Bill Mitchell — Attacks on the welfare state are misguided and will only worsen things

The idea that it is necessary for a sovereign government to stockpile financial resources to ensure it can provide services required for an ageing population in the years to come has no application. It is not only invalid to construct the problem as one being the subject of a financial constraint but even if such a stockpile was successfully stored away in a vault somewhere there would be still no guarantee that there would be available real resources in the future.

The claims that welfare entitlements will be unsustainable because governments will run out of money are equally flawed.

The best thing governments can do at any point in time is to ensure that incomes are maximised in the economy and a necessary condition for that is the achievement of full employment. This requires a vastly different approach to fiscal and monetary policy than is currently being practiced and proposed by the conservatives.

If there are sufficient real resources available in the future then their distribution between competing needs (income claimants) will become a political decision which economists have little to add.

Long-run productivity growth that is also environmentally sustainable will be the single most important determinant of sustaining real goods and services for the population in the future.

Principal determinants of long-term growth include the quality and quantity of capital (which increases productivity and allows for higher incomes to be paid) that workers operate with. Strong investment underpins capital formation and depends on the amount of real GDP that is privately saved and ploughed back into infrastructure and capital equipment.

Public investment is very significant in establishing complementary infrastructure upon which private investment can deliver returns. A policy environment that stimulates high levels of real capital formation in both the public and private sectors will engender strong economic growth.

Reducing inequality also can play an important role in keeping the claims on real resources commensurate with their availability.

Read it at Bill Mitchell — billy blog
Attacks on the welfare state are misguided and will only worsen things
by Bill Mitchell