Reaganist/Thatcherist/neoliberalist policies are bad for countries
Debate Rounds (5)
I accept the debate.
Socrato forfeited this round.
All of the above was accompanied by double -igit interest rates, with the prime rate peaking at 21.5% in 1980. The poverty rate started increasing in 1978, eventually climbing by an astounding 33%, from 11.4% to 15.2%. A fall in real median family income that began in 1978 snowballed to a decline of almost 10% by 1982. In addition, from 1968 to 1982, the Dow Jones industrial average lost 70% of its real value, reflecting an overall collapse of stocks.
So lets look at the stats and what he did about it:
1. Cut tax rates to restore incentives for economic growth, which was implemented first with a reduction in the top income tax rate of 70% down to 50%, and then a 25% across-the-board reduction in income tax rates for everyone. The 1986 tax reform then reduced tax rates further, leaving just two rates, 28% and 15%.
2. Spending reductions, including a $31 billion cut in spending in 1981, close to 5% of the federal budget then, or the equivalent of about $175 billion in spending cuts for the year today. In constant dollars, non-defense discretionary spending declined by 14.4% from 1981 to 1982, and by 16.8% from 1981 to 1983. Moreover, in constant dollars, this non-defense discretionary spending never returned to its 1981 level for the rest of Reagan"s two terms! Even with the Reagan defense build up, which won the Cold War without firing a shot, total federal spending declined from a high of 23.5% of GDP in 1983 to 21.3% in 1988 and 21.2% in 1989. That"s a real reduction in the size of government relative to the economy of 10%.
3. Anti-inflation monetary policy restraining money supply growth compared to demand, to maintain a stronger, more stable dollar value.
4. Deregulation, which saved consumers an estimated $100 billion per year in lower prices. Reagan"s first executive order, in fact, eliminated price controls on oil and natural gas. Production soared, and aided by a strong dollar the price of oil declined by more than 50%.
The success of this
Reagan conservative policies amounted to the most successful economic experiment in world history:
20 million new jobs were created.
Unemployment fell to 5.3% by 1989.
The top income tax rate was cut from 70% to 28%.
The Reagan Recovery took off once the tax rate cuts were fully phased in.
Total federal spending declined to 21.2% of GDP in 1989 (even with the Reagan defense build up, which won the Cold War.)
Eliminated price controls on oil and natural gas. Production soared, and aided by a strong dollar the price of oil declined by more than 50%.
Real per-capita disposable income increased by 18% from 1982 to 1989 (meaning the American standard of living increased by almost 20% in just 7 years.)
The poverty rate declined every year from 1984 to 1989, dropping by one-sixth from its peak.
The stock market more than tripled in value from 1980 to 1990 (a larger increase than in any previous decade.)
The Reagan recovery started in official records in November 1982, and lasted 92 months without a recession until July 1990 (when the tax increases of the 1990 budget deal killed it.)
During this 7-year recovery, the economy grew by almost one-third (equivalent of adding the entire economy of West Germany to the U.S. economy.)
In 1984 alone real economic growth boomed by 6.8%, the highest in 50 years.
The inflation from 1980 (in the Carter era) was reduced from 13.5% to 3.2% by 1983.
The Reagan Recovery kicked off a historic 25-year economic boom (with short recessions in 1990 and 2001.)
The period from 1982 to 2007 is the greatest period of wealth creation in the history of the planet. In 1980, the net worth"assets minus liabilities"of all U.S. households and business was $25 trillion in today"s dollars. By 2007, net worth was just shy of $57 trillion. Adjusting for inflation, more wealth was created in America in the 25-year boom than in the previous two hundred years.
Economic growth averaged 7.1% over the first 7 quarters.
These economic policies amounted to the most successful economic experiment in world history. The Reagan recovery started in official records in November 1982, and lasted 92 months without a recession until July 1990, when the tax increases of the 1990 budget deal killed it. This set a new record for the longest peacetime expansion ever, the previous high in peacetime being 58 months.
So as it is shown here, Reagan's policy on just the economy alone really excelled the country into gain and success. If you consider any of the points in my argument bad for the country I look forward to hearing a rebuttal. Until then, I will leave my argument here and eagerly await my opponents rebuttal.
"Reagan conservative policies amounted to the most successful economic experiment in world history:" - No, they didn't. I'll get to why.
"20 million new jobs were created."- Where they? According to the BLS (Bureau of Labour Statistics) Reagan only "created" 5,322 jobs in his first term and 10,780 in his second.
"Unemployment fell to 5.3% by 1989 " - From what? If it was by 0.2% from 1988 its hardly an impressive feat is it?
"The top income tax rate was cut from 70% to 28%." - I fail to see how this is an argument, you are just stating a fact.
"Total federal spending declined to 21.2% of GDP in 1989 (even with the Reagan defense build up, which won the Cold War.) " - What is your point? Spending isn't necessarily a bad thing.
