Tuesday, April 14, 2015
I hope the ending of yesterday's post wasn't confusing.
I don't like the "inequality" argument. Oh, I think it's an easy argument to make, sure. But I don't know how to deal with the "class warfare" rebuttal. Yes, you can deny you're engaging in class warfare. But denial is a weak argument.
That's what the other guys want, you know: They want you to keep making weak arguments.
I prefer to avoid that approach altogether.
This preference for the future of which Hendrickson writes -- How could it have developed?
Not suddenly. It started with the first dollar of savings. It grew gradually and for a very long time, along with savings. Eventually it began to have economic effects. In the early days of capitalism, accumulated savings was large enough to effectively drive capitalism forward. And because of that, it seemed to be true that supply creates its own demand. I think it likely was true, for a time.
But savings continued to grow. Savings grew beyond the point where it only contributed to economic growth: grew to the point where it started undermining economic growth as well.
At that point there would have been some measure of slowdown in economic growth. Policymakers would have wanted to fix that problem.
Policymakers' experience had taught them that the increase of savings is good for growth. So they did their best to create policies to enhance the growth of savings.
But the economy had already changed. Savings had already grown beyond the point where it only contributed to economic growth. And further increase in savings could only enhance the ineffectiveness of savings as a device for obtaining growth.
Savings, of course, is provision for the future. A vast accumulation of savings is a vast provision for the future. Once the accumulation of savings becomes great enough, the focus on the future overrides the focus on the present and becomes the dominant focus. At that point, Hendrickson's conclusion applies.
All of this happens by the natural process of saving money, something that everyone wants to do. Let that process continue until it begins to harm the economy, then enhance that process in the mistaken belief that this will reverse the damage done, and eventually Hendrickson's conclusion is the inevitable conclusion.
Sure: Apply inequality to the process I describe, and you speed up the process.
Posted by The Arthurian at 4:00 AM