculum

These views were seen as threatened

Suburban Flight

The baby boom and the automobile led to large suburban flight in the 1960’s

Residential sorting became a way in which educational and income inequalities were propagated

This made Congressional districts “safer”

What Americans think

72% said income differences are too large

68% said distribution is unfair

87% aid the government should spend whatever it needs to in order to ensure good public schools for all

80% favor having their taxes help pay for retraining programs for those who have been fired

73% say it is the responsibility of the federal government to make sure everyone has healthcare coverage

95% say one should always find ways to help those less fortunate

Americans still left thinking

77% say there is too much power concentrated in the hands of a few businesses

62% say big businesses make too much profit

83% say there needs to be stricter environmental regulation

71% say the government should regulate greenhouse e gases

66% say renewable energy would be a better long-term investment than fossil fuels

Spending differences

Of the ten largest net-recipient states, Obama carried only two

Of the ten largest giving states, Obama won all

Receiving States1. New Mexico – 57%2. Mississippi – 43%3. Alaska – 38%4. Louisiana – 40%5. West Virginia – 43% 6. North Dakota – 45%7. Alabama – 39%8. South Dakota – 45% 9. Kentucky – 41%10.Virginia – 53%

Giving States1. Colorado – 54% 2. New York – 63% 3. California – 61% 4. Delaware – 62% 5. Illinois – 62% 6. Minnesota – 54% 7. New Hampshire – 54% 8. Connecticut – 61% 9. Nevada – 55% 10.New Jersey – 57%

Globalization

Started a huge shift in the United States economy in the 1970’s

The lead protagonist was MNC’s or multinational corporations

America’s include: General Electric, Exxon Mobil, Ford Motor Company, Wal-Mart, Chevron Corporation, IBM, etc.

In the 1960’s Hong Kong, Taiwan, and South Korea came to the table

In 1978, the biggest change occurred when the People’s Republic of China joined the global market

1991- India joined as well

China

In 1985, trade between the U.S and China was equal at 3.9 billion dollars in each direction

By 2009, The United States has raised their output to 69.5 billion dollars

At the same time, China has raised it’s share to 296.4 billion dollars

In 2010, China overtook Japan as the second-largest economy in the World

The 1970’s mishaps

The U.S international monetary fund collapsed in 1971

In 1973, Oil prices soared – the great stagflation

1975, the U.S lost the War in Vietnam

Late 1970’s Japan rapidly rose in the auto industry

Reaganomics focused on monetary policy, scarcity of resources, and foreign competition, trying to fix the government from the inside

Alan Greenspan

Alan Greenspan was Federal Reserve Chairman from 1987-2006

He overlooked the severe risks of his own policies

He pushed down interest rates

He said the inflation was an occurrence of productivity

Inflation was really a product of Chinese imports

The Fed’s monetary policy did create jobs, but in China, rather than the U.S

Ben Bernanke is following down the same path

Different Effects

Three overarching effects of globalization that is transforming the global economy: The Convergence effect- refers to the new globalization

providing the availability for today’s emerging economies to leapfrog technologies – Allowing China to quickly master imports and then branch out (The Process of Absorption)

The Labor effect – refers to China’s opening being tantamount to hundreds of millions of low-skilled worked being thrown into the labor pool – China’s costal cities were designated as “special economic zones”

The Mobility effect – refers to the asymmetry of internationally mobile capital and immobile labor – created a ‘Race to the bottom’

Mobile Capital effects

Globalization has allowed China, India, and others to have the fastest growing economies in history

Internationally mobile capital gains in three ways The sharp boost in productivity means huge investment

opportunities with high rates of return

The surge of global labor means wages around the world are bid down

Governments around the world are cutting corporate taxes easing regulations to raise competition

All three of these effects are negative for U.S workers

Winners and losers

Winners are owners of human capital (i.e. corporate lawyers, high-tech engineers, Wall Street bankers, senior managers, etc.)

The biggest losers BY FAR are those with a low level of education, thus leading to huge income gaps

Governments have cut the EATR (effective average tax rate) which has increased capital mobility

New York and London were two cities over the past twenty years on a dramatic race to the bottom

The end result was a massive financial bubble the imploded in 2008

Solution <3

International Cooperation!

By banding together to set international minimum norms such as a common approach to eliminate tax havens, financial environmental regulation, etc.

The race led to the depletion of natural resources and long-term damage to earth’s ecosystem

The technological knowhow to deploy technology still requires large-scale research and development

Market regulations are necessary to steer markets toward sustainable solutions – so far such measures have been blocked