{"id":22381,"date":"2013-01-15T18:47:26","date_gmt":"2013-01-15T08:47:26","guid":{"rendered":"https:\/\/billmitchell.org\/blog\/?p=22381"},"modified":"2013-01-15T18:47:26","modified_gmt":"2013-01-15T08:47:26","slug":"neo-liberalism-fails-time-to-wake-up-to-that","status":"publish","type":"post","link":"https:\/\/billmitchell.org\/blog\/?p=22381","title":{"rendered":"Neo-liberalism fails – time to wake up to that"},"content":{"rendered":"

\t\t\t\tRegular readers will know that I place the shifts in the distribution of national income (at the sectoral level) as one of the keys to understanding the current economic crisis and the what needs to be done to get out of it. I covered this early on in this blog – The origins of the economic crisis<\/a>. The mainstream press is now finally latching on to this issue, which is good but sadly the media is still allowing itself to be captured by mainstream economists who have a particular and wrong view of what has been happening, why it has occurred and what the implications of it are for public policy. The fundamental changes that are needed to policy frameworks and societal narratives before the crisis is full resolved are still so far off the radar though. Until we start promoting discussions such as that which follows there will be only limited progress to a sustainable solution.
\n
\nThe New York Times Sunday Review (January 12, 2012) published an interesting article – Our Economic Pickle<\/a> – which focused on what it termed a “major factor contributing to income inequality” in the US – “stagnant wages”.<\/p>\n

It reports recent cases such as the US iconic firm Caterpillar which “reported record profits last year” but “insisted on a six-year wage freeze for many of its blue-collar workers”. That is not an isolated case. Indeed it is the norm and is one of the defining characteristics of the neo-liberal era that has dominated economic policy making over the last three decades.<\/p>\n

There are two concepts of – income distribution<\/a> – that economists consider.<\/p>\n

First, the so-called size distribution of income<\/strong> or personal income distribution, which focuses on distribution of income across households or individuals. Often the data is expressed in percentiles (each 1 per cent from bottom to top), deciles (ten groups each representing 10 per cent of the total income), quintiles (five groups each representing 20 per cent of the total income) or quartiles (self-explanatory).<\/p>\n

Various summary measures are used to demonstrate the income inequality. For example, the share of the top 10 per cent to the bottom 10 per cent. The Gini coefficient is another summary measure used in this type of analysis.<\/p>\n

Second, the functional distribution of income<\/strong> or the factor shares approach, which divides national income up by what economists call the broad claimants on production – the so-called “factors of production” – labour, capital, and rent. Other classifications also include government given it stakes a claim on production when it taxes and provides subsidies (a negative claim).<\/p>\n

While orthodox economists argue that the shares reflect “contributions to production” (via the erroneous marginal productivity theory), Post Keynesians (and proponents of Modern Monetary Theory) do not place this emphasis given the class relations that government who gets what. Profits are a return on ownership not contribution.<\/p>\n

The distribution of national income is often summarised by the wage share and the profit share and it is that context that this blog proceeds.<\/p>\n

This academic article (from 1954) – Functional and Size Distributions of Income and Their Meaning<\/a> – is a good starting point for understanding the two concepts in more detail, although you need a JSTOR library subscription to access it. <\/p>\n

[Full Reference: G. Garvy (1954) ‘Functional and Size Distributions of Income and Their Meaning’, The American Economic Review<\/em>, 44(2), Papers and Proceedings of the Sixty-sixth Annual Meeting of the American Economic Association (May, 1954), 236-253]<\/p>\n

Incidentally, given the recent death of RSS creator and Internet activist Aaron Swartz<\/a> it is worth noting that he had been charged with hacking into JSTOR in order to distribute the material on an open source basis. JSTOR is an incredible on-line archive of old academic journals that many libraries have culled under pressure of space.<\/p>\n

The charges were equivalent as this MSNBC report (January 13, 2013) – The brilliant mind, righteous heart of Aaron Swartz will be missed<\/a> – said that we:<\/p>\n

\n… should also know that at the time of his death Aaron was being prosecuted by the federal government and threatened with up to 35 years in prison and $1 million in fines for the crime of – and I’m not exaggerating here – downloading too many free articles from the online database of scholarly work JSTOR. Aaron had allegedly used a simple computer script to use MIT’s network to massively download academic articles from the database that he himself had legitimate access to, almost 5 million in all, with the intent, prosecutors alleged, of making them freely available. You should know that despite JSTOR declining to press charges or pursue prosecution, federal prosecutors dropped a staggering 13 count felony indictment on Aaron for his alleged actions\n<\/p><\/blockquote>\n

