Page 165 - Global Political Economy_Understanding The International Economic Order

CHA PTER S EVEN
though at the opening of the twenty-first century the federal govern-
ment retains responsibility for full employment and social welfare, a
significant retreat from this commitment began with the 1980 election
of Ronald Reagan as President of the United States and the triumph
of a more conservative economic ideology emphasizing free and un-
regulated markets.
Commitment to the welfare of individual consumers and the reali-
ties of corporate power have resulted in an unresolved tension be-
tween ideal and reality in American economic life. Whereas such
consumer advocates as Ralph Nader want a strong role for the gov-
ernment in the economy to protect the consumer, American econo-
mists and many others react negatively to an activist government be-
cause of their belief that competition is the best protection for
consumers except when there are market failures. In addition, there
has been no persistent sense of business responsibility to society or to
individual citizens. Japanese corporations have long been committed
to the interests of their stakeholders, including labor and subcontrac-
tors, and German firms acknowledge their responsibility to society
and are more accepting of the welfare state than are American firms.
This explains why Japanese and German firms are much more reluc-
tant to shift industrial production to other countries than are their
American rivals. However, over time, the balance between the ideal
and the reality of the American economy has shifted back and forth.
In the 1980s, the election of Ronald Reagan as President and then his
Administration’s emphasis on the unfettered market diluted the wel-
fare ideal of the earlier post–World War II era.

Economic Role of the State
The role of the American government in the economy is determined
not only by the influence of the neoclassical model on American eco-
nomic thinking but also by fundamental features of the American
political system. Authority over the economy is divided among the
executive, legislative, and judicial branches of the federal government
and between the federal government and the fifty states. Whereas the
Japanese Ministry of Finance has virtual monopoly power over the
Japanese financial system, in the United States this responsibility is
shared by the Treasury, the Federal Reserve, and several other power-
ful and independent federal agencies; furthermore, all of those agen-
cies are strongly affected by actions of the legislative and judicial
branches of government. In addition, the fifty states frequently con-
test the authority of the federal government over economic policy and
implement important policies of their own.
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