Date: Tue Sep 23 2003 10:22
trotsky (frustrated, 7:50) ID#377387:
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"Rising productivity is a wonderful thing as long as the demand for the rising output grows even faster. Insufficient demand is the problem today, and stepped-up government spending may be necessary to supplement inadequate demand in the private sector. Other than rising outlays for the military, that is not happening yet."
what you have here is economic illiteracy running wild. it is highgly important to continue to point out the fallacies behind this 'we have insufficient demand' type Keynesian thinking. its abominable conclusion, namely that the robber-baron State must confiscate more loot and 'distribute' it is not only illogical, but also immoral. furthermore, the fact that corporations are cutting costs and liquidating malinvested capital is not something to be deplored, but something to be welcomed. the artificial credit induced boom of the 90's has left the economy's structure wildly distorted, as entrepreneurs were constantly sent false signals by the too loose monetary policy of the Fed. this structural distortion is now being rectified by realigning the structure to meet ACTUAL consumer demand as well as reflecting the now reduced expectations for future demand, instead of the FALSE expectations that were raised during the boom. interfering with this process , whether it be through 'fiscal stimulus' or more easy money, only results in delaying the NECESSARY economic realignment, and relegates us the type of never-ending recession that has characterized Japan's economy over the past 13 years. as for consumer demand, consumers likewise should be encouraged not to spend more money they don't have on things they don't need, but instead to repair their own balance sheets first. note also that there is another fallacy imbedded in this 'critique' of productivity: the wages earned by workers are a COST of business. what is necessary for an upswing is not that this cost increase - what is needed is a restoration of profitability, which in its wake will produce the currently elusive, but ultimately most important facet driving upswings: business capital investment.
in short, it is erroneous to clamor for the stimulation of demand, and if implemented, likely to inflict even more harm on the economy. |