JSTOR has published the following – statement<\/a> – about the death of Aaron Swartz<\/p>\n

The scale of our societies under neo-liberalism have become very screwed. Consider this situation against the IMF last week admitting that it had systematically produced terrible forecasts over many years and used public expenditure multipliers that they have now revealed were not only wrong quantitatively but the quantitative errors were so large that they produced exactly the opposite conclusion to reality about proposed government policy options.<\/p>\n

The also used these incorrect multipliers and resulting grossly inaccurate forecasts were used to justify their bullying Eurozone governments (and other nations) in harsh fiscal austerity, which has caused millions to lose their jobs and their life savings.<\/p>\n

Why aren’t the bosses and the technicians at the IMF who oversaw that incompetence and malpractice being prosecuted?<\/p>\n

Anyway, back to the topic at hand, which builds on the notion that the scale of our societies has become very screwed.<\/p>\n

The NYTs article produced this marvellous graphic which is self-explanatory.<\/p>\n

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<\/div>\n

The NYTs article quotes a Harvard labour economist as saying:<\/p>\n

\nFor the great bulk of workers, labor’s shrinking share is even worse than the statistics show, when one considers that a sizable – and growing – chunk of overall wages goes to the top 1 percent: senior corporate executives, Wall Street professionals, Hollywood stars, pop singers and professional athletes. The share of wages going to the top 1 percent climbed to 12.9 percent in 2010, from 7.3 percent in 1979.\n<\/p><\/blockquote>\n

While the same data is not easy to get for Australia (within my allocated blog writing time today at any rate), the following graph provides some insight.<\/p>\n

It makes use of the ABS – Household Income and Income Distribution, Australia, 2009-10<\/a> – data. The latest edition is 2009-10 and we will get 2011-12 around August this year. My guess from related data is that the inequality that is demonstrated in the following graph and table will have worsened because the top percentiles will have recovered from their temporary setback during the economic crisis.<\/p>\n

The graph shows Income per week at top of selected percentiles (in this case the 10th, 20th, 50th (Median), 80th and 90th). I used the CPI to convert the nominal weekly income into real equivalents.<\/p>\n

While the degree to which the top income cohorts have outstripped the lower groups is less than in the US, the widening gap is still pronounced. Workers in the bottom two deciles have gone backwards in real terms while those in the top two deciles have made strong real gains.<\/p>\n

The disparity would have been worse had I had comparable data going back to the 1970s and 1980s. The widening really started in earnest in the 1980s.<\/p>\n

\"\"<\/a><\/p>\n

<\/div>\n

The following Table shows the percentage change in real weekly income for the percentiles from 1994-95 to 2009-10. <\/p>\n

\"\"<\/a><\/p>\n

<\/div>\n

The degree of inequality shown in the Graph and Table is downward biased by not being able to decompose the top decile into individual percentiles. While there is considerable variation between the top quintile and the rest, there is also considerable variation gain within<\/strong> the top decile.<\/p>\n

In this blog – I feel good knowing there are libraries full of books<\/a> – I introduced the concept of the Parade of Dwarfs. It was came from a book written by Dutch economist Jan Pen (Income Distribution, 1971, Penguin). There was an interesting article in the Atlantic Magazine in 2006 about this – The Height of Inequality<\/a> – which traced how the productivity gains in the US had been siphoned off by the few at the top-end of the income distribution.<\/p>\n

The Atlantic Magazine article described Pen’s Parade as follows (and provided this graphical depiction<\/a> of the Parade):<\/p>\n

\nSuppose that every person in the economy walks by, as if in a parade. Imagine that the parade takes exactly an hour to pass, and that the marchers are arranged in order of income, with the lowest incomes at the front and the highest at the back. Also imagine that the heights of the people in the parade are proportional to what they make: those earning the average income will be of average height, those earning twice the average income will be twice the average height, and so on. We spectators, let us imagine, are also of average height …<\/p>\n

As the parade begins … the marchers cannot be seen at all. They are walking upside down, with their heads underground-owners of loss-making businesses, most likely. Very soon, upright marchers begin to pass by, but they are tiny. For five minutes or so, the observers are peering down at people just inches high-old people and youngsters, mainly; people without regular work, who make a little from odd jobs. Ten minutes in, the full-time labor force has arrived: to begin with, mainly unskilled manual and clerical workers, burger flippers, shop assistants, and the like, standing about waist-high to the observers. And at this point things start to get dull, because there are so very many of these very small people. The minutes pass, and pass, and they keep on coming.<\/p>\n

