Econ

2016 Words9 Pages
MacEwan and Miller argue that income inequality was a huge factor to the economic crisis in 2008. Their argument goes back to the great depression. It show how the changes in the country’s economy through ideology, regulations, and politics. They then link these three main principles with income inequality. The Great Depression — A New Ideology and a Greater Equality After the Great Depression the country was in shambles. GDP had dropped 26.5 percent; industrial production fell by 52.9 percent and retail sales diminished by 31.5 percent. To make things worse the peak unemployment rate was at 24.9 percent. No one was buying anything because no one had a job and thus no money. Before the Great Depression the US economic system was based on the leave-it-to-the market ideology. This ideology was working out great. Most people had a job, and the economy was growing. But what this ideology meant was that the US economy had very few regulations. The 1930’s marked the failure of this ideology. This failure caused a change in how the United States government and business would treat the once closed to regulation free economy. The government began to grow they started using expansionary policy to jump-start the stagnant economy. This growth for the most part was in the form of spending more money “in relation to national output” (40). The US governmental created social security and Medicare programs. The federal spending limit was also increased and consequently made the government more involved in the overall economy though regulation, taxation, and military spending. The country’s new domestic spending spurred a new wave or social programs, which in turn led to greater equality. The improved social programs provided low-income families a... ... middle of paper ... ...o many loans were given at a rate that would have been impossible for most people to pay off. Due to the influx and type of people buying housing, banks deemed that the people taking out loans would not be able to make their payments. So banks were charging high interest rates. The high interest rates would make it very hard for people to pay off mortgages. It would also make the bank a lot of money. Unfortunately, the banks were setting up these consumers for failure. The banks knew exactly what they were doing. An average Joe has no idea how a mortgage works. He just know he needs to pay his monthly payments. The banks on the other hand sell loans daily. As mentioned earlier regulators were turning blind eyes to these kind of activates due to what MacEwan and Miller argue as a change in ideology. But why would a bank want to sell loans that they know would fail?

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