Many countries face unequal wealth and income distribution. This is very problematic for the foreign exchange market. Economists and sociologists have looked for gaps in wealth to determine how economic equality can be counteracted. Economic inequality has been examined on many different levels. The European Union researched inequality from country to country to figure out just how different factors had been affecting their economies. Once realized they felt the best way to close the gap between themselves and the United States economy was to create an all-new currency.
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On January 1, 1999, the European Union introduced there first ever currency called the Euro (Hämäläinen, 1999). Eleven different countries would adopt the European version of the American dollar. This newly created Euro system includes the European Central Bank and eleven national banks throughout Europe. The European Union took a decade to create this currency and they finally launched their currency 9 days before my birth in 1999. They called the new Euro invincible for the first three years because it was only used for electronic payments and accounting purposes (Hämäläinen, 1999).
The main reason the European Union created the Euro was to reduce the transaction cost and to unify Western Europe as an economic common market (Hämäläinen, 1999). The European economist projected the Euro to rival the Dollar as the preferred international currency. The Euro has been able to do just that, initially an idea and now the Euro is the second largest currency around the globe. With the introduction of the Euro in January of 1999 currency fluctuations have been reduced and global pricing for goods has become more transparent (Hämäläinen, 1999). The Euro has made European business transactions for the eleven countries in the European Union more efficient.
Broadly speaking, the European Union adopted a neoliberalism economic perspective with the creation of the Euro. This ideology promotes an economic system in which the political and economic perspective that promotes an economic marketplace free of government regulations. With the introduction of the new currency, the European Union was able to reduce taxes, improve workers' rights, and ease government regulations (Obringer, 2002). The power of large European corporations strengthened, and government influence was weakened. Although, the Euro loosened government regulations the introduction of the currency contributed to the decline of other European labor unions (Independent Institute, 1999). With the decline of European labor unions, income and benefits received a decline but were reinforced by the certainty of the new currency. Therefore, the decline of the labor union benefitted the income and benefits of countries in the European Union. The European Union's Euro was created to promote economic diversity, promote growth, and international economic stability (Independent Institute, 1999).
The Euro is used in a culmination of different countries, but each nation still had the individual right to use its own previously existing currency as well. It was not until three years after the launch that the Euro was established in all eleven countries in the European Union as the everyday currency in Europe (Independent Institute, 1999). To this day the Euro is still not fully adopted by every country in the European Union as the only currency for transactions (Independent Institute, 1999). The creation of the Euro in 1999 has had a major effect on the global economy. However, the Euro has not successfully taken over the world leading-dollar as the main currency due to key transactional flaws. Since its creation, the Euro has been a major player in digital currency transactions (Independent Institute, 1999).
The most substantial consequence of the 1999 introduction of the Euro has been the function of the foreign exchange market. The fact that eleven of the world's most powerful economies agreed to stop trading their existing currencies and adopt a new currency has had a major effect on worldwide trade and the fundamental attention of currency in the foreign exchange market. The major flaw in the Euro of 1999 is that a single monetary policy has not completely fit all local economic conditions for each country in the European Union (Obringer, 2002). The European Union has been prosperous for decades with a high growth platform but with the introduction of the Euro in 1999 some of the countries who made the switch suffered from prolonged economic downturns and higher unemployment rates.
Throughout modern history, national currencies have dictated how global economies operate. Currencies allow us to accurately express the set value of individual products across markets globally. Wealth is the culmination of assets and currencies transported (Obringer, 2002). The Euro created a system in which investments are supported throughout the eurozone. Without the proper allocation of the Euro, the foreign exchange market could face high risk which could lead to inefficient foreign exchange and major capital deficits (Obringer, 2002). Although, global stocks also have high risk in the foreign exchange market (Obringer, 2002).