By about halfway through the parade … the observers might expect to be looking people in the eye-people of average height ought to be in the middle. But no, the marchers are still quite small, these experienced tradespeople, skilled industrial workers, trained office staff, and so on-not yet five feet tall, many of them. On and on they come.<\/p>\n

It takes about forty-five minutes-the parade is drawing to a close-before the marchers are as tall as the observers. Heights are visibly rising by this point, but even now not very fast. In the final six minutes, however, when people with earnings in the top 10 percent begin to arrive, things get weird again. Heights begin to surge upward at a madly accelerating rate. Doctors, lawyers, and senior civil servants twenty feet tall speed by. Moments later, successful corporate executives, bankers, stock\u00adbrokers-peering down from fifty feet, 100 feet, 500 feet. In the last few seconds you glimpse pop stars, movie stars, the most successful entrepreneurs. You can see only up to their knees … And if you blink, you’ll miss them altogether. At the very end of the parade … the sole of … [the last person] … is hundreds of feet thick.\n<\/p><\/blockquote>\n

What has been going on at the functional distributional level in the US and Australia?<\/p>\n

The US wage share data comes from the US Bureau of Economic Analysis (BEA) – National Accounts Interactive Data<\/a> – and the graph shows the annual movement from 1929 to 2011. The most recent peak of the series was in 1970 (53.5 per cent).<\/p>\n

There has been a dramatic redistribution of income towards profits in the US over this period. Prior to that the wage share had grown steadily from 1929 through the 1960s peaking at 60.1 per cent in 1980s. After that time, the share has fallen again.<\/p>\n

The NYTs article cited at the outset concluded that:<\/p>\n

\nWages have fallen to a record low as a share of America’s gross domestic product. Until 1975, wages nearly always accounted for more than 50 percent of the nation’s G.D.P., but last year wages fell to a record low of 43.5 percent. Since 2001, when the wage share was 49 percent, there has been a steep slide.\n<\/p><\/blockquote>\n

The NYTs article quotes a Harvard labour economist as saying:<\/p>\n

\nWe went almost a century where the labor share was pretty stable and we shared prosperity … What we’re seeing now is very disquieting.\n<\/p><\/blockquote>\n

\"\"<\/a><\/p>\n

<\/div>\n

The Australian wage share data comes from the ABS National Accounts file – Table 20. Selected Analytical Series <\/a>.<\/p>\n

The following graph shows the movement in the wage share the March quarter 1975 (when it was 62.5 per cent) to the September-quarter 2012 (54.2 per cent). The data shows a major redistribution of national income away from wages and salaries towards profits (I could have shown the profit share graph as an alternative).<\/p>\n

The Australian plot is more “ragged” because it is quarterly data, whereas the US graph is based on annual data.<\/p>\n

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<\/div>\n

What do these movements in the wage share mean?<\/p>\n

To understand what the wage share is I summarise the answer from a recent quiz. For those not happy about simple algebra, don’t worry, I will make it clear in words when I get to the final point.<\/p>\n

The share the workers get of GDP (National Income) is called the “wage share”. Their contribution to production is labour productivity.<\/p>\n

The wage share in nominal GDP is expressed as the total wage bill as a percentage of nominal GDP. Economists differentiate between nominal GDP ($GDP), which is total output produced at market prices and real GDP (GDP), which is the actual physical equivalent of the nominal GDP.<\/p>\n

To compute the wage share we need to consider total labour costs in production and the flow of production ($GDP) each period.<\/p>\n

Employment (L) is a stock and is measured in persons (averaged over some period like a month or a quarter or a year.<\/p>\n

The wage bill is a flow and is the product of total employment (L) and the average wage (w) prevailing at any point in time. The wage bill is the total labour costs in production per period, W.L<\/p>\n

The wage share is the wage bill expressed as a proportion of $GDP, that is, (W.L)\/$GDP.<\/p>\n

We can actually break this down further to gain further insights. Labour productivity (LP) is the units of real GDP per person employed per period, that is, LP = GDP\/L<\/p>\n

It tells us what real output (GDP) each labour unit produces on average.<\/p>\n

The real wage is the purchasing power equivalent on the nominal wage that workers get paid each period and is the ratio of the nominal wage (W) and the aggregate price level (P). The real wage (w) tells us what volume of real goods and services the nominal wage (W) will be able to command.<\/p>\n