"Eliminated price controls on oil and natural gas. Production soared, and aided by a strong dollar the price of oil declined by more than 50%."- Production soared; well i'm glad Reagan helped environmental desecration along just fine.
"The poverty rate declined every year from 1984 to 1989, dropping by one-sixth from its peak."- Define poverty, that is quite a confusing term. Do you mean Absolute Poverty or Relative Poverty?
"The Reagan recovery started in official records in November 1982, and lasted 92 months without a recession until July 1990 (when the tax increases of the 1990 budget deal killed it.)"- You previously mentioned this but without data? Strange. Anyhow, I fail to see how an economy can recover for 92 months; at some point the economy stops "recovering" and beings booming, unless it recovered extremely slowly of course, which would not be good for a country.
"During this 7-year recovery, the economy grew by almost one-third (equivalent of adding the entire economy of West Germany to the U.S. economy.)"-When you say the economy grew you mean GDP increased of course; all this means is the value of all goods, services and assets increased, or their are more goods, services and assets.
"In 1984 alone real economic growth boomed by 6.8%, the highest in 50 years."- But in the previous year it was 4.6% and the year after it was 4.2%. This suggests this statistic is an outlier.
"The period from 1982 to 2007 is the greatest period of wealth creation in the history of the planet."- It created wealth, that's great, but America has the highest Gini Index of any developed country at 0.42 post-tax and transfer, according to the World Bank. Its all very good and well when wealth is created but it matters where it goes for it to benefit a country.
What "bad" is bad for a country is very much dependent on one's views as to what constitutes "good" for a country. What I see as good for a country is policy that aims to improve the quality of life and standard of living for ALL citizens of a country via working towards central aim of development and fair redistribution of income via progressive taxation. So in my mind what is "bad" for a country in terms of policy-making are policies that do NOT improve the quality of life and standard of living for all citizens of a country via development and redistribution of income via taxation.
Both Reaganism and Thatcherism comprise of 2 strands: social conservatism and economic neoliberalism. While social conservatism isn't necessarily bad for a country's development (for example, making addictive and harmful drugs illegal means not as many people take them, making them more productive citizens who then spend their income on other goods, services and assets rather than addictive and harmful drugs) it does in some aspects prevent a decent quality of life being handed out to all citizens; for example many social conservatives are against gay marriage, which means homosexuals are not allowed the same quality of life as heterosexual people.
But neoliberalism prevents ALL citizens from being granted a decent quality of life. By deregulating corporations via cutting corporation tax, deregulating corporations via simplifying or exempting red tape around employment legislation and smashing trade unions (as Margaret Thatcher did) means that workers are unable to argue a fair wage, which means wages are often cut and there is no firm job security. Cuts to employment are made, and the remaining workers are coerced into working harder to keep their job. This in the end means workers work longer hours for less money to keep their job, while the corporations can keep a larger cut of profits that the workers made for the corporations in the first place. This is bad for a country as the state shrinks due to a cut in revenue and a cut to intervention in markets means the education and health of the labour supply deteriorates, the infrastructure of the state collapses and the effectiveness of law enforcement collapses. This in the end is neoliberalism shooting itself in the foot.
Neoliberalism itself is bad for countries, and only good for corporations and large businesses. While Reagan and Thatcher were not full neoliberalists, but equally as atrocious as the ideology of neoliberalism.
REAGAN: Under Reagan productivity (efficiency of production) did increase by 45%, but working peoples' wages only increased by 1%. Thanks to deregulation under Reagan, General Motors saw profits of $24.1 billion, while laying off 100,000+ employees, General Electric saw profits of $20.4 billion while laying off over 100,000+ employees. Household debt increased increased from 47% of GDP in 1980 to over 111% in 2000. There was an explosion in personal bankruptcies, from 287,000 in 1980 to 2,039,000 in 2000. Healthcare costs as a % of GDP were up from 9.1% in 1980 to 12% in 1990. By 1989 General Motors was making profits of over $4 billion, while eliminating thousands of workers; Flint lost 3,600 jobs in 1983 according to the newspaper "The Detroit News". The manufacturing complex Buick City eliminated 1,300 in 1986, according to the newspaper "The Flint Journal", while "The Detroit News" reported 4,500 jobs cut at the start of the year (All above statistics supplied by Michael Moore's Documentary "Capitalism: A Love Story"). All this occurred under Reagan's famous, "Reaganomics", or "Trickle-Down Theory", which he was majorly enamored with. In 2012 a study by the Tax Justice Network indicates that "the wealth of the rich does not trickle down to improve the economy but is instead amassed and sheltered in tax havens with a negative effect on the tax bases of the home economy". My favorite non-fiction author Ha-Joon Chang, is an Institutionalist Economist and Professor at Cambridge, responsible for writing many popular economics books, writes "Slow job growth in the last few decades, rising income inequality in most rich nations and the inability provision in raising living standards across all income brackets rather than at the top only."
