History 479B

Devine

Fall 2012

 

Study Questions for Wells, American Capitalism, pp. 109-163

 

  1. Why was increasing worker productivity seen as an effective way to control inflation? [see p. 111]

 

  1. What was “industrial policy”?  What were its shortcomings as economic policy (both political and intellectual)?

 

  1. Why did conservatives believe that tax cuts would be the best way to revive the economy and increase productivity?  What role did the economist Alfred Laffer play in shaping conservative economic policy?

 

  1. What were the short-term and long-term effects of the Federal Reserve’s tight-money policy of 1979-1982?  Overall, how did this policy affect the economy and people’s perceptions of the economy?

 

  1. According to the author, what factors slowed productivity growth between 1973 and 1982?

 

  1. Between 1983 and 1989 what happened to a) the inflation rate; b) the unemployment rate; c) the Gross Domestic Product; d) worker productivity; e) real wages; f) the gap between rich and poor?

 

  1. What role did broader social developments and changes in the economic structure play in widening the gap between rich and poor?  What trends in particular were most significant?

 

  1. Which regions and sectors of the economy suffered during the 1980s? Why?  Why was there no significant political uprising to protest the worsening conditions?

 

  1. What sectors of the economy prospered during the 1980s?  Why?

 

  1. How did anti-trust and labor relations policies change during the Reagan years?

 

  1. Why did the power of organized labor decline during the 1980s?  To what extent was this decline inevitable due to structural changes in the economy?

 

  1. After 1982, why did the federal deficit remain so high even though the economy was prosperous?  (Note that Republicans, Democrats, and the author all offer different answers to this question.)

 

  1. What does the author mean when he says that “Americans paid for deficits not in higher taxes but in higher interest rates”? (Wells, 138)  Why did high deficits produce high interest rates? What were some of the negative effects of high interest rates?

 

  1. Why does the author argue that those who feared that the growing trade deficit reflected a decline in the “competitiveness” of U.S. industry had “missed the point”?  Why did certain industries like steel, automobiles, and consumer electronics lose business to foreign competitors while other American industries remained competitive?

 

  1. What were the pros and cons of “downsizing” and corporate reorganization?  How can a country “downsize” its way to prosperity?

 

  1. What is a “leveraged buyout”?  Why did many financiers engage in this practice during the 1980s?

 

  1. What factors account for the booming stock and bond markets of the 1980s?

 

  1. What happened to the commodities markets during the 1980s?  How were developing nations affected?

 

  1. What is the difference between “import substitution” and “liberalization”?  (Both are policies that developing nations pursued to improve their economic position.)

 

  1. What caused the Savings & Loan crisis of the late 1980s?

 

  1. How did George Bush’s economic policies (or lack of economic policies) hurt him politically?