Module3Lecture1.pptxHistorical development of government’s roles with business
Chapter 3
The evolution of government’s roles
As American society has changed, so too have the expectations of government.
Examples of social changes include:
Need for big defense
The creation of big business
The desire for less risk and more stability
The demand for social architecture
Example: Johnstown Flood of 1889 and Hurricane Andrew in 1992
Expectations in Johnstown Flood, 1889
Federal assistance was not expected
President Benjamin Harrison organizes a fund-raiser and then goes on summer holiday
Expectations in Hurricane Andrew, 1992
Federal government would respond instantly and massively
Because of slow federal response, President George HW Bush was blamed and subsequently lost presidency (a significant but not sole cause)
The five eras of us government
Anti-Central Government (1781-1787)
Small Government (1787-1887)
Moderate-Sized Government (1887-1933)
Big Government (1933-1970s)
Rightsizing Government (1970s-present)
| Anti-Central Government, 1781—1787 | ||
| Provider of monetary and fiscal structure | Minimal | Mint money, request proportional taxes from the individual states, pay off debt |
| Provider of infrastructure | Modest | Cities would maintain streets |
| Purchaser | Modest | States and cities would purchase some supplies |
| Regulator of Business | Virtually none | By states only (criminal laws) |
| Social architect | Virtually none | By states only (some education) |
| Service provider | Virtually none | By states only |
| Safeguard against (individual) risk | Virtually none | Raise an army for a common cause; Request states to use state militias for a common cause |
| Promoter of business | Virtually none | Appoint ambassadors |
| Small Government, 1787—1887 | ||
| Provider of monetary and fiscal structure | Modest | Raise money through tariffs, mint money, Treasury Department, national bank (1791-1836) |
| Provider of infrastructure | Substantial | Postal and national roads, transcontinental railroads States and local: most roads, harbor improvements, support of bridges, Erie Canal, drinking water in large cities |
| Purchaser | Modest | Transportation services, military supplies |
| Regulator of Business | Virtually none | |
| Social architect | Modest | Morrill Land Grant Act of 1862 (funds for higher education), set-asides of “federal” land for educational purposes State and local: primary and secondary education |
| Service provider | Modest | Postal service (communications) State and local: poor farms, county hospitals, public libraries |
| Safeguard against risk | Virtually none | |
| Promoter of business | Substantial | Barbary pirates, Louisiana Purchase, Monroe Doctrine, Florida purchase, annexation of Texas, Mexican-American War, California, Gadsden Purchase, Alaska |
| Moderate-Sized Government (1887-1933) | ||
| Provider of monetary and fiscal structure | Substantial | Federal Reserve, federal income tax (Sixteenth Amendment) |
| Provider of infrastructure | Great | Federal: postal airports State and local: streets, public transportation, sidewalks, streets, sewage, water and electricity in all urban areas |
| Purchaser | Modest | Transportation services, military supplies |
| Regulator of Business | Substantial | Interstate Commerce Act of 1887, Sherman Act (1890), Clayton Anti-Trust, Federal Trade Commission Act (1914), Food and Drug Act (1906) State and local: stronger zoning, comprehensive planning |
| Social architect | Substantial | Growth of 1-12 education, normal schools |
| Service provider | Substantial | Expansion of drinking water, irrigation water for rural areas, other utilities, rudimentary welfare systems |
| Safeguard against risk | Minimal | One time legislation to assist after disasters by state legislatures or Congress |
| Promoter of business | Substantial | Spanish-American War, give away of Western lands (e.g., land rushes in Oklahoma), Hawaii, Panama Canal, expeditionary forces in Central America |
| Big Government, 1933 to 1970s | ||
| Provider of monetary and fiscal structure | Great | Required taxes to support insurance to counterbalance recessions and depressions—Social Security, Medicare, Glass-Steagall (protect deposits) |
| Provider of infrastructure | Great | Federal Highways Act, bailout of Penn Central, continued expansion of all transportation systems |
| Purchaser | Substantial | Large and technologically advanced military, materiel for civilian employees and services |
| Regulator of Business | Substantial | Securities and Exchange Commission, National Labor Relations Act, Fair Labor Standards Act, Age Discrimination Act, OSHA, consumer protection laws (1960s to 1980s), EPA |
| Social architect | Great | National Parks, WPA during Great Depression, mortgage support (Fannie Mae and Freddie Mac) |
| Service provider | Substantial | Rural electrification, flood prevention, garbage and other “specialty” services |
| Safeguard against risk | Substantial | Social Security, unemployment insurance, Medicare, Medicaid, FEMA predecessor agencies |
| Promoter of business | Substantial | Tariff war at beginning of Great Depression, informal leader of world economy via international finance institutions; creation of economic development agencies |
| Rightsized Government, 1970s to the present | ||
| Provider of monetary and fiscal structure | Great but shifting | Use of interest rates by Fed; repeal of Glass-Steagall but addition of new regulations in 2010 (Dodd-Frank); bailouts of Wall Street (banks and AIG) and main street (automakers) |
| Provider of infrastructure | Reduced | Taxes from gas allowed to stagnate |
| Purchaser | Substantial | Military and basic materiel |
| Regulator of Business | Reduced and shifting | Deregulation of transportation, airlines, banking, finances Regulation of some banking and finance; Sarbanes Oxley 2002 |
| Social architect | Reduced and shifting | Reform of welfare (limitations); defunding of public higher education as well as K-12 |
| Service provider | Reduced and shifting | Expansion of privatization in some areas, but expansion in healthcare ; postal reorganization |
| Safeguard against risk | Substantial | Affordable Care Act (2010), occasional extension s of unemployment insurance from 26 week base |
| Promoter of business | Substantial but shifting | CA makes it more difficult to have local economic development agencies |
Summary
| Anti-Central Government, 1781—1787 | Small Government, 1787—1887 | Moderate-Sized Government, 1887—1933 | Big Government, 1933—1970s | Right-sized Government, 1970s—present | |
| Provider of monetary and fiscal structure | Minimal | Modest | Substantial | Great | Great but shifting |
| Provider of infrastructure | Modest | Substantial | Great | Great | Reduced |
| Purchaser | Modest | Modest | Modest | Substantial | Substantial |
| Regulator of Business | Virtually none | Virtually none | Substantial | Substantial | Reduced and shifting |
| Social architect | Virtually none | Modest | Substantial | Great | Reduced and shifting |
| Service provider | Virtually none | Modest | Substantial | Substantial | Reduced and shifting |
| Safeguard against risk | Virtually none | Virtually none | Minimal | Substantial | Substantial |
| Promoter of business | Virtually none | Substantial | Substantial | Substantial | Substantial but shifting |
