Economic Problems Lecture outline (& Group Discussion Pts.)
Economic trends --. Increasing Economic Inequality key theme, & too much is a problem…
Shift to Hour-Glass shaped economy (shrinking middle class)
[See D&B Ch. 2 & 3, And Lowrey et al web rdg. for various data on income, wealth distribution, etc. -- know
trends, not necessarily specific #s]
Video “Inequality for All” & how too much inequality harms US economy and undermines Middle-classKey role of consumer demand as making up 70% of US economy. (consumers as “job creators”),
Middle class struggles & widening economic inequality since late 1970s,
Rising Econ. Growth and labor productivity, but flat / stagnant wages for most workers, many in
middle class have struggled and fallen out of middle class. [D& B Chs. 2 & 3 show this,
as does Lowrey et al. web rdg.]
70% of US Economy is based on consumer demand – The great widening of economic inequality
in recent decades is bad for economy, b/c rich not spend enough. Need strong middle
class for strong consumer demand.
Labor Theory of Value (LTV)– (An explanation for Economic Inequality)
What creates all wealth / value?
Value of product split 3 ways –
Fixed costs, Variable costs & Surplus Value.
Exploitation is key concept also, & degree of it makes economic inequality greater or lesser
Examples: Historical conditions in US factories in early industrialization (D&B Ch. 3); Apple computers
made overseas vs. in US (Duhigg web rdg.), [ See also History of US Labor, brutal early conditions (D&B
ch. 3)]
Companies moving jobs overseas to reduce labor costs and increase profits, like Apple (Duhigg web rdg.;)
Commodity Fetishism – definition and how Apple’s products & our fascination with them fits that idea (what
about workers who made these products & labor-management systems used? Do we think of that much?)
Crisis of Over-production in Capitalism & how that relates to current economic crisis: Consumer demand key
part of economy. When workers can’t afford products, demand goes down…[ Middle-class
squeeze, can’t afford to buy as much]
Problems in Production of Mac IPhones, etc. in China and advantages for the company as well as problems for
workers—hours, working conditions, pay, mental health of worker, etc. Compared to production in US.
(Duhigg et al. web rdg.) How fits with labor Theory of value…
Increasing Globalization as key factor in rising economic inequality -- deindustrialization in US and moving
manufacturing abroad, decline of unions in US, etc.). Hurts middle class, esp. those without higher ed., can fall
down class ladder even to poverty. [D&B Ch. 3]
Out-sourcing --a technique that increases economic inequality, reduce labor costs. Hiring of outside company to
provide labor & services more cheaply (e.g., Harvard and LIU cases (D&B Ch. 3).
Out-sourcing also can be international—like Apple hiring / contracting with Foxconn to make products in China
(Duhigg et al. web rdg.).
Poverty Explanations –
Cultural / Behavioral Vs. Structural / Economic – main general ideas of each (Rodgers rdg. 8 in C&V) \
Which type of explanation more influential on US poverty program policies and with public?
Govt. assistance for corporations is known as “corporate welfare” (see D&B Ch. 2), which we pay a lot less attention
to than welfare programs for the poor (also discussed in D&B Ch. 2)
Govt. bail out of AIG & big banks -- Rewarding very risky, unsuccessful & unethical (& sometimes illegal)
practices by AIG and big banks. All govt. assist. to corps. given with few conditions/restrictions… Bonuses
paid to executives of failed firms (Nocera et al web rdg., Johnson web rdg.).
US Financial Industry excessive Political Influence distorting US economic policy, led to crisis and lack of effective
response. This is bad for the economy, ultimately… Rewarding risky, unsuccessful behavior makes it likely it will
happen again… Solution--limit size of banks “too big to fail” (Johnson web rdg.)
[Also, corporate CEOs egt richer and corporations pay less taxes (sometimes none) as they continue to cut US jobs &
poverty in creases (Lowrey et al web rdg.)]
Other key Issues not covered in class, or not much, but that you should know about:
Income vs. Wealth –definitions of each (D&B ch 2).
& know general patterns of rising inequality, esp. Income inequality, in recent decades & years (Lowrey et al
web rdg. & tables in D&B chs. 2 & 3)
Poverty—Rate overall, and changes over time & who is more likely to be poor. (Lowrey et al. web rdg. and D&B
ch. 2)
Human Agency (vs. Social Structure) concept from Ch. 1 of D&B in “Intro” topic section. Where is there Human
Agency in Econ. problems readings—people trying to change economic structure a bit to benefit more people, lower
poverty, etc.—
Occupy Movement (Gupta et al. web rdg.) – what are main grievances and issues of concern, and what are they
doing in response?
Case Studies in D&B ch. 2 as examples of Human Agency --“Welfare Warriors” fighting stereotypes of poor (reframe
debate) and policies that make lives harder; Homeless youth writing project and expressing their lives; E St. Louis
Farmers Market project to improve access to healthy foods in very poor community – (All D&B Ch. 2).
Ch. 3 Case studies as examples of Human Agency--Student Action with Farm workers –services to very needy
group, youth leadership development and college; Southampton College Coalition for Justice fighting
outsourcing of custodial jobs (like Harvard case also); Pomona Day Labor Center – worker needs &
empowerment. (D&B ch. 3). Also SLAM group at Harvard protests against outsourcing of security guards.
Also, History of labor in US in Ch. 3 has lots of examples of human agency…
See also: Group Discussion Questions