Nominal GDP ($GDP) can be written as P.GDP, where the P values the real physical output.<\/p>\n

By substituting the expression for Nominal GDP (P.GDP) into the wage share measure ((W.L)\/$GDP) we get:<\/p>\n

Wage share = (W.L)\/P.GDP<\/p>\n

Which is equivalent to:<\/p>\n

Wage share = (W\/P).(L\/GDP)<\/p>\n

(L\/GDP) is the inverse (reciprocal) of the labour productivity term (GDP\/L).<\/p>\n

An equivalent but more convenient measure of the wage share is: Wagee share = (W\/P)\/(GDP\/L) – that is, the real wage (W\/P) divided by labour productivity (GDP\/L). The wage share is also equivalent to a concept that treasuries and central banks use called real unit labour cost (RULC).<\/p>\n

It becomes obvious that the wage share will fall if the real wage grows more slowly than labour productivity. It could fall if the real wage falls faster than productivity falls. Either statement is correct.<\/p>\n

The wage share in most nations was constant for a long time during the Post Second World period and this constancy was so marked that Kaldor (the Cambridge economist) termed it one of the great “stylised” facts in economics.<\/p>\n

The reason that there was this constancy is because institutional structures introduced after the Second World War in the advanced nations as part of the peace-time full employment consensus ensured that real wages grew in line with productivity growth. This was the way that workers enjoyed non-inflationary increases in their living standards.<\/p>\n

The productivity growth provided the “room” in the distribution system for workers to enjoy a greater command over real production and thus higher living standards without threatening inflation.<\/p>\n

That all changed with the creeping onset of neo-liberalism in the late 1970s and early 1980s. Since that time, the neo-liberal assault on workers’ rights (trade union attacks; deregulation; privatisation; persistently high unemployment) has seen this nexus between real wages and labour productivity growth broken. So while real wages have been stagnant or growing modestly, this growth has been dwarfed by labour productivity growth.<\/p>\n

The NYTs article says:<\/p>\n

\nConservative and liberal economists agree on many of the forces that have driven the wage share down. Corporate America’s push to outsource jobs – whether call-center jobs to India or factory jobs to China – has fattened corporate earnings, while holding down wages at home. New technologies have raised productivity and profits, while enabling companies to shed workers and slice payroll. Computers have replaced workers who tabulated numbers; robots have pushed aside many factory workers.\n<\/p><\/blockquote>\n

These trends have been apparent in most advanced nations but the reaction of the public sector has not been common. For example, the way the Norwegians have coped with these private sector trends has been to ensure growth in well-paid, secure (often part-time) jobs in the public sector providing a range of personal care, health and educational services.<\/p>\n

Nations such as the US and Australia have sought to trash their public sectors. Over the last last 2-3 decades, many governments have implemented the supply-side agendas advocated by agencies such as the OECD (Jobs Study) and the IMF (structural adjustment), which were based on the neo-liberal myth that budget austerity and vast structural reforms would engender unprecedented growth in living standards.<\/p>\n

The data doesn’t support the narrative.<\/p>\n

These governments have variously introduced policies which allowed the destructive dynamics of the capitalist system to create an economic structure that was ultimately unsustainable. Once this instability began to manifest it was only a matter of time before the system imploded – as we are now seeing.<\/p>\n

In Australia, the Federal government (aided and abetted by the state governments) helped this process in a number of ways: privatisation; outsourcing; pernicious welfare-to-work and industrial relations legislation; the National Competition Policy to name just a few of the ways.<\/p>\n

The result is that it has become progressively harder for labour via trade unions to secure real wages growth in line with productivityThe next graph depicts the summary of this gap – the wage share – and shows how far it has fallen over the last two decades.<\/p>\n

The NYTs article chose to quote a MIT academic as saying:<\/p>\n

\nSome people think it’s a law that when productivity goes up, everybody benefits … There is no economic law that says technological progress has to benefit everybody or even most people. It’s possible that productivity can go up and the economic pie gets bigger, but the majority of people don’t share in that gain.\n<\/p><\/blockquote>\n

Which is a typical comment that you hear from economists and management theorists. There are no economic “laws”. The distribution of income is a social<\/strong> construct mediated by the institutions that a society creates and sustains.<\/p>\n

The fact that the wage share was very much higher than now and stable for decades was because there was a collective will<\/strong> expressed through government policy that sought to mediate the raw outcomes that the capitalist market might produce.<\/p>\n

