David+Ricardo



**How would David Ricardo respond to the US government bailout of the Insurance Industry? Why? Would this economic thinker approve? Disapprove? Alter the bailout? Be specific with both your answer and your reasoning.**

The "escalator of progress" seems to directly apply to the insurance bailout in the United States. His theory is that some people will ride up the escalator to fortune and fame, while others will never even get close to the top. This is a harsh reality that many citizens in the United States have already realized. The American dream is no longer within reach for many citizens, and the social classes are growing farther apart, creating many problems within the country.[1] Though the people in the lowest classes are the ones who need the most help, they are often the ones who are receiving little to no aid, and are being cheated by many insurance companies. In 2008, the United States bailed out the insurance company AIG (American International Group), the aftermath of which severely affected the lower class in the United States.
 * David Ricardo's thoughts as a Worldly Philosopher: **

**Facts about the AIG Bailout:** [|**AIG-OBAMA: LAUNDERING OUR MONEY?**] $165 MILLION AIG BONUSES allowed by the so-called Stimulus bill[2] [|**COSTS: BAILOUTS vs. WARS**] Bailouts (Jan. 2008 – Sept. 2008)….$1.5 Trillion Iraq War cost (2003 – 2008)……………$648 Billion[3]

This shows how much money was used to bail out AIG in comparison to the war, which was arguably one of the most expensive choices by the United States government in the past decade. Even though the spending for the Iraq war was costly, it spanned over five years, while the Bailout for AIG doubled the war spending and was within only nine months. Adding to the outrage of Americans, this money was used for bonuses for some top executives, instead of actually being used to help AIG regain it's previous footing.

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Revolution occurs when the lower class citizens become fed up and revolt against the principles and laws that mainly benefit upper class citizens, and generally ignores or detriments the larger population of the lower class. This occurred often throughout history, and has shaped how our economy works today. David Ricardo is a strong supporter of revolutions, he believes that they revive the economy and ultimately help the economy grow. Ricardo wouldn't approve of the government bailout of American International Group (AIG) because it is essentially an anti-revolution act. Instead of the company failing and therefore reforming the way insurance works (which is better for the consumer), the Government is enabling AIG to continue practices, such as charging high fees and not providing full coverage. These do not favor the consumer. This will only hurt the economy because the competition that would have been created by AIG failing is not being allowed the chance to become realized.
 * The Bailout is Anti-Revolution: **



This graph depicts the rise and fall of AIG throughout the last 25 years of its existence. The obvious drop in 2008 was a result of the economic downfall. AIG has yet to get back to the success level that it previously had. .



Bad For Lower Class Citizens: ** The money that is used in discretionary spending is taken from the taxpayers own pockets. For lower class citizens this is potentially a very detrimental occurrence because they may not have enough disposable income to afford the increased taxes. The people with power in this country, have money. With this money and power, they are able to manipulate and make sure that laws are passed in their favor. These taxes are mandatory, yet they are just helping the people in a higher socioeconomic class regain income that they don't necessarily need. These taxes often do not benefit the majority of citizens in the country at all. Therefore this tax does not do anything good for lower class citizens who are at the bottom of the escalator. This discretionary spending proposed for the bailout helps the rich to get richer, and the poor to suffer. What is happening to our country's consumption level: The United States consumption level is currently 32. This means that on average each American consumes 32 times more than the average Kenyan (the country with the lowest consumption level in the world). "Despite rising consumption in the developing world, industrial countries remain responsible for the bulk of the world’s resource consumption—as well as the associated global environmental degradation. Yet there is little evidence that the consumption locomotive is braking, even in the United States, where most people are amply supplied with the goods and services needed to lead a dignified life."[4] The bailout has spun this out of control. The money that would usually be spent for goods and services such as new school systems and roads is now being spent to help the large companies regain their possession of America's economy. AIG is being bailed out because they have no more money, yet they took their first bailout check and used it for vacations and raises. This spending seems to be going toward companies that increase consumption, instead of ones that are looking out for America's future.

