Merely transferring money into the wages channel, increasing the spending power of consumers without forcing them to borrow, is of course not enough; the spending power must be translated into effective demand, with increased spending and consumption actually taking place – the more the better.
The resulting increase in the throughput of goods and services increases employment and also increases the rate of wealth depletion, bringing it closer to, or pushing it further ahead of (varying from one wealth form to another), the renewal rate.
Maximising consumption and its rate of increase have become the global economic religion since Keynes’ time, with the old virtue, thrift, becoming a vice. Governments, and business through intensive advertising, have promoted the new creed as being good all round – higher profits, higher taxes, permanent full employment, everybody always getting “richer” (i.e. more perfluent).
Of course it would be good for all forever if we lived on a flat earth extending indefinitely in all directions. For most of history this concept would have been a good enough approximation to the actual round, limited earth we live on. But it is no longer good enough in the age of technological humanity, dominating the planet.
In fact, ever-increasing consumption depleted more and more resources, eroding the whole basis of economic activity and setting up stresses, as described elsewhere, which push employment up again.
Thrift is necessary to use as little of a resource as possible and thus maximise the chances of having a sustainable economy that is in dynamic equilibrium with the world’s resources. Another name for this is the steady state economy.
But this kind of thrift, in the absence of other measures, would have left the unemployed of the Great Depression in that state all their lives.
So that is the dilemma – the maximised consumption that lifted the Great Depression and whose continuation appeared necessary to keep employment full have, through resource depletion and its secondary effects, caused economic problems that threaten to raise unemployment again to levels not seen since the Great Depression, and higher yet.
So what’s the answer? What should have been done in the 1930’s? what should be done now? The answer will be developed in the posts that follow.
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Posts in this Series
- Review of 1988 edition of Economics for a Round Earth
- Ends and Means
- Evolution Not Revolution
- Notes on Evolution Not Revolution
- Concepts and Terms – What is ‘wealth’?
- The Throughput Chain
- The Derivatives of Wealth
- Global Inequalities in Wealth
- Economic Growth Redefined
- Misconceptions in Practice
- Borrowing to Invest to Get Rich
- Environment versus Economic Progress
- Digression: Pollution Red Herrings
- Digression: Depletion and Inflation
- Value Inflation – the Trigger, not the Bullet
- Living Standard and Quality of Life
- Digression: Resource Consumption, Jobs, and Hands Off
- When the Boom comes
- The Effect of People’s Expectations
- Hard Work – Virtue or Vice?
- Who needs the Snail Darter?
- More Dollars for Conservation?
- Non-renewable Resources – Leave Them in the Ground?
- Digression: Fast Breeder Nuclear Fission Reactors
- Minerals in National Parks – Leave Them in the Ground?
- Population and Wealth
- Left, Right and The Environment
- Digression: “So Long As We Profit, Costs Elsewhere Aren’t Our Problem”?
- Limits to Growth?
- Solar Energy – a Special Case
- The Solar-Powered Car
- Money Supply, Throughput and Inflation
- Real and Money Wages: Living Standards
- Digression: Caution about “Increases” and “Decreases”
- The Idea of Proportionate Flows Applied to Wages: the Great Depression
- Deficit Financing
- The Optimum Proportionate Flow Condition
- Digression: Thrift versus Spendthrift
- Digression: the Private Motor Car – a Basic Necessity?
- The Idea of Proportionate Flows Applied to Wages – the Stagflation of the 1970’s and 80’s
- Excessive Wages Can Cost Jobs
- Fight Unemployment or Inflation First?
- Digression: Work and Jobs
- Other “Job Creation” Schemes
- Visual and Noise Pollution
- Digression: Renewal and Recycling of Resources; Wages and Jobs
- Ratio Distortion and Consumption
- Aggregate Demand – Components and Internal Ratio
- The Slave Economy
- Employment and the Steady State
- Consumer-Led Recovery
- Interest Rates and Ratio Distortion
- Demographic Trends and Living Standards
- Digression: Bad Economics Good for Conservation?
- Coping with Aging Populations
- Stabilising the Human Population
- Costs – What Really Costs Us and What Doesn’t?
- Digression: Other Comments on Statements in UN Report
- Discussion of Costs Resumed
- Budget Balancing Methods – Cost or Gain?
- Digression: Government Expenditure – Government Employees
- Expenditure on Weapons