THE AMERICAN WELFARE STATEWeek 2

The Political Economy

Refers to the interaction of political and economic theories in

understanding society.

Democratic Capitalism

• An open and representative form of government that coexists with a market economy.

• Social welfare policy plays an important role in stabilizing society by modifying the play of market forces and softening the social and economic inequalities generated by the marketplace.

The U.S. Economic Continuum

• Keynesian economics• Classical or free market economics• Democratic socialism

Basic Keynesian Principles

• Formed the economic basis for the modern welfare state

• Keynesians believe that social welfare expenditures are investments in human capital

• Government must spend when the private sector won’t/can’t in order to continue to create supply and demand

Free Market Basics• Based in the belief that many small buyers and

sellers who exchange homogeneous products with information in a setting in which each can freely enter and exit the marketplace at will

• Welfare spending exists only for altruistic rather than economic reasons

• Based in the belief that welfare programs erode the workforce and take resources that could be invested in the private sector

Basics of democratic socialism

• Based in the belief that radical economic change can occur within a democratic context

• Radical worldview, poverty is directly linked to structural inequality

• Social welfare is viewed as a form of social control

Group DiscussionThe authors identify three characteristics of a free market on page 7- many buyers and seller, perfect information, and free entry and exit. Many buyers and sellers make it impossible for one buyer or seller to influence the price of any product. Perfect information places neither buyer nor seller at a competitive disadvantage. Free entry and exit into the market eliminates barriers for both buyers and sellers to get the best price.

Class Exercise:Break into teams of 3 and identify specific companies or products that clearly indicate that the free market does not accurately describe the American economy.

The Politics of the Republican & Democratic Parties

• http://images4.fanpop.com/image/photos/22700000/Left-vs-Right-US-Political-Spectrum-us-republican-party-22707903-1415-1022.jpg

The U.S. Political Continuum• Liberalism • Neoliberalism• The self-reliance school• Classical conservatives • Neoconservatism• Libertarianism

http://commons.wikimedia.org/wiki/File:Political_spectrum_graphic.svg

The Risk Shift

• What is the great risk shift?

Group Discussion

Break into your small groups again. Identify risks that you believe we all should share from risks that only the individual or family should face. How are these risks different? If the current political trend were more liberal, would any of the risks you identified be in another category?

Thursday!

• Reading: Trattner Chapters 3, 4, 5• Due: 1 page Summary of Trattner Chapters 1-5