The United States Federal budget is used by the Government for mandatory spending and discretionary spending. Mandatory spending is required by law to be used for certain services and goods. Discretionary spending is money that is spent on services that are decided by the President and Congress. Allocating money to close the income gap would be a smarter and better use of the money, as opposed to widening this gap by bailing out the large companies, such as AIG. Ricardo would find using this money to help the income gap as a great way to start fixing what the previous administrations have allowed to go on for so many years. Redirecting the money in discretionary spending to help narrow the income gap will also help to solve the economic crisis we are facing in this country.
 * Discretionary Spending: **

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The Club of Rome is a group of international members who want to show the world what is happening now with the way humans are consuming, and what we can do to prevent further damage. There are many different topics and issues that are addressed on this website, and one is about the recent 2008 AIG bailout. It is by a man from London, Wouter van Dieren, who felt that the answer to stabilizing our economy was to "go green" in every way possible. This could potentially do many things for the people who are at the bottom of the escalator, and looking to move up. "Going green" as a nation would mean that many new jobs would be created. These jobs would allow unemployed people to embark into a new field that we as Americans have never entered before. As well as providing jobs, our country's consumption level would decrease as companies started to catch on as well. Large companies like AIG take away competition by buying out smaller companies and creating a monopoly-like atmosphere where only a few large companies are running the insurance field. This increases the amount of money for people at the top of the escalator, and also raises our consumption levels. By bailing out these companies, we are heading in the opposite direction from what we need to happen for our country's successful future.
 * What the Club of Rome would have to say about this issue: **

The 2008 Government bailout of AIG goes against everything Ricardo believes in. This is creating a larger income gap between the poor and the rich, which will do no good for the United States. The people who are at the bottom of the escalator are still there, and the people who already rose to the top, are getting even higher. This isn't fair to the American public and it does not make economic sense to bail out these failing companies. It is up to our generation to fix this problem and restore the healthy competition that Capitalism once brought to the United States. This bailout is anti-revolution, and Ricardo would be very disappointed with the turmoil this country will have to go through to fix this mess. The income gap must get smaller, otherwise this country will have to go through a hard revolution in the near future.
 * Conclusion: **

[[|1] ] Heilbroner, Robert L. //The Worldly Philosophers: the Lives, Times, and Ideas of the Great Economic Thinkers//. New York: Simon & Schuster, 1999. Print. [|[2] ] "QUICK FACTS «." //FactReal//. Web. 12 Apr. 2010. . [|[3] ] Bilmes, Linda J., and Joseph E. Stiglitz. "The Iraq War Will Cost Us $3 Trillion, and Much More - Washingtonpost.com."//Washingtonpost.com - Nation, World, Technology and Washington Area News and Headlines//. 9 Mar. 2008. Web. 12 Apr. 2010. . [|[4] ] "The State of Consumption Today | Worldwatch Institute." //Worldwatch Institute | Vision for a Sustainable World//. Web. 11 Apr. 2010. .

"AIG Failure Would Have Meant 'complete Collapse' of Financial System, Paulson Says | Money & Company| Los Angeles Times." Top of the Ticket | Confederate History Month -- Virginia's New Governor Accused of Racial Insensitivity, Political Cynicism | Los Angeles Times. Web. 07 Apr. 2010. . "American International Group, I Share Price Chart | AIG - Yahoo! Finance." Yahoo! Finance - Business Finance, Stock Market, Quotes, News. Web. 07 Apr. 2010. . Bilmes, Linda J., and Joseph E. Stiglitz. "The Iraq War Will Cost Us $3 Trillion, and Much More - Washingtonpost.com." Washingtonpost.com - Nation, World, Technology and Washington Area News and Headlines. 9 Mar. 2008. Web. 12 Apr. 2010. . Dieren, Wouter V. "The Club of Rome - Globalisation." THE CLUB OF ROME. Web. 11 Apr. 2010. . "Geithner Defends AIG Bailout at House Hearing - Los Angeles Times." Featured Articles From The Los Angeles Times. Web. 07 Apr. 2010. . Heilbroner, Robert L. The Worldly Philosophers: the Lives, Times, and Ideas of the Great Economic Thinkers. New York: Simon & Schuster, 1999. Print "The State of Consumption Today | Worldwatch Institute." Worldwatch Institute | Vision for a Sustainable World. Web. 11 Apr. 2010. . "QUICK FACTS «." FactReal. Web. 12 Apr. 2010. . "YouTube - Backdoor Bailout: AIG Paid out More to Get More." YouTube - Broadcast Yourself. Web. 09 Apr. 2010. . "YouTube - Escalator Temporarily Stairs." YouTube - Broadcast Yourself. Web. 09 Apr. 2010. .
 * // Works Cited: //**