The latter has no social values. We rely on government policy to express our values. The problem is that the top-end-of-town has used its political power and control of the media and other power sources to capture governments and reorient the policy agenda to suit their own narrow interests. This has clearly been at the expense of the “rest” of us. I don’t think the “rest” is 99 per cent – more like 80 per cent with an emphasis on the bottom 20 per cent.<\/p>\n

So social institutions are the way we say that we want progress to be shared among all of us to reinforce the idea of a collective. Those institutions developed in the C20th because it was clear the alternative – with more power to the elites – was unsustainable and wars and revolutions proved that.<\/p>\n

Social stability is influenced by the distribution of income, whichever way we want to express the latter. There is only so far that the elites can push before the rest of us will rebel and demand a fairer outcome.<\/p>\n

While the notion of collective will has been usurped by the neo-liberal narrative that we are all in this as individuals and responsible for our own outcomes – the mainstream economics myth – the evidence is mounting that policies that support that narrative have dramatically failed.<\/p>\n

Individuals are increasingly seeing that systemic constraints imposed on them by macroeconomic policy (aggregate demand constraints) render them powerless to participate in the benefits of productivity growth.<\/p>\n

Everybody should benefit from productivity growth – that is what we call a society. It makes no sense to drive the train increasingly faster and leave an increasing proportion of the people stranded on the platform.<\/p>\n

The shift in income distribution has also been a central factor in the crisis. In other words, the neo-liberals have been very successful at creating economies that were certain to fail, while enriching just a few.<\/p>\n

The gap between labour productivity and real wages that increased over the last 2-3 decades in many nations represents profits and shows that during the neo-liberal years there was a dramatic redistribution of national income towards capital.<\/p>\n

The question then arises: if the output per unit of labour input (labour productivity) is rising so strongly yet the capacity to purchase (the real wage) is lagging badly behind – how does economic growth which relies on growth in spending sustain itself? This is especially significant in the context of the increasing fiscal drag coming from the public surpluses in some nations (such as Australia) which squeezed purchasing power in the private sector in the latter half of the 1990s.<\/p>\n

In the past, the dilemma of capitalism was that the firms had to keep real wages growing in line with productivity to ensure that the consumptions goods produced were sold. But in the recent period, capital has found a new way to accomplish this which allowed them to suppress real wages growth and pocket increasing shares of the national income produced as profits. Along the way, this munificence also manifested as the ridiculous executive pay deals that we have read about constantly over the last decade or so.<\/p>\n

The neo-liberal trick was to foster the rise of “financial engineering” via widespread financial deregulation and a diminished oversight by responsible government prudential agencies (central banks etc).<\/p>\n

The financial sector was able to garner the increasing profit share in national income and used it to pushed ever increasing debt onto the household sector. The capitalists found that they could sustain purchasing power and receive a bonus along the way in the form of interest payments.<\/p>\n

This seemed to be a much better strategy than paying higher real wages. The household sector, already squeezed for liquidity by the move to fiscal austerity (for example, the Clinton surpluses in the US and the Costello surpluses in Australia) were enticed by the lower interest rates and the vehement marketing strategies of the financial engineers.<\/p>\n

The financial planning industry fell prey to the urgency of capital to push as much debt as possible to as many people as possible to ensure the “profit gap” grew and the output was sold. And greed got the better of the industry as they sought to broaden the debt base. Riskier loans were created and eventually the relationship between capacity to pay and the size of the loan was stretched beyond any reasonable limit. These dynamics, of-course, led to the sub-prime crisis.<\/p>\n

The problem with this strategy is that is was unsustainable. The only thing maintaining growth was the increasing credit which, of-course, left the nasty overhang – the precarious debt levels. <\/p>\n

In the discussions the early Modern Monetary Theory (MMT) proponents had in the mid-1990s and after between ourselves via E-mail and various catch-ups, that these developments were going to blow-up.<\/p>\n

It was obvious that this would eventually unwind as households and firms realised they had to restore some semblance of security to their balance sheets by resuming their saving.<\/p>\n

Further, this increased precariousness of the household sector meant that small changes in interest rates and labour force status would now plunge them into insolvency much more quickly than ever before. Once defaults started then the triggers for global recession would fire and the malaise would spread quickly throughout the world.<\/p>\n