The IMF in 2015 published a report reading "If the income of the top 20% increases, then GDP growth actually declines over the medium term, suggesting that benefits do not trickle down. In contrast, an increase in the income share of the bottom 20% is associated with higher GDP growth." Reaganism is ultimately bad, as I have just shown. His application of trickle down theory and his deregulation of the economy have led to the Gini Index of America being the highest of any developed nation, and mean that ultimately Reaganism was bad for the USA, & should be a warning for other countries not to do the same.
Not only did Reagan NOT perform the duty of a good government, he has provided problems that, like Thatcher, have lasted beyond his Premiership and still wreak havoc to this day in the United States. If you consider any of my points null, please, I encourage you to refute.
While you have only discussed Reagan so far I assume you are, as I am, going to discuss Thatcher and how she damaged Britain next round.
TheRobocrat forfeited this round.
Thatcher had many policies, but of the the many, I will discuss the main problems, focusing on the economy and taxation, industrial relations, deregulation and privatisation
Economy and taxation
She was groomed by Chicago school economists like Milton Friedman, and took inspiration from writings of the Austrian School of Economics like Hayek"s "The Road to Serfdom". This meant she felt the extreme need to employ monetary policy. She cut direct taxes while raising indirect taxes, and raised interest rates to slow money supply growth. While all this cut inflation to 4% by 1983 from 18.6% in 1981, it closed factories, resulting in unemployment of 3 million (12.5% of Britain"s population at the time) across the UK, the worst in 40 years. Northern Ireland, a region already plagued by civil war saw unemployment reach 20%, while Scotland and Northern England saw unemployment reach 15%. By April 1983 Britain became a net importer of goods for the first time; a sad decline from the title of "Workshop of the World". People who had bought their homes due to the "right to buy" schemes saw their house repossessed, as mortgage payments spiralled upwards. Alongside this in 1981, due to racial tensions with immigrants in inner cities, race riots broke out in inner city areas. The racial tensions culminated in the riots due to the Conservative introduced "sus-law" of 1979, allowing police to stop and search suspicious people. A young black man who had been stabbed in Brixton, London, was reported to have been stopped and questioned under "sus-law" by police rather than helped. The sus-law was effectively an opportunity for institutional racism. It was only when the law was repealed in 1981 was law and order fully restored.
Privatisation and deregulation
After 1983 Thatcher began selling state utilities, raising more than "29 billion from privatised industries and "18 billion from the sale of council housing. Stock exchange controls were abolished in 1979, and other forms of financial deregulation were introduced on the finance sector. She heavily promoted the free market, and moved the economy onto a service base. As a result 80% of the UK"s labour force works in services. And all of this was in the name of her individualist point of view: "there is no such thing as society. There are individual men and women and there are families." According to Neil Harding, a writer on Politics.co.uk, "Surveys have long suggested the 70s were the happiest times in Britain", which he attributes to the strong sense of communities, because as we know in 1970 employment was rising in Britain. Thatcher destroyed this social identity when she began instating her ideals of neoliberalism (which we know do not work for countries). By smashing manufacturing in the North, poverty increased drastically; in fact when football fans travelled to away games in London they would be taunted by home supporters waving wads of "10 notes.
Thatcher greatly reduced the power of the unions, like Reagan, by making it harder to take strike action. True, the unions had caused the Winter of Discontent, in which public sector trade unions took strike action over James Callaghan"s attempts to control cost-push inflation caused by rising oil prices, by capping wage growth at 5%. She smashed Trade Unions legislation that she "managed to destroy the power of trade unions for almost a generation". In the Miners" Strike of 1984, Nationalised coal industry miners" went on strike as the government insisted cutting jobs and mechanising the industries. Out of the 174 operating coal mines, more than 20 were shut and over 20,000 jobs lost. In fact, the "de-industrial revolution" began under Thatcher, and the only people that could have stopped her were made powerless.
All of this comes under Thatcher"s individualist, Neoliberalist ideals of government; she didn"t do what was in the best interests of all citizens; improving their quality of life and standard of living. She paved the way for a state in which corporations will only pay 12.5% corporation tax by 2021. T Thanks to Thatcher, the decline of manufacturing jobs accelerated, and Britain is a shadow of itself. A country that used to be "The Work-Shop of the World" is now nothing more than a set of banks and a housing crisis. We have a trade deficit almost reaching 100 billion, thanks to Thatcher, and while she did some things right, and was a conviction politician (hence the nickname "The Iron Lady"), something lacking in today"s British Politics, her introduction of Neoliberalism has left Britain as the state it is now. The Gini Index in the UK stands at 32.2 according to the World Bank.
TheRobocrat forfeited this round.
Thank you for your time Robocrat, and thank you to everyone who took the time to read the debate, I hope the topic was amusing, interesting and informative.
TheRobocrat forfeited this round.
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