And now, day (lesson) six.
For those who follow this blog, they know that it has been about
reporting the development, in real time, of a unit of study. The unit is a two-week instructional plan
designed as the last unit of a senior level, American government class. To date, the plan has students look at the
history of this nation’s foreign trade, specifically how government policy
since World War II has attempted to reinvigorate the economies of war torn industrial
nations, and to spur industrial developments in lesser developed nations.
In general,
some criticize this historical path in that its policy choices have left the US
in a disadvantaged position. By
liberalizing foreign trade policy, the nation has lost its dominant position in
foreign trade and, as a consequence, has lost millions of manufacturing
jobs. Hence, the main thrust of the
unit: foreign trade and how that trade
has affected job availability.
For this sixth
lesson, the focus shifts to other countries, but, before describing this topic,
a word on data that indicate more recent years have been a bit contrary to the
general history just reviewed. The
turning point for this reversal was the onset of the Great Recession. Apparently, to combat the detrimental effects
of the downturn that began in 2008, the Federal Reserve initiated a policy
known as quantitative easing. Central to
this policy was to devalue the dollar.
How? The FED bought government and other
securities (IOUs, such as bonds, and stock ownership certificates) and, by so
doing, increased the money supply. This,
in turn, puts more dollars into circulation and lowers the value of a
buck. As such, this makes, as has
already been pointed out in these lessons, American goods cheaper in other
countries. Of course, cheaper goods
enjoy higher demand. All this can’t help
but improve economic conditions and, as more recent data indicate, that is what
has happened.
To instruct
students on this development, this sixth lesson’s newsletter reflects this and
is identified below. The information is
taken from a FED publication and it reports on the improved economic
developments from 2013 to 2016. One word
of caution: the economic improvements
are relative to its initiating year, 2013, not to the economic conditions
facing the American middle-class in the 1960s.
Since the ‘60s there has been an enormous shifting of income and wealth
to the very top economic classes.
In terms of
the actions and policies of other nations, the main topic of this lesson, the
point is that other nations can be classified as using one of two approaches in
dealing with foreign trade. One approach
can be summarized as “beggar thy neighbor” and is implemented by mostly Asian
countries such as China. The other
approach is followed by European countries and reflect a nurturing strategy
that does not negate market forces.
Previous
posting identified two insights that reflect this distinction. They are the original thirteenth and
fourteenth insights and based on the work of Edward Aldin.[1] In
shorten form, they are:
Often
in American discourse concerning international trade, it is portrayed as a
zero-sum competition. Unfortunately,
this has been accomplished by nations, especially China and Japan, ascribing to
“beggar thy neighbor” strategies.[2]
And
In
counter distinction to the distorting policies utilized by Asian countries and
identified in the [above] insight, European countries use more pro-market
strategies. They rely mostly on
nurturing their businesses and training their workforces. This approach is particularly seen in the
Nordic countries (Denmark, Finland, Sweden, Norway, and Iceland).[3]
One can add Germany to this list of countries. These insights will be further addressed
below as the lesson plan incorporates them into the instruction.
Here is that
lesson plan.
LESSON ON FOREIGN COUNTRIES’ FOREIGN TRADE POLICIES
Objective:
Given a list of foreign trade policy elements, the student
will be able to correctly identify whether the elements represent a “nurturing”
policy strategy or a “beggar thy neighbor” policy.
Lesson steps:
·
Between 2013 and 2016, median family
income grew 10 percent, and mean family income grew 14 percent.
·
Families throughout the income
distribution experienced gains in average real incomes between 2013 and 2016,
reversing the trend from 2010 to 2013, when real incomes fell or remained
stagnant for all but the top of the income distribution.
·
Families at the top of the income
distribution saw larger gains in income between 2013 and 2016 than other
families, consistent with widening income inequality.
·
Families without a high school diploma
and nonwhite and Hispanic families experienced larger proportional gains in
incomes than other families between 2013 and 2016, although more-educated
families and white non-Hispanic families continue to have higher incomes than
other families.
·
Families near the bottom of the income
and wealth distribution experienced large gains in mean and median net worth
after experiencing large declines between 2010 and 2013.
·
Families without a college education
and nonwhite and Hispanic families experienced larger proportional increases in
net worth than other types of families, although more-educated families and
white non-Hispanic families continue to have higher wealth than other families.
·
Homeownership rates decreased between
2013 and 2016 to 63.7 percent, continuing a decline from their peak of 69.1
percent in 2004. For families that own a home, mean net housing values (value
of a home minus outstanding mortgages) rose.
