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Government Is Whose Problem?

  • Jon D. Wisman

This article addresses the political meaning of President Ronald Reagan's 1981 declaration that "government is the problem." Whereas historically the state had been used by elites to extract as much surplus as possible from producers, with democratization of the franchise, the state became the sole instrument that could limit, or even potentially end, the extraction of workers' surplus. Once control of the state is in principle democratized by the ballot box, the fortunes of the elite depend solely upon controlling ideology. In 1955, Simon Kuznets offered the highly influential conjecture that while rising inequality characterizes early economic development, advanced development promises greater equality. However, rising inequality in most wealthy countries over the past four decades has challenged this hypothesis. What those who embraced Kuznets' conjecture failed to recognize is the dynamics by which the rich, with their far greater command over resources, education, and status, inevitably regain control over ideology and thereby the state. Over the course of history, only the very severe crisis of the 1930s discredited their ideology and led to a sustained period of rising equality. However, by 1980 they had regained ideological ascendancy. This article examines how this struggle over ideology has unfolded in the U.S. since the democratization of the franchise in the late nineteenth century. It concludes with reflections on whether the current crisis holds promise of again de-legitimating the elites' hold on power and ushering in another period of rising equality.

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File URL: http://www.american.edu/cas/economics/research/upload/2013-1.pdf
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Paper provided by American University, Department of Economics in its series Working Papers with number 2013-01.

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Date of creation: 2013
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Handle: RePEc:amu:wpaper:2013-01
Contact details of provider: Web page: http://www.american.edu/cas/economics/

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  1. Lantican, Clarita P & Gladwin, Christina H & Seale, James L, Jr, 1996. "Income and Gender Inequalities in Asia: Testing Alternative Theories of Development," Economic Development and Cultural Change, University of Chicago Press, vol. 44(2), pages 235-63, January.
  2. Jon D. Wisman & James F. Smith, 2011. "Legitimating Inequality: Fooling Most of the People All of the Time," American Journal of Economics and Sociology, Wiley Blackwell, vol. 70(4), pages 974-1013, October.
  3. Acemoglu, Daron & Robinson, James A, 1998. "Why did the West Extend the Franchise? Democracy, Inequality and Growth in Historical Perspective," CEPR Discussion Papers 1797, C.E.P.R. Discussion Papers.
  4. José Gabriel Palma, 2009. "The revenge of the market on the rentiers," Cambridge Journal of Economics, Oxford University Press, vol. 33(4), pages 829-869, July.
  5. Jon D. Wisman, 2010. "Inequality, Social Respectability, Political Power and Environmental Devastation," Working Papers 2010-09 JEL classificatio, American University, Department of Economics.
  6. George Lodge, 2010. "The Need for Ideological Consciousness," Challenge, M.E. Sharpe, Inc., vol. 53(2), pages 76-89, March.
  7. Claudia Goldin & Robert A. Margo, 1991. "The Great Compression: The Wage Structure in the United States at Mid- Century," NBER Working Papers 3817, National Bureau of Economic Research, Inc.
  8. Jon D. Wisman & Barton Baker, 2010. "Rising Inequality and the Financial Crises of 1929 and 2008," Working Papers 2010-10 JEL classificatio, American University, Department of Economics.
  9. Glaeser, Edward L. & Saks, Raven E., 2006. "Corruption in America," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1053-1072, August.
  10. Srinivasan, T.N., 1977. "Development, Poverty, and Basic Human Needs: Some Issues," Food Research Institute Studies, Stanford University, Food Research Institute, issue 02.
  11. James Crotty, 2009. "Structural causes of the global financial crisis: a critical assessment of the 'new financial architecture'," Cambridge Journal of Economics, Oxford University Press, vol. 33(4), pages 563-580, July.
  12. Albert Rees, 1961. "Real Wages in Manufacturing, 1890-1914," NBER Books, National Bureau of Economic Research, Inc, number rees61-1, August.
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