Friday, February 6, 2015

The politics of what if

Part of a quote from Wolfgang Streeck, in Syll's The politics of public debt:
What if a resumption of growth, as implied by older traditions of political economy, requires more public investment rather than less, and perhaps also a reversal of the apparently inexorable trend toward ever more inequality?

What if it doesn't? What if it doesn't require more public investment rather than less. What about that? Nobody ever thinks to look for some other solution, other than increasing government spending, or decreasing government spending.

Everybody is still fighting the last war, the war on the Great Depression.


Auburn Parks said...

Art- Im not sure what point you are trying to make here. It seems you are trying to make the subject more complicated then it is.

Economic activity is measured by spending (GDP) and spending = income

So you cant grow the economy without growing spending.

So the question always becomes where will the spending come from.

The domestic private sector?
The foreign sector?
The Govt sector?

Thats it, the economy is a closed system. Only the Govt can choose to grow its net spending because Govt is the only source of debt free money.

geerussell said...

Demand management wasn't a static, one-off event to deal with the great depression. Not a "war" that ended. It's dynamic, continuous. In every period the economy is demand-driven and net govt spending is the policy variable available to balance the economy at full employment.

In some periods there are shocks requiring a lot more net govt spending, in some there are booms requiring a lot less, in others it's ambles along near neutral. What it never does is end, the flow of funds is always driving the flow of real output and the flow of govt spending is always a part of it.