·
Retirement plan participation and
retirement account asset values rose between 2013 and 2016 for families across
the income distribution, with the largest proportional increases in
participation occurring among families in the bottom half of the income
distribution.
·
Ownership rates and the value of direct
and indirect holdings of corporate equities increased between 2013 and 2016,
with the largest proportional increase in ownership among families in the
bottom and upper-middle parts of the income distribution.
·
Business ownership increased from 2013
to 2016 to 13.0 percent, nearing its 2010 level. These gains were broad based,
occurring throughout the income distribution, with the largest proportional
gains occurring among the highest earners.
·
Overall, debt obligations fell between
2013 and 2016: Median debt declined 4 percent, and mean debt decreased 2
percent, for families with debt.
·
For the median family with debt, debt
burdens also fell between 2013 and 2016: Leverage ratios, debt-to-income
ratios, and payment-to-income ratios all fell. The fraction of families with
payment-to-income ratios greater than 40 percent declined to 7.0 percent, the
lowest level seen since 2001.
·
Some of the decline in debt can be
explained by the decline in the fraction of families with home-secured debt,
which fell from 42.9 percent to 41.9 percent, a decline that is comparable to
the size of the drop in homeownership.
·
Between 2013 and 2016, the fraction of
families with credit card debt increased. Although median and mean balances for
families with credit card debt both fell 3 percent, the fraction of families
that pay off credit cards every month decreased.
·
Although many measures of debt and debt
obligations indicate that debt has fallen, education debt increased
substantially between 2013 and 2016.
·
In 2016, 20.8 percent of families were
considered credit constrained; i.e., those who reported being denied credit in
the past year, as well as those who did not apply for credit for fear of being
denied in the past year.[4]
(Same day steps)
1. Teacher
collects homework assignment – student notes on policy option choices. (one
minute, students’ attendance will be based on homework sheets – i.e., students
who did not do the assignment need to turn in a blank sheet with their names on
it)
2. Teacher hands out the newsletter for the day. Students are given time to read the
newsletter while attendance is taken and other administrative items are
handled. (seven minutes)
3. Teacher asks students if they have any clarifying questions
regarding the newsletter. Since this
day’s newsletter is significantly longer, the teacher will give students more
time to read and consider its content.
After about ten minutes, the teacher opens up the process for general
discussion. The teacher should make sure
that students are cognizant of the dates the newsletter highlights. This is important because the improvements
the FED is reporting need to be in the context of the poor economic years from
2008 to 2013. Those were the years of
the Great Recession. The point is that
improvements reported does not mean all the damage of the recession or of the
loss of manufacturing jobs, since the late ‘60s, no longer exists. (twenty minutes)
4. In
the remaining time, the teacher hands out a sheet that contains two insights
which describe how foreign countries approach foreign trade and their
manufacturing capabilities (originally thirteenth and fourteenth insights). One is summarily described as “beggar thy
neighbor” and is associated with Asian countries, notably Japan and China. The other is considered a “nurturing”
approach and is associated with European countries, particularly the Nordic
nations and Germany.
5. Teacher
writes on the board the following strategies:
restrictive regulations, subsidizing businesses, and manipulating
currencies. For each strategy, students
investigate and answer these questions:
how is this strategy done? How
does it lead to short-term advantage?
How does it pose long-term disadvantages? How does it distort market forces? What needs to be spelled out is: how does a national government “nurture”
domestic businesses, especially in the manufacturing sector? What seems to be central to a nurturing
approach is a strategy that avoids direct subsidy and instead focuses on
creating a fertile environment of entrepreneurial factors. Students investigate to answer these
questions. They can see internet
site: https://www.weforum.org/agenda/2014/12/6-ways-governments-can-encourage-entrepreneurship/
to gather the needed information. (twenty
minutes)
6. Teacher
instructs students to complete this in-class assignment at home. Students will, at the beginning of the next
class period, be quizzed on the information they find. (two minutes)
Assignment:
Students finish in-class assignment.
That ends lesson six. The remaining class time in subsequent
lessons will be taken up with preparation for and conducting a class debate and
developing an action plan (mostly accomplished by the debate component).
[1] Edward Alden, Failure to Adjust: How Americans Got Left Behind in the Global
Economy (Rowman and Littlefield, 2017).
[2] See posting,
“Restrictive or Liberalized,” September 22, 2017.
[3] Ibid.
[4] Board of
Governors of the Federal Reserve System, “Changes in U.S. Family Finances from
2013 to 2016: Evidence from the Survey of Consumer Finances,” Federal Reserve Bulletin, September,
2017, 103 no. 3, accessed November 1, 2017, https://www.federalreserve.gov/publications/files/scf17.pdf.
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