Introduction
The majority of today’s economic commentators and politicians are opined that capitalism is the best way to build a perfect society. Furthermore, several research studies demonstrated that this assumption is also deeply ingrained in the contemporary public opinion of many Americans, who strongly believe that the current system of income distribution is the shortest way to making the American, and, possibly, the international society completely egalitarian (Robibson & Santos 9). Many people from the developing countries believe that the American economic system provides is the best way to make it possible for everyone in the country, as well as around the globe, to reach the living standards of a middle-class USA family (Robinson 231).
At the same time, it is important emphasizing that the system of American capitalism is a multifaceted phenomenon, and each of its components should be analyzed in a separately. Yet, while the number of its ingredients is infinite, there is a strong opinion among the academics that the ten principles of the so-called “Washington Consensus”, the ideas of neo-liberalism and globalization constitute the framework of the American economic model, which many developing countries are trying to imitate (Yates)
Many national leaders believe in the efficiency of the American-styled capitalism and try to persuade their people that this approach to market regulation will help them to curb endemic poverty (Haymes, Haymes & Miller 90). However, the practice mercilessly exposed that it is neither effective in the United States of America, nor it is likely to be effective in other countries of the world. As long as the income gap between the rich and the poor keeps increasing, it is hardly possible arguing that the economic policies developed in Washington are effective (Robinson 13).
The purpose of this research is to analyze the changing dynamics of United States society during the four past decades. Specifically, the paper seeks to demonstrate that in spite of the all benefits of neo-liberalism, globalization and the “Washington Consensus Principles” the income differences between the rich and the poor continue to increase, and that the climax point of income disparity is much closer than it seems to be. In addition to that, this research also focuses on arguing that the use of this model of economic growth can hardly be effective for the developing countries, which should start developing alternative methods of economic improvement.
Washington Consensus, Neo-Liberalism and Globalization
Before this research is advanced further, understanding the key principles of the American economic model is essential. As highlighted above, among the most important pillars of the contemporary American capitalism are the Washington consensus, neo-liberalism and globalization. Understanding the connection between these terms and the global economic realities is essential for both theoretical discussions and practical policymaking.
Washington Consensus refers to the combination of the ten economic prescriptions, which are viewed as a framework, designed to help the developing countries to rebuild their economies, which have been wracked by the economic crises. Although theoretical debates about the original authorship, as well as the extent of these prescriptions are rampant, the main dimensions of this system are rather obvious. Thus, many theorists believe that the USA recipe of overcoming economic difficulties involve the use of balanced fiscal policies, reforms of the tax system to boost foreign direct investment and encourage the local business communities, ensuring liberalization of trade and enhanced legal protection of the investors’ rights (Haymes, Haymes & Miller 208).
Neo-liberalism encompasses a wide range of different concepts, including privatization of the state assets, economic deregulation and delegation of some of the state functions to the private corporations. Whatever ramifications this idea may have, it mainly focuses on reducing the role of government in the economy and incentivizing the business communities (Pierce 93).
In broad terms, globalization refers to the process of exchanging ideas, products and services internationally. As far as the USA economy is concerned, the primary impact of globalization is that it allows the country to share human resources, i.e. it enables the USA-based corporations to outsource some of their tasks to the countries, where labor is cheaper, as well as this trend simplifies the process of labor migration to the United States.
Generally, these intertwined forces are heavily influencing the process of income distribution in the United States. Further research demonstrates that although the initial designs of the policy makers were inherently benevolent, the main outcomes of these three pillars of American capitalism were utter immiseration of the poor and unprecedented enrichment of the American elite.
The Impact on Income Demographics
The research demonstrates that after several decades of relative stability since the Great Depression, starting from 1970 the income gap in the United States started to deepen dramatically. Despite the fact that the United States has an average ranking in terms of ‘before tax’ earnings, it belongs to the 30% of countries with the highest ‘after tax’ income differences (Robinson & Santos 10). It means that the USA reliance on public mechanisms of income distribution is relatively poor, as well as that the difference between the rich and the poor in the United States is conspicuous.
