Chapter 4: Historical Development in Public Policy

RISE OF INDUSTRIAL SOCIETY

Role of sources of energy: people, animals, and wind prior to Civil War.

Population growth significant 3.9 million to 17.1 million, but small artisan businesses with competition.

After Civil War change toward industrial society.

Civil war impacted on the form of the economy and society.

Development of intracostal transportation system, RR

Increase in agricultural productivity

Increase in large scale production facilities

Trusts, gentlemen's agreements, pools, holding companies used to control competition and promote stability. Standard Oil Trust.

Advantages of large scale production and vertical integration versus disadvantages of large power concentration, predatory competitive practices and loss of competitions.

Competitive market system was destroying itself through concentration and predatory practices. Antitrust Legislation began with the Sherman Act in 1890. Antitrust Division lost seven of first eight cases until 1911 when Standard Oil and American Tobacco were found guilty and order to dissolve into several separate firms.

ICC in 1887 became the pattern for industry regulation when a natural monopoly existed.

THE GREAT DEPRESSION

On the heels of whole new industries, such as automobiles, during the early twentieth century.

The Crash (debate over cause) resulted in the New Deal following Franklin Roosevelt's election in 1932. The federal government assumed responsibility for stimulating business activity. It sought to relieve the distresses of businesses, farmers, workers, homeowners, consumers, and investors. In first two years, 93 major pieces of legislation passed. (Exhibit 5.1)

Was Roosevelt the enemy of the free market system or its savior?

Areas of public policy that emerged:

1. Economic Management: initially in the form of social welfare designed to help victims of the depression. Later use for economic stability not established until Keynes' General Theory. (Full Employment Act of 1946 formalized government role for stability.

2. Labor-Management Relations. Development of collective bargaining procedure. National Industrial Recovery Act (found unconstitutional in 1935) led to Wagner Act followed by Taft-Harley Act of 1947 and Landrum Griffin Act of 1959.

3. The Welfare State. Social Security and beginning of a philosophy of entitlements. Aid to Family with Dependent Children and Medicaid have grown much faster than the overall economy. Slowed during the Reagan Administration (food stamps, AFDC, student loans.

THE POSTINDUSTRIAL SOCIETY

Three Characteristics:

1. Affluence throughout much of the population

2. Service-based economy

3. Knowledge-based economy.

Movements by groups in society: Civil Rights, Feminist, Consumerism.

Hugh buildup in private sector debt during the 80s, the development of indexes to inflation (Social Security, COLA, Tax brackets)

Threats for continued growth and prosperity: Federal deficit, trade deficit, inflation and interest rates, competitiveness in world markets, growth in services that reduces skews wage earners toward lower paying jobs.

The development of a new type of functional regulation in response to social costs of production and distribution.

Should there be a national industrial policy (some type of planning mechanism)?

Save basic industries for national security? Government help in transition in time of economic and social change? Government help in allocating the burdens of change throughout the society? What about persistent trade deficit?