Inequality resulting in lack of effective demand without supplementing income with debt, which leads to systemic instability. Pretty much like MMT says, following Minsky.
Eurasia Review
The Real Reason The Economy Might Collapse – OpEdRobert Reich | Chancellor's Professor of Public Policy at the Goldman School of Public Policy at UC Berkeley, Secretary of Labor in the Clinton Adminstration, and formerly a professor at Harvard University's John F. Kennedy School of Governmen and professor of social and economic policy at the Heller School for Social Policy and Management of Brandeis University
12 comments:
"And the government has to spend more and more to fill the remaining gap.
None of this is sustainable. "
Government spending more is always sustainable because it has no fiscal limits.
That's the bit these articles always get wrong.
The rich saving is of no concern. We can accommodate it. We don't need to confiscate it.
What is not sustainable is the government not making up the difference, so that either effective demand suffers or else consumer debt rises. IF the former, economic contraction. If the later, financial crisis as defaults increase.
However, while there may be no financial limit on the ability of the government to make up the difference by taking on the debt that consumers otherwise would, that may be politically unsustainable, at least in the US.
Moreover, that difference the government makes up goes into the pockets of the rich and just finances the problem of rising equality, which entails social and political issues in addition to economic, e.g., shredding the social fabric, as his happening in the US now.
The problem is neoliberalism, which entails neo-imperialism and neocolonialism. Now in an era of decolonization (vide China), the neoliberal elites are "colonizing" their own domestic population and turning "the little people" into debt serfs.
Not working, and the result there is a growing tendency toward neo-fascism, along with the perceived need to find scapegoats — foreign governments, immigrants, etc.
The economy is not going to “collapse!” … stimmies are over and fiscal flows are just returning to normal lower rates of govt spending similar up before the covid policies were put on…
I am not as concerned with economic or financial collapse as I am with social and political dysfunction, in which growing inequality and distribution skewed toward the top are playing a part.
But there are many other factors at work, too, with no end in sight. We can't agree on whether there is pandemic or whether climate change is real, let alone agree on how to address them. Meanwhile, the drums are beating for war with Russia, China and Iran.
SNAFU, FUBAR.
Yes, there is plenty of spending and flows have been generous and promise to continue to be if even a portion of the infrastructure spending is approved, which seems likely. It's just a matter of dealing, as usual.
The problem rather is targeting. A lot of people are getting left out of the "growth," it seems from the numbers. But that doesn't address the many other issues that the post leaves unsaid to focus on the economics.
I think that neoliberalism is the underlying factor but neoliberalism includes many factors — social, political and economic — that lead to systemic stress.
Debt is at a long term low…
Debt is at a long term low…
In aggregate. Need to look at the distribution. It's the lower tiers (the "precariat") that are stretched.
The stim helped prevent collapse at the bottom end of the scale, but that was a stopgap measure that didn't affect overall distribution as far as I can tell.
Ifctheyceerentvthecloeerctiers they wouldn’t have to borrow or borrow as much
If they weren’t the lower tiers they wouldn’t have to borrow as much…
It’s like you are saying “the lower tiers are the lower tiers”…
There is a parable about distribution — Luke 16:19–31.
But as the ranks of the precariat swell relative to the top of the town, "the little people" may not be willing to wait for an afterlife for redress.
While there are many factors affecting political divisiveness and social dysfunction, economics is fundamental and the fundamental economic problem is distribution. It has become a social and political problem, too, and it is also a moral problem.
While economic collapse may not be likely, there are other ways that society can collapse, e.g, loss of trust in the system and loss of confidence in the leadership.
A lot of people either know or suspect that this is a pseudo-problem that could easily be solved. One way to solve it is to remove the obstacles.
https://www.wccbcharlotte.com/2021/06/10/crime-stoppers-thieves-steal-16000-worth-of-purses-from-southpark-mall/
“Lower tiers” can’t afford Gucci?
Robert Reich's Real Reasons - rated R
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