Demand Side Economics

Carlinomics: "It's all about stuff." -- George Carlin

The economy is like the weather. Everybody talks about it, but nobody does anything about it.

   That's not quite true, actually. People in business talk about it but insist nobody should interfere with their cherished "free enterprise" belief.
   People in academia talk about it endlessly, and even offer suggestions on how to improve it, but they don't have the ability or resources to do anything.
   That leaves people in government, who talk about it and listen to academic suggestions, and are willing and able to do something about, if they can get past the political objectors who insist nothing can be done about it.
   The general public, meaning consumers who are the primary driving force of a growing economy, are left between the proverbial rock and hard place.
   Consumers want to spend more money and buy more stuff, but when they're out of work or their wages are stagnant, and suppliers cut back on making stuff because they think there's a declining demand, round and round the two sides go while the economy recedes.
   So if consumers cannot or will not increase their demand for more stuff, and suppliers suspect they won't, who's left to step in and boost demand, which in turn stimulates supply?
   Government, that's who. Call it Demand Side Economics. Then when the national economy gathers momentum of its own, government can pull back and refocus on the things that only government can do.
   All the while, conservatives insist that government should in no way interfere with private enterprise and eventually things will work out and the economy will improve.
   We should live so long.

   At its most basic, economics is the study of what people do with what's available, and economies run in cycles as people pause in their efforts to make stuff (Supply) and their ability to buy and use stuff (Demand).
   The issue, then, is how to smooth out these cycles to minimize the damage and suffering of as many people as possible. And if the private sector, including consumers and suppliers, cannot or will not smooth out a cycle, it falls to government.
   How can government do this? Simply by increasing demand for stuff, be it products, services or anything else.
   One proven way is through infrastructure spending on things like roads, bridges, and other major projects. By doing this, government arranges contracts with businesses, which hire more workers, who then have jobs and wages, which enables them to buy food, clothing and shelter, which increases demand for that stuff, and the cycle picks up.
   Yes, government goes into debt to do this, but as the economy accelerates and business and consumer income improves, so also does tax revenue, and the government pays back the borrowed money.
   Moreover, when rates of interest are near zero, as they are now, it's a clear advantage for government to borrow and spend if the result will be an improved economy.
   However, there remains a committed few who so firmly believe that government has no role in an economy that they are willing to wait years for things to revive on their own.
   But what if they don't?
   That happened in the 1920s, as conservatives insisted on watching and waiting. That was good enough for the wealthy, who lived largely on investment or inherited income and actually benefitted from lower prices. But those who depended on wages and were out of work only went hungry.
   The solution, then, was for government to step in and increase spending, thus providing jobs and wages for workers who then stimulated the recovery.
   
   The current recovery from the Great Recession of eight years ago is not as strong as it could or should be, and the nation's central bank has been trying to stimulate the recovery by making more money available through low interest rates, which theoretically encourages borrowing and investment by private enterprise, in turn boosting economic growth.
   The federal government, however, has been hobbled in efforts to encourage infrastructure spending by opposition politicians more concerned with votes than with consumer prosperity.
   Why? One political party has historically been associated with Big Business and the Investor Class than with Wage Earners.

   "The people have no bread," said the advisors. "Well then, let them eat cake," said Marie Antoinette.