President Ronald Reagan promoted and passed into law provisions of an economic plan that came to be known as Reaganomics. The principles of his plan were based on the neoliberal economic theory originally developed by Friedrich Hayek and Ludwig Von Mises of the Austrian school of economics.
The major principles followed by Reaganomics were as follows: 1) totally free markets, devoid of government intervention are the best way to promote economic growth and personal freedom, 2) the government should refrain from any interference economic matters, 3) taxes should be kept at as low as possible to stimulate economic growth, 4) government regulations should be eliminated except those that ensure contracts, 5) government should not own businesses or property and should privatize those that it does own, and 6) international trade should be promoted by removing all tariffs and quotas.
Laws and policies based on neoliberalism were passed from 1981 through 2008 in the US and have had influence on the national economy down to the present. Based on analysis of economic results and political developments during the period this paper argues that Reaganomics and neoliberalism have failed to improve economic growth and the preserve personal freedom above that provided by of the Welfare State which has developed in the US and OECD countries for more than a hundred years. Furthermore the neoliberal agenda is highly correlated with the undesirable unintended consequences of a rapidly rising national debt and balance of trade deficit.
Table of Contents
Introduction
Tax Cuts
Government Regulation
Government Size and Function
Privatization
International Trade
Conclusion
Research Objective and Key Themes
This paper examines the impact of neoliberal economic policies, often referred to as "Reaganomics," implemented in the United States from 1981 through 2008, specifically evaluating whether these measures successfully improved economic growth and preserved individual freedoms compared to the established welfare state.
- The effectiveness of tax cuts in stimulating economic growth and reducing the national debt.
- The impact of government regulation on corporate profitability, employment, and public welfare.
- The correlation between government size, economic prosperity, and the preservation of political rights.
- The consequences of free trade policies on domestic manufacturing, wage stagnation, and trade deficits.
Extract from the Book
Government Size and Function
Adam Smith’s classical theory of capitalism believed that the government had only a small role to play in economic activities and that was enforcing the law including contract law. So neither he nor any of the other classical economists recommended that the government develop and enforce rules about how markets should work. He did however recognize that businessmen were accustomed to colluding to set prices whenever possible, and that this activity should be suppressed. This belief in a very limited role for the government in economic activity was prevalent in American politics throughout the 19th Century, but it would change little by little when big business started using the tactics that Adam Smith had warned against.
A brief history of the growth of government intervention in American business will provide background about why the government’s role has expanded so much over time. In the late 19th Century the Industrial Revolution had a meteoric rise in the United States. Rapid development of railroads, steel, oil, meat packing, finance, and other industries led the way and these industries quickly came under monopoly control in regional markets. Monopolists or Robber Barons as they were called felt no compunction about the use of predatory and fraudulent business practices to gauge profits from small businesses and consumers, and to exploit laborers. Many unscrupulous businessmen and financiers manipulated financial markets leading to devastating boom and bust business cycles (1873, 1893, 1907, and others) that left many citizens unemployed and even destitute. As the size, power, and avarice of businesses grew during the Industrial Revolution, the victims of monopolies and other unfair and harmful business practices started appealing to the government for help to level the playing field against large corporations.
Summary of Chapters
Introduction: Provides the historical context of neoliberalism and sets the research agenda to evaluate its real-world economic outcomes.
Tax Cuts: Analyzes the relationship between federal tax rates, economic growth, and the national debt, finding that tax cuts failed to ensure growth while exacerbating deficits.
Government Regulation: Examines how regulations balance public interest against corporate profits, showing that they often yield significant net benefits for society.
Government Size and Function: Reviews the historical evolution of government intervention as a necessary response to market failures, monopolies, and economic instability.
Privatization: Investigates the neoliberal argument against government ownership and contrasts it with data showing that public services coexist with high levels of freedom and prosperity.
International Trade: Discusses how unregulated free trade has contributed to job losses and trade deficits rather than the broad prosperity promised by theory.
Conclusion: Synthesizes findings to argue that neoliberalism functions more as a rigid ideology than a proven economic model, advocating for a more balanced approach.
Keywords
Reaganomics, Neoliberalism, Free Market, Economic Growth, Government Regulation, Tax Cuts, National Debt, Welfare State, Privatization, International Trade, Trade Deficit, Capitalism, Public Policy, Market Failure, Wealth Inequality
Frequently Asked Questions
What is the primary focus of this research?
The paper evaluates the economic and social performance of neoliberal policies, or "Reaganomics," in the U.S. from 1981 to 2008.
What are the central thematic areas covered?
The core themes include the impact of tax policies, the role of government regulations, the necessity of government size, privatization efforts, and the consequences of free trade.
What is the central research question?
The author asks whether neoliberal reform platforms improved GDP growth and individual freedom compared to the preceding welfare state model.
Which scientific methodology is employed?
The paper utilizes an historical and empirical analysis of economic data, comparing government policy shifts and their resultant economic outcomes over several decades.
What topics are discussed in the main body?
The main body examines empirical data on tax rates, the benefits of environmental and safety regulations, the historical reasons for government growth, and the realities of modern trade deficits.
Which keywords define the work?
Key terms include Reaganomics, Neoliberalism, Economic Growth, National Debt, Government Regulation, and Welfare State.
How does the author interpret the relationship between government size and freedom?
The author argues that there is no empirical evidence supporting the claim that big government leads to the loss of individual freedoms, citing OECD data on free societies with large public sectors.
What does the author conclude about the "free trade" agenda?
The conclusion highlights that unregulated free trade has resulted in unintended consequences, such as the displacement of high-paying manufacturing jobs and significant trade deficits with partners like China.
What specific economic concern is raised regarding future stability?
The author notes that financing the benefits of a welfare state through debt is unsustainable, and that society must address how to pay for these services to prevent future economic malaise.
- Citation du texte
- Fred Haggerson (Auteur), 2016, The Failures of Reaganomics and Neoliberalism, Munich, GRIN Verlag, https://www.grin.com/document/339340
