Paul Krugman continues to have a hard time connecting the dots—for example, between inequality and macroeconomics. For him, there’s the macroeconomic dot and then there’s the inequality dot, and the two are separate: the former is “economics,” while the latter is “politics.” That’s what you get in the IS-LM world of which Krugman is so enamored.
Joseph Stiglitz, on the contrary, is in fact busy connecting the dots. He understands quite well that the existing macroeconomic models are fundamentally flawed, at least in part because they exclude the problems created by growing inequality.Real-World Economics Review Blog
Connecting the dots—or not (Stiglitz or Krugman)
David F. Ruccio | Professor of Economics, University of Notre Dame
12 comments:
Inequality is a function of high profits and a not-progressive-enough tax code.
We tax 99% of households too much.
Inequality is not hurting corporate profits, but I'm not sure why. Perhaps the plutocrats have achieved the plutonomy they have always wanted. In other words, perhaps the plutocrats are so rich that their consumption is enough to produce high corporate profits.
"perhaps the plutocrats are so rich that their consumption is enough to produce high corporate profits"
I think it may have more to do with cutting down on the number of employees…that can only go so far.
Anyway, it looks like corporate profits are beginning to wane…
…one can only push a boulder up a hill for so long…the pushers are dropping off.
Inequality is not hurting corporate profits, but I'm not sure why. Perhaps the plutocrats have achieved the plutonomy they have always wanted. In other words, perhaps the plutocrats are so rich that their consumption is enough to produce high corporate profits.
That's part of it. The other part is not sharing productivity gains with labor and also profiting from the expansion taking place in the emerging nations.
In addition, the (economic) rent is too damn high.
"Inequality is not hurting corporate profits, but I'm not sure why. Perhaps the plutocrats have achieved the plutonomy they have always wanted. In other words, perhaps the plutocrats are so rich that their consumption is enough to produce high corporate profits."
The plutonomy thing sounds like a possibility.
I tend to believe that another possibility is that, in a globalized economy, with all its capital flows and the accounting tricks available to minimize tax, the system of national accounts may not be reflecting profits accurately.
In some cases the SNA may be inflating profits, in others it may be underestimating them.
The rich can't get rich selling only to themselves…that transaction chain is a closed system.
They need external funding to get richer…to do that they have to capture public spending but they are jonesing to lower that so…they will just take everything we have and discard us.
The very rich own most of the economy, with much smaller percentages owned by a few tens of millions of stockholders who are very widely distributed. These are the people who have all of the decision-making power over what will be produced, who will be employed and how much the employed will be compensated.
If the ownership class can now generate as much wealth for themselves from an economy of 250 million people as formerly required 300 million people, then what will happen? The owners will jettison 50 million people from the economy. This is more or less what is happening. Count up the massive number of people in the United States who are incarcerated, the permanently unemployed who the opinion elite have forgotten and abandoned, the homeless, the people who are barely hanging on, the trailer park nobodies.
And this can keep right on happening. People who think the invisible hand of "The Economy" is magically going to deliver to them free stuff and abundant labor in a robot future aren't thinking properly about the realities of private property and it connection to political power, the control of physical space, police and security systems and the rest of the organizing apparatus of modern society. Capitalism doesn't give people stuff for free; it gives people a share of the output only to the extent that they have something valuable to exchange for it with the owners of that output. Absent that, you don't exist.
they will just take everything we have and discard us.
That looks to be the plan.
Capitalism works in a democratic republic to the extent that the ruling class can control the election process and capture the government. This works through crony capitalism and corruption, as well as duping the rubes to get them to vote with the ruling elite against their own interests through propaganda, xenophobia, interest politics, wedge issues, and many more tricks of the trade that have been honed to near perfection.
But the bottom line is convincing a majority of the electorate that their interests are aligned with the ruling class.
If that breaks down, then serious problems can develop for the ruling class through political regime change. Then the only hope the ruling class has is a military coup to "restore order." But that is no sure thing in a democratic republic, since the military is not drawn from the ruling class.
"Inequality is not hurting corporate profits"
previously private debt was holding profits up, now government deficits are doing the job.
kalecki profits equation:
http://www.economonitor.com/lrwray/files/2012/11/kalecki-profit.png
http://en.wikipedia.org/wiki/Micha%C5%82_Kalecki#The_profit_equation
The other part is not sharing productivity gains with labor ... Tom Hickey
"Share" is another name for common stock.
But why "share" with labor when one can steal their purchasing power and exalt in one's "creditworthiness" to boot?
http://www.biblegateway.com/passage/?search=Luke 16:10-15&version=NASB
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