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August 23, 2016


In words of the street, when no one has any money, they don’t buy anything, and when they don’t buy anything, the economy goes south. It has nothing to do with managerial brilliance, over-taxation, over-regulation and other excuses the business press tries to sell us when corporate business models fail; it is all about aggregate demand. The rest is pretense, however disguised by the Wall Street Journal, Fox News business reporters and other purveyors of corporate propanda.

Keynes observed in his famous book, General Theory of Employment, Interest and Money, that the engine of economic growth was not investment by the few, but consumption by the many. As a matter of economic history, such a claim is indisputable. There has never been a time when economic growth in market economies did not depend upon aggregate demand (which would otherwise give credence to such inane corollary arguments that demand, which tanked during the Great Depression, gave us economic growth during the 1930s).

Arguments of the financial sector in citing other factors having to do with regulation and taxation as measures of economic growth are false, misleading, and unsupported by economic history. Economic growth in market economies does not now nor has it ever depended upon further enrichment of the rich. The engine of economic growth rather depended, as Keynes noted, not on investment by the few, but consumption by the many. He further observed that “significant inequalities” would continue to exist – not because they were essential to economic growth, but because they offered an outlet to predatory impulses that might otherwise fuel more antisocial activities.

Indeed Keynes’ predictions in such connection have been proven time and again. Higher rates of taxation and adequate public services have not retarded economic growth either here or elsewhere – quite the contrary. Thus there is “no lost GDP from taxing the wealthy heavily.” The benefits from doing it “are there, like hundred dollar bills lying on the sidewalk” and “We lack only the flexibility and dexterity required to retrieve them.” There is no downside to taxing and regulating the financial sector, since increased demand would improve their bottom lines as well, among other benefits to all of us who live in this economy. The argument that we cannot afford better than we are now experiencing is false; it’s just a matter of having the intestinal fortitude to make this economy work for all of us or the few who are living off unproductive economic froth for needless accumulation insulated from the demand structure. How many Rolls Royces can the rich have in their front yards and yachts at their piers?

As things stand right now (low tax, low regulatory environment, enormous share of the economy’s income and wealth – and for what?), the financial sector can fairly be said to be parasites. They contribute nothing to the real economy in which you and I live and work and have our being. They are drags rather than facilitators of economic growth and a vibrant economy. Their bottom lines are not our bottom lines. Who put them in charge of our economy? Answer: replaceable politicians.

What to do? We need to bring back the political vision we had after WW II in which all of us were beneficiaries of our economy’s income and wealth while building a robust middle class, a vision in which no one sector (financial, labor or any other such participant) dictates the economic outcomes for the rest of us. This economy is, after all, ours, and it is up to us to set forth the rules of participation by the various participants, so let’s elect those who will do just that this fall and make the economy work for all of us, not just the pampered few.     GERALD      E

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