Amanda Labrado

PLSC 210
Prof. Miller
05/02/10
Homework #12
Domestic Policy
1. (a) Describe at least three key differences between the two “variables” (models) of
capitalism found in rich industrialized democracies.
I. In liberal/pluralist market economies, “shareholders own the firm and expect a
continuing return on their investment[s], while in a coordinated market economy the
supervisory board of a company is composed of other company members and other
“stakeholders” whom the company’s decisions will affect.
II. In coordinated market economies, employees are kept longer, “giving employees a
greater stake in the business but also reducing the capacity for radical change”,
while in a liberal one companies hire people but know that they can fire them if
“conditions worsen”, and “employees are mobile and willing to move for a better job”
(Hague 146-8)
III. In a coordinated market economy, “wage negotiations for specific types of jobs take
place at national or sectoral level”, unlike “within the firm”, as is done in a liberal
market economy (Hague 148)
(b) List at least three countries that follow each of these models of capitalism.
Liberal Market Economy – New Zealand, Australia, and the U.S.
Coordinated market economy- Germany, Sweden, France
(c ) Discuss the advantages and disadvantages of each model.
Liberal Market Economy Coordinated Market Economy

Advantages Advantages

1. “Large Corporations and individual 1. “’private’ sector is seen less as an

employees have considerable autonomy, a
feature which creates the potential for
market-led restructuring when needed”
(Hague 146)
2. Can declare bankruptcy but also start
another business that may be “funded by
venture capitalists whose function is to
invest in young firms with good growth
prospects” (Hague 146)
3. “Managers […]secure a generous share of
profits” (Hague 146)
Disadvantages
1. Trade unions and employer organizations don’t
have much strength or say in the way businesses
are run.
2. Employees may lose jobs frequently due to high
turnover and frequent changes based on stocks.
independent sphere of activity and more as
an arena subject to control by social and
political forces” (Hague 146).
2. “Companies hold shares in each other,
forming a strong interlocking structure”
(Hague 147).
3. “more capital come through long term
funding from banks, which limits the
pressure from shareholders for immediate
returns” (Hague 147).
4. Trade unions and employer organizations
have more “strength.
5. Less chance/reason for/of changing jobs
frequently
Disadvantages
1. not much “radical change”(147)
2. “hiring and firing staff” is not very flexible. (147)

3. When companies close down, employees lose all

their benefits and resort to worker’s comp.
2. (a) Explain how “the development state” differs from the two models discussed in
question #1.
The developmental state differs from the liberal and coordinated models of market
economies because “wages and benefits [are] low but distributed more equally”, “job
security is high”, unlike in the liberal market, and it “provides secure employment in
exchange for life-long loyalty”. Unlike in the liberal market, “profits are reinvested [instead]
of being paid out to shareholders”. The developmental state concerns itself more with
efficient production rather than making a profit and it invests more than it consumes from
other countries (Hague 149-50).
(b) Discuss the advantages and disadvantages of this approach to raising a poor country’s
level of economic development.
The disadvantage of the developmental state is that there is one elite group that controls
the economy. The advantage of the developmental state is that people get similar wages
and benefits and they have a higher job security than people in liberal economies. Also, the
developmental economy allows itself to develop faster by using its profits to make new
investments. (Hague 149-50).
3. According to Olson, why do democracies experience higher economic growth rates than
nondemocratic countries?
They “experience higher levels of investment” because democracies are “able to provide
stronger guarantees of property rights than non-democratic” countries and dictatorships
(Miller 70).
4. Which nondemocratic countries deviated from Olson’s hypothesis by experiencing high
rates of economic growth in the 1980s and 1990s?
South Korea, and Taiwan. (Miller 94)
5. What explanation does Miller provide for this anomaly?
“Economic development leads to democracy because human capital […is] important to
develop[ing a nation]”, and the “degree of income and wealth equality help[s] to insulate
their governments from rent-seeking behavior from interest groups”; essentially the reason
these countries deviated from Olson’s theory is because they demonstrated democratic
efficiency: “a high level of income inequality lessens economic growth and strong, unified
labor organizations increase economic growth” (Miller 95).
6. Taxes are necessary in order for the government to function. Most of the U.S.
government’s income comes from three sources:
• Tax on the income of individuals.
• Payroll taxes (i.e. taxes on employers’ payrolls to support Social Security, Medicare,
unemployment insurance benefits, etc.)
• Tax on the income of corporations
If you had the power to do so, how would you change the tax system? Be creative,
suggesting alternatives to the taxes listed above. Keep in mind that taxes discourage
whatever activity is taxed.

