Economic Communities and Social Investments
The U.S. Labor Department reported that the unemployment rate rose to 7.6% as of June
2013. In today’s global market, there is a much higher demand for skilled workers as compared
to in the past. In Lester Thurow’s “Economic Community and Social Investment,” Thurow
discusses the detrimental effects of capitalism coexisting without “economic communities,” for
today’s workforce, which include the falling wages and standard of living In Fred Magdoff and
Harry Magdoff‘s “Disposable Workers: Today’s Reserve Army of Labor,” the authors discuss the
appalling conditions of job prospects in our century and how capitalism has forced many workers
to join the “reserve army of labor.” In Paul Krugman’s, “The Great Compression,” he discusses
how political changes have led to economic changes in the past and the role “economic
communities” should play for a higher standard of living for its citizens. “Economic
communities” such as government agencies and labor unions should provide today’s struggling
workforce with opportunities to increase their standard of living and focus on the “social
investment” of educating and protecting wages of the workers of today so that they are able to
compete globally in the world market.
In today’s generation, many investors, corporate boards and managers tend to focus on
short-profit gains rather than focusing their attention on long-term prizes. In his essay, Thurow
acknowledges this defect in our economy and states, “What this standard perspective doesn’t
admit is that capitalism has a defect. It intrinsically has a short time horizon” (Thurow 21). This
behavior has become a trend and has proven to be detrimental to our economy; at the end of the
day, many of these corporate boards and managers are looking to make quick profits to give a
good look to their quarterly earnings. Thurow discusses that many board leaders and managers
do not admit that capitalism has a defect because they have their mind set that the main priority
of the company is to create more profit. While it is true that generating more profit should be a
priority for a company, companies should also try to focus on a long time horizon. Magdoff and
Magdoff further expand on Thurow’s comments about the nature of capitalism by stating, “More
than an underlying attribute of capitalism, the reserve army helps to keep costs down—
permitting the market system to function profitably—and serves as a constant and effective
weapon against workers.” Magdoff and Magdoff explain how unemployment causes disparity
that force workers in the “reserve army,” to surrender to lower wages and job benefits.
Companies use their power as a weapon against workers to portray that they are in control and
use that power as an advantage to generate more profit. Thurow and Magdoff and Magdoff all
discuss the detrimental effects of capitalism on our economy. The only way to change the trend
towards increased short-term profitability to long-term investments is through means of
