One of the functional responsibilities assumed by central banks is that of “maintaining asset value.” In an interesting essay, well-known economist, John Komlos, discusses how a number of so-called “black swan” events have occurred in the past two decades. Despite the fact that black swan events should be a rarity, the Internet bubble led to a bust in 2000, this was followed in 2001 with the 9/11 attack, and then in the late 2000s we had a major financial crisis. More recently, our markets were jolted again by the COVID-19 pandemic. In each of these periods, the government took action to stabilize the economy and rescue businesses, financial institutions, and/or households using federal money. With this background in mind, please do the following:
Instructions:
1) Take a look at the attached document that compares capitalism and socialism. Neither of these really describe any modern country today. Also look at the descriptions of corporate socialism and democratic socialism. The latter two are seen in the U.S. and other advanced economies today although there have been efforts by the U.S. political parties to sharply curtail both of these regimes.
2) Read the two attached Letters to the Editor that were published in the Des Moines Register newspaper in 2019.
3) Finally examine the following chart that looks at income inequality across countries and look at the summary of the results of the World Happiness Index ranking described in the paragraph below that.
4) Take “The World’s Smallest Political Quiz” to determine your political orientation. This can be found at: https://www.theadvocates.org/quiz/
Since the first World Happiness Report in 2012, four different countries have held the top position: Denmark in 2012, 2013 and 2016, Switzerland in 2015, Norway in 2017, and now Finland in 2018, 2019 and 2020. With its continuing upward trend in average scores, Finland consolidated its hold on first place, and is now significantly ahead of Denmark in second place. The remaining countries in the top ten are Switzerland, Iceland, Norway, the Netherlands, Sweden, New Zealand, and Austria, followed by top-10 newcomer Luxembourg. Interestingly these “Nordic countries” seem to operate under a system of Democratic Socialism while the U.S. is much closer to Corporate Socialism. Despite being the most economically successful (wealthiest) country, the U.S. consistently places near the bottom of the Top 20.
Here is a link if you are interested in learning more: https://worldhappiness.report/news/its-a-three-peat-finland-keeps-top-spot-as-happiest-country-in-world/#:~:text=Partners-,It’s%20a%20Three%2DPeat%2C%20Finland%20Keeps%20Top%20Spot,as%20Happiest%20Country%20in%20World&text=NEW%20YORK%2C%20March%2020%20%E2%80%93Since,in%202018%2C%202019%20and%202020.
Questions:
1) Many Americans think that we have only two choices for our economic system: pure capitalistism or pure socialism. They fail to see that almost all democracies operate somewhere between the two (i.e., there is a spectrum between these two extreme forms of economic systems). The reality is that most countries operate on a mixed system. The current system in the US is not pure capitalism (e.g., Social Security and Medicare/Medicaid are social welfare programs run by the US government) even though it is probably closer to pure capitalism on the spectrum than most other developed countries (e.g., Canada and many Western European countries have universal healthcare and subsidized or free higher education in addition to retirement programs). If the U.S. was operating under pure capitalism, we would not have public schools or public universities (like Lamar) or public parks or public highways or public roads or Social Security. Also, if the US were purely capitalist, we would not see subsidies to industry. For example, the Sabine Pass Liquefaction, LLC near us has received over $500 million in government subsidies since 2017 and it’s ranked as only the 50th largest recipient of corporate subsidies. On the other hand, if the U.S. were purely socialist, we would not have private businesses. Do you think the American economic system should stay right where it is on the spectrum between socialism and capitalism or should it change direction?
2a) If you think everything should stay right where it is, explain why. You need to discuss several, but not necessarily all, aspects of the current situation regarding taxation, regulation, healthcare, higher education, poverty, income inequality, etc. and why they are perfect as they are.
2b) If you think some things should be changed, describe in specific terms how it should change (higher/lower taxes, more/less regulation (and of what), free/subsidized/full cost healthcare, free/subsidized/full cost higher education, more/less done to reduce poverty, more/less income inequality, more/less corporate subsidies, etc.) and why you believe this would be beneficial.
3) Political beliefs are typically a reflection of our worldview. If you feel comfortable sharing your World’s Smallest Political Quiz outcome,you could tie it into your response. If you are not comfortable with that there will, of course, be no penalty. However you should identify what the basis for your beliefs are be they based on ethical, moral, religious, philosophical, or political and how you think that fits in with your earlier answers.
Your discussion should contain at least 250 words but I think it would be a rare student who could answer these questions well using so few words.