Thursday, December 1, 2016
trump - o - nomics
Apparently trump's cabinet shares a consistent set of economic beliefs.
Those beliefs are commonly referred to as either Classical Economics or as Supply Side Economics.
Here are the basic ideas behind those beliefs
1. Full employment is normal - if you want a job you can have one.
2. Wages and prices are flexible - so that businesses can raise and lower prices in response to market conditions and workers will accept lower wages if the business that employs them faces failure.
3. Markets allocate all capital if left alone - free markets choose which products to expand and which to reduce.
4. Therefore, there is no need for government to intervene in the market system to achieve full employment.
Since there is no need for government to interfere in markets, the government should be as small as possible and certainly not have any regulatory powers.
In a nutshell, these are the beliefs which most conservative politicians share.
These ideas are wrong.
And, they create recessions and real harm to families whenever they are followed. We saw that in 1930 and 2008. We will see it again.
J. M. Keynes thoroughly deconstructed all of these ideas in the 1930's; but, they never die. The stay alive because they offer a rationale for low taxes and markets free from regulation.
In fact, Keynes suggested that the Great Depression with unacceptable levels of misery and despair was caused by those policies of free markets with no regulation.
Unemployment is normal and is caused by business cycles, trade and technology. The definition of a business cycle recession is when unemployment rises and business activity declines. Business cycles are a fact of life. The Roman Empire had recessions and was forced to bail out bankers. King Phillip IV the Fair of France burned banker Jacques de Molay at the stake in the 1314 to stop the Knights Templar from stealing from French peasantry.
Trade causes unemployment when goods can be acquired from countries with lower labor costs than in home markets. Technology causes unemployment when machines replace workers.
Wages and prices are not flexible. Modern markets have constraints like minimum wages [which was introduced in 1938] and price controls which did not exist in 1929. Even if businesses were free to change wages and prices, most employees will not work for less; Keynes called it Sticky Wages.
Markets can choose products which harm or kill people. We need government to protect us from harmful products.
Government has an active role to play in today's 21st Century world.
Taking government from the economy would create great misery.
But, that appears to be what trump and his minions want to do.