Monday, October 22, 2012
Populist, Left Leaning Economist Writes
Barry, My Liege :
This space has been honored to be identified as an '...explicitly populist and left-leaning economic blog ...'.
Well, alrighty then.
Without further ado, I will try to provide a basic four of the principles which guide comments in this space ; please bear in mind that this is NOT a formal essay but rather a short list of fundamentals, many of which have been published previously.
A. RECOVERY - GREAT FORTUNES, GREAT INCOMES - published 5.18.12 :
The accumulation of great fortunes and large incomes in the United States has a deleterious effect on economic growth and job creation.
Economic growth and job creation comes from people who invest in businesses. It is well known that business investing is risky...
In conclusion, My Liege, it is clear both theoretically and practically that people with large incomes and fortunes do not wish to invest in business start-ups. Any activity that increases already large fortunes will take money away from people wishing to start new businesses, thus reducing economic growth and the Economic National Security of the United States.
B. CONSERVATIVE ECONOMIC THEORY, WRONG IN 1776, WRONG NOW - published 9.30.12 :
Adam Smith's WEALTH OF NATIONS, the book which codified and justified [today's conservative] philosophy, was published in 1776, the year of our revolution. Some of our founding fathers explicitly acknowledged that the invisible hand identified by Adam Smith helped in drawing our Constitution.
And, our conservative friends rely on that coincidence to support their free market beliefs.
But, it is significant that even Adam Smith suggested that a just and moral society requires curbs on the free play of market forces in order to secure a decent life for all people.
As he wrote his book, he surely observed the life around him. The life he observed consisted of great accumulations of capital and material wealth together with unimaginable social misery in the England of the 18th century.
C. WHAT WILL HAPPEN IF THE GOVERNMENT IS DOWNSIZED - Published 8.16.12 :
Part of the populist credo is the idea that an adequately sized Government is required to protect citizens from the effects of both criminals and unbridled market forces.
In August, this space discussed the real world effects of 'drowning government in the bathtub' by looking at places where the government is unable to restrain criminal elements.
'According to John P. Sullivan, who has written extensively on this phenomena over the past several years, a "criminal insurgency" occurs when criminal enterprises compete with the state not for traditional political participation, but rather to free themselves from state control in order to maximize profits from illicit economic activity. In so doing, TOC [transnational organized crime] elements seek to establish zones of "dual sovereignty" within states where they have freedom of movement, perceived legitimacy from the communities they exploit, and the complicity or acceptance of state political actors. Ultimately, the result is pervasive corruption, evidenced by a reciprocal criminalization of politics and politicization of crime.'
D. THE JOBS THEORY OF GROWTH [http://www.mkeever.com/apply.html]
This space uses a new theory of economic growth and bases its comments on that theory. This JOBS THEORY OF ECONOMIC GROWTH is delineated in the parent website at the link above.
Previous theories of economic growth measured numbers of ourput and dollars while ignoring any social effects ; this new theory addresses the social results of growth for each person.
In the economic circular flow of money and goods, businesses sell goods to consumers and hire workers to produce and sell those goods. The workers take their wages and buy products and services from businesses.
The classical economist's way of looking at the flow was to say that 'Supply creates Demand'. In other words, business must hire workers to create products and those workers in turn use their incomes to create demand for businesses by spending their wages. Classical economics then looks at businesses as the foundation of economic activity for their efforts to create products by hiring workers. While creating a product or service the business pays workers wages which then creates an income for consumers. Classical economics focuses on business product creation and assumes the demand will follow.
The jobs theory turns that around to make this statement: 'Demand Creates Supply'. In other words, if consumers have an income, businesses will be formed to supply products to consumers. Then, the focus is on the consumer's income - if consumers have an income, business will cater to that income by creating products for consumers to buy.
Economic growth then becomes the creation of new businesses and jobs; and, it is measured by the number of jobs created. One cannot just measure the number of businesses created since one new business may create hundreds of jobs while another new business creates only one job.
When more jobs are created, then the economy grows. It is measurable - just count the number of new jobs created and subtract the number of jobs lost. If the number is positive, then there is economic growth. If the number is negative, then the economy has shrunk.
For example, the number of people working in the USA grew from 64,630,000 in 1959 to 145,926,000 in December of 2006, according to the 2007 Economic Report of the President [http://www.gpoaccess.gov/eop/tables07.html]. This is a growth of two and one quarter times over a 47 year period.
During that same period, the population grew from 177,830,000 in 1959 to 299,801,000 in 2006. This was a growth of about 68%.
Not only did the absolute number of jobs grow by 125% during that period, the number of jobs grew almost twice as fast as the population.
The number of jobs per capita is derived by dividing the number of jobs by the population. It grew from 0.36 in 1959 to 0.49 in 2006. In other words, one working person supported nearly two non-working people in 1959, but one working person supported only one non-working person in 2006. Economic growth is measured by an increase in per capita jobs.
Thank you for your attention, My Liege.
It is an honor to be considered a populist and I hope that the views above may help you in your campaign to defeat the forces of Republican repression.
Your faithful servant,