Different scholars have extensively researched this phenomenon, concluding that the starting from 1970 onwards, the country switched its economic system to free capitalism and neoliberalism, eventually creating leverages for the rich to accumulate wealth and indirectly limiting professional opportunities of the poor (Yates 95). Specifically, ubiquitous adoption of the Washington Consensus model across the United States led to rising income disparities.
The following aspects of this problem should be accentuated:
Globalization Aspect and Income Disparity
The research demonstrates that globalization affected income distribution in the United States in many dimensions. First of all, because of substantial innovations in the supply chain management, the process of shipping the goods from Asia to the USA and vice versa has been substantially simplified. Because of that, many American companies decided to relocate their centers of production to the Asian countries, where the cost of labor is substantially lower. As a result, many Americans, who relied on low-skilled jobs, lost their occupations, and the real winner of globalization was the middle class in Asia, for whom many new job opportunities became available.
Secondly, because of imported substitutes, many American companies had to phase out their operations altogether, laying off thousand Americans. Many analysts argue that if current rates of globalization persist, the situation will become worse for many Americans, especially in the light of weak government policies of income distribution.
The Role of Neoliberalism
Despite the fact that the idea of neoliberalism has many dimensions, several aspects should be particularly accentuated in the context of this research, mainly focusing on education, skill-based technological change and policymaking activities in the United States.
Firstly, one of the most prevalent opinions among sociologists is that the level of educational attainment correlates with the income level. Thus, the more education a person is, the bigger income this person is likely to have, though this approach fails to explain why 0,1% of the richest people in the United States of America do not have college or other diploma at all. Yet, for the overwhelming majority of the population this assumption is valid, i.e. those with a doctorate degree are among those, who earn more, while those with high school or no degree at all are substantially limited in their earnings.
The key aspect of this problem is that the United States of America is famous for its exorbitantly expensive tuition fees, what makes a vicious circle for many poor Americans and their children. In other words, the parents’ incomes are not sufficient to pay for their children education, and they have no other choice, but to start working in low-paid industries, or remaining unemployed (Haymes, Haymes & Miller 67).
Secondly, laissez-faire doctrine of neoliberal economies presumes the rise of technology. As a result, the number of jobs requiring unique skills is dynamically increasing, while the availability of ‘brawn’ jobs is steadily shrinking. There is ample evidence showing that skilled workers are favored over their unskilled counterparts. Under the most conservative estimates, the growth of technology is reported to be the main reason of 40% of reduction in job openings in the USA only, while other factors are thought to contribute to 10-15% only.
Thirdly, trade unions were powerful restraints in the past. The unionized employees were able to negotiate higher salaries collectively. In 1980, the ratio of unionized employees exceeded 20% of the total domestic workforce, while nowadays it hardly reaches modest 7%. Thus, the employers became capable of dictating their salary policies, and, because of endemic unemployment, the applicants have no other options, but ‘to take it or leave it’.
Finally, the income and other tax policies in the USA favor the rich. The bigger profits a company declares, the less taxed it becomes. It is one of the major causes of capital centralization and emergence of the large business empires, leaving no place for middle and small-sized competitors. To illustrate, 90% of all revenues in the USA media market are generated by the six largest corporations (Lutz), which shows that the USA business regulators fail to implement effective anti-trust policies.
Conclusions
Works Cited
Haymes, S., Haymes, M. & Miller, R. The Routledge Handbook of Poverty In The United States. London New York: Routledge, Taylor & Francis Group. 2015. Print.
Lutz, A.. These 6 Corporations Control 90% Of The Media in America. 2012. Web. Retrieved from http://www.infowars.com/these-6-corporations-control-90-of-the-media-in-america/
Robinson, W. “Promoting Polyarchy: 20 Years Later”. International Relations, 27,2, 228 – 234. 2013. Print.
Robinson, W., Santos, X. “Global Capitalism, Immigration Labor and The Struggle For Justice”. Class, Race and Corporate Power, 2, 3, 1-14. 2004. Print
Yates, M.D. “Poverty and Inequality In The Global Economy”. The Monthly Review, 55, 9. Web. 2004. Retrieved from http://monthlyreview.org/2004/02/01/poverty-and-inequality-in-the-global-economy/