I was often criticised in the 1990s and beyond by conservative economists and other neo-liberal types in the Australian media for “crying wolf”. They kept harping on the fact that wealth was rising so there was no problem. Even the RBA issued discussion papers advocating the “all is well” narrative. The mainstream profession introduced terms such as the “Great Moderation” to assuage our concerns.<\/p>\n

Please read my blog – The Great Moderation myth<\/a> – for more discussion on this point.<\/p>\n

The chickens have come home in spades! The wealth has been severely diminished in the crisis but the nominal debt and the servicing commitments remain.<\/p>\n

Apart from the anti-union legislation and other policy developments, the abandonment of full employment as a primary policy goal during this period has also been a major factor in the shift in wages and profits.<\/p>\n

The NYTs article says:<\/p>\n

\nMANY economists say the stubbornly high jobless rate and the declining power of labor unions are also important factors behind the declining wage share, reducing the leverage of workers to demand higher wages. Unions represent just 7 percent of workers in corporate America, one-quarter the level in the 1960s.\n<\/p><\/blockquote>\n

The abandonment of full employment and the deliberate creation of a persistently high pool of unemployment by governments has allowed the employers to increase their discrimination and stand hard against what union resistance has been able to survive the anti-union legislation.<\/p>\n

These trends are endemic to the current crisis and unless they are reversed the crisis will persist and what growth there is will be undermined.<\/p>\n

Several things have to happen if stable and sustainable growth is to return (I implicitly include here a raft of climate change policy developments – more about which another day).<\/p>\n

The return to deficits is the first step in recovery. Budget deficits finance private savings and are required if the household balance sheets are to remain healthy. Almost every nation should be running larger deficits than they are now and be prepared to run these deficits indefinitely.<\/p>\n

There is a huge private debt overhang that has to be eliminated before more stable private spending patterns will return.<\/p>\n

Policy changes have to be made to ensure that real wages grow in proportion to labour productivity so that private spending levels can be maintained with sustainable levels of household and corporate debt. The household sector cannot dis-save for extended periods.<\/p>\n

A whole host of financial market reforms are required to eliminate most of the financial markets, but that discussion is outside my ambit today. Please read the following blogs – Operational design arising from modern monetary theory<\/a> and Asset bubbles and the conduct of banks<\/a> for some further discussion on this topic.<\/p>\n

In designing the policy framework that will sustain growth in employment and reduce labour underutilisation these tenets have to be central. It also means that the massive executive payouts both in the private and public sector (including universities) have to be stopped and more realistic distributional parameters (more widely sharing the income produced) have to be followed.<\/p>\n

Obviously, I also consider an orderly dissolution of the Eurozone is required. But I will provide no further discussion on that today though.<\/p>\n

Finally, the first thing national governments should do is to purchase all the labour that the private sector doesn’t want to use.<\/p>\n

Conclusion<\/strong><\/p>\n

Until government realise that this trend cannot continue the problems will remain. Growth requires spending. There are only a few possibilities – consumption, investment, government and net exports.<\/p>\n

If net exports are draining spending (that is, the nation is running a Current Account deficit), then the options narrow for which sectors will run deficits (spend more than they earn).<\/p>\n

If the private domestic sector desires to spend less than it earns overall (that is, net save – saving greater than investment), then the options narrow to maintain growth narrow to one<\/strong> – the government sector has<\/strong> to run an on-going deficit.<\/p>\n

If the government tries to run on-going surpluses (or even balanced budgets) then it is also signalling that it is happy that the private domestic sector is running persistent deficits (as flows) and the stock implications of that are simple – they will be accumulating increasing levels of indebtedness.<\/p>\n

The problem with this strategy is that it is unsustainable and eventually the system will crash under the burden of the private debt.<\/p>\n

The other option is that the government surplus desires are matched by surplus desires in the private domestic sector and the result is a major recession.<\/p>\n

It is really that simple.<\/p>\n

That is enough for today!<\/p>\n

(c) Copyright 2013 Bill Mitchell. All Rights Reserved. \t\t<\/p>\n","protected":false},"excerpt":{"rendered":"

Regular readers will know that I place the shifts in the distribution of national income (at the sectoral level) as one of the keys to understanding the current economic crisis and the what needs to be done to get out of it. I covered this early on in this blog – The origins of the…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[18],"tags":[],"class_list":["post-22381","post","type-post","status-publish","format-standard","hentry","category-economics","entry","no-media"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/posts\/22381","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=22381"}],"version-history":[{"count":0,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/posts\/22381\/revisions"}],"wp:attachment":[{"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=22381"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=22381"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=22381"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}