I would tax how many miles people drive in addition to the cost of gas and the car itself.
I would also tax wasting food, so that however many pounds of food you waste (throw in
the trash) – depending on the amount you bought – will ultimately set your tax rate, in
turn, discouraging people from generating so much waste.
I think the government would make a lot of money off these, and they also might stop
global warming.

7. Suggest government policies to remedy the related problems of traffic, smog, and
sprawl.
To eliminate traffic, the government could create a policy that forces people to rideshare or
carpool on certain days, and if a certain number of people are not in a certain type of car,
then they would be ticketed.
To reduce the amount of smog in the air, the government could implement a policy that
calls for drivers and industries that emit smog to pay for the amount they emit; the amount
they emit would be measured by a device on the end of the source of such smog.
Sprawl could be reduced by destining certain lands as parks or by limiting the number of
people allowed in a certain number of square feet.

The Modesto Bee articles: Homelessness

8. How did the following people become homeless? :
(a) Mick Matthews: He spent his $200,000 savings on his stroke’s med. Bills and missed a
payment on his truck b/c he was in the hospital. Both his apartment and his “spot on his
friend’s couch” followed.
(b) Blue Bike Mike: He broke an axle to a 4-wheel drive on his excursion up to the mtn.s
and he didn’t have a phone to call work, since he wouldn’t be able to make it on Monday, so
he lost his job, causing him to go to Reno to look for work, in which time “his child support
payments mounted”. Then when he finally returned home his house was cleaned out
because the owner died, and all his belongings were gone. The stress caused him to drink,
and he was fired from another job for drinking. Then his truck was taken because he
couldn’t afford to pay the registration or insurance. Then he was homeless.
(c ) Stephen Harris: He fractured parts of his back and his knee was crushed in an accident
between his truck and a 40 ton water truck that rear-ended him.; after the incident, his wife
divorced him, and he couldn’t get another job because people think he’ll “just get hurt
again”. PUNCHED & BEATEN by YOUTH.
(d) Linda & Terry Cool:Linda stopped working because she is “overweight and has chronic
arthritis” + she is suffering “from the early stages of emphysema and asthma”. She is
“waiting for social security to kick in” as she has been for the past year. Terry pinched
nerves in his back while working that prevented him from doing so.
(e) Charles: He was a crystal meth addict. Now he’s Christian.
9. The 2nd article discusses several costs borne by the public associated with the problem of
homelessness.
(a) What sort of costs?
Tax payers pay for homeless people’s Mental health providers, emergency room visits,
police involvements, “before judges”, and short jail stays, all of which add up to $200,000
per person. Chronically homeless cost taxpayers about $1,000 dollars per ER visit.
(b) Would the costs to the taxpayers be higher of lower if the government provided the
homeless with housing, health care, counseling, etc?
The cost would be lower, “we could have rented ocean-side condos and concierges to attend
to their evert whim, and it would have been a less expensive venture”. Another good
example would be Miller Pointe, a place where the homeless can get rehab by their own will
and get back on their feet.
10. Do you think that all Americans should be guaranteed the right to housing? Explain.
Yes, All Americans should be guaranteed the right to housing because then they wouldn’t be
as depressed as they are out on the streets, where they are more likely to get involved with
drugs and alcohol. People in housing are also more likely to be safe from people like the
teenagers who beat up Stephen Harris. Furthermore, people who live in housing projects
such as Miller Pointe are less likely to get in trouble with the law when they are trying to get
the things they need to live: life’s necessities.
11. Do you think that all Americans should be guaranteed the right to medical care?
Explain.
Medical care is necessary to keep a person in good health and to prevent them from
becoming miserable from their in-capabilities to provide for themselves. If everyone had
medical care, then no one would go broke from having to pay so much money in bills, no
one would go broke, and not so many would be on the streets or in a worse position
because of a hospital visit.