Moreover, on January 6, 1999, President Clinton and Vice President Gore created a three-part economic resolution to cut the federal budget deficit, invest in government systems, and create a free market foreign exchange system (Clinton Administration, 1999). With the creation of this 1999 economic resolution, the United States was able to create a budget surplus of $76 billion which helped counteract the creation of the European Union's Euro (Clinton Administration, 1999). With a surplus of $76 billion, President Clinton was able to create a budget deficit that was 50 percent higher than the previous year's budget deficit and would be the largest dollar surplus in United States history (Clinton Administration, 1999). The largest dollar surplus in history was the seventh consecutive year of fiscal balance for the country. In 1999 the Clinton administration was able to create an expanding budget for not only education but also jobs and labor union training (Clinton Administration, 1999). President Clinton's resolution also created tax cuts for the working middle class and created the lowest tax burden for the middle class in over two decades. President Clinton built an economic resolution that provided the necessary aid for the working classes and provided key benefits that helped close the gap of hierarchal wealth and education inequality. In 1999, the Clinton administration was able to create a surplus that has helped solve generational deficits in the United States (Clinton Administration, 1999).
In the social class system, people can move upward or downwards in social class, this is called social mobility. Many factors determine your social hierarchy including education, income, and occupation (Atkinson, Korgen, Trautner, 2019). There are many social classes that people fall into, the highest being the upper class, followed by the middle class, then finally the lower class (Atkinson, Korgen, Trautner, 2019). Societal arrangements are established through laws and interactions. The way our government is structured determines the countries level of economic inequality. In the United States, our government leaders have historically created a meritocracy, this means the largest rewards are claimed by those who work the hardest and do the work that is most needed (Atkinson, Korgen, Trautner, 2019). The goal of a meritocracy is to allow those individuals who work the hardest to move up in societal hierarchy the easiest. A meritocracy affects the wealthy families because it makes it possible for a wealthier family to move down in the societal hierarchy if they do not continue to work hard for their status. Although, there is a major flaw in meritocracy because it creates the notion that the lower class is only there because they simply do not work hard enough. This is not always the case and many wealthy families built their wealth on the backs of hard-working laborers.
Social reproduction theory reflects a viewpoint in which social inequality plays a negative role in society. "Karl Marx's idea that society is composed of groups competing for power forms the basis of this theory" (Atkinson, Korgen, Trautner, 2019). Leading social reproduction theorists have concluded that limited or unequal access to resources such as education and jobs leads to the unequal distribution of wealth causing impoverished areas to stay that way without further government intervention. Many theorists have argued that our United States economy is structured for upper-class families to use their wealth to stay in the upper class without any additional work effort (Atkinson, Korgen, Trautner, 2019). When these upper-class families insert themselves in political positions, they create laws that benefit only the elite and create a gap in the distribution of wealth which further restricts opportunities for lower-class families. This lack of distribution of wealth to deserving hard-working people defies the purpose of our government meritocracy and does not allow upward mobility. Social reproduction theory helps us explain economic inequality and study just how harmful inequality can be for our American culture (Atkinson, Korgen, Trautner, 2019).
Works Cited
Sirkka Hämäläinen. (1999). The euro: the birth of a new currency. European Central Bank. https://www.ecb.europa.eu/press/key/date/1999/html/sp990521.en.html Newspaper
Lee Ann Obringer. (2002). How the Euro Works. HowStuffWorks.com. 45(03), pp.45-1203-45-1203. https://money.howstuffworks.com/euro.htm Journal
.Clinton Administration. (January 6, 1999) THE 1999 BUDGET SURPLUS. Clintonwhitehouse4.archives.gov. https://clintonwhitehouse4.archives.gov/WH/Work/010699.html Journal
Independent Institute. (January 8, 1999). Independent Institute: The Euro and Economics.
https://www.independent.org/news/article.asp?id=468 Journal
Maxine P. Atkinson, Kathleen Odell Korgen, Mary Nell Trautner. (2019). Chapter 2: Analyzing Economic Inequality. Social Problems: Sociology in Action. Thousand Oaks, CA: SAGE Publications. Book
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