Michael Roberts reports on World Press:
[Jeffery] Sachs says that crude Keynesianism has failed because “recovery is impeded by structural factors. These structural components are not susceptible to a Keynesian diagnosis or to a Keynesian remedy…and [Paul] Krugman seriously and repeatedly downplays these structural changes occurring in the U.S. economy. He repeatedly emphasizes that we suffer a demand shortfall, pure and simple, one easily remedied by more stimulus. Yet it’s increasingly hard to reconcile many features of the U.S. economy with this view.” Sachs cites the long term problems of the US economy as “large-scale offshoring of jobs, large-scale automation of jobs, decline in demand for low-skilled workers, skill mismatches, broken infrastructure, and rising global energy and food prices. These require various kinds of targeted public investment spending, not simply aggregate demand.
For Sachs, the problem is that fiscal spending that is not aimed at getting ‘structural’ improvements and just at boosting ‘demand’ will not work and the resulting debt from extra public borrowing will damage the economy ‘down the road’ when interest rates start rising. Sachs emphasises that “The U.S. needs productive public investments, not wasteful spending. We need to modernize our infrastructure, retool our energy system, make our cities more resilient, and help to train a new productive labor force.
Our economy’s recovery is impeded by structural factors whose components are not susceptible to a Keynesian diagnosis or to a Keynesian remedy such as strictly more stimulus financed by debt without stipulations as to who owns the resulting new productive capital output capacity. Structural changes have been exponentially occurring in the U.S. economy due to tectonic shifts in the technologies of production. We suffer a demand shortfall because the base of “customers with money” is being depleted because of these tectonic shifts, large-scale offshoring of jobs, decline in the demand for low-skilled workers, skill inadequacies, broken and/or outdated infrastructure and the impact of rising fossil fuel energy costs not yet off set by sustainable, renewal clean energy production. Structurally, the shortfall in aggregate demand is due to the exponential disassociation of production and consumption, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being and become “customers with money” to support the full potential of the future economy. Yet ownership of productive capital is never discussed out in the open and addressed as an issue in the national media or by academia or our elected governmental representatives. Without a policy shift to broaden productive capital ownership simultaneously with economic growth, further development of technology and globalization will undermine the American middle class and make it impossible for more than a minority of citizens to achieve middle-class status. What is needed are various kinds of targeted public investment spending that simultaneously expands private ownership of productive capital formation and creates “customers with money,” not simply aggregate demand financed with debt that benefits only the few who already own America.
The purpose of production in a market economy is the consumption of products and services by the consumers who make up the economy. But without income, the non-capital ownership class, the 99 percenters, cannot afford to purchase the products and services they desire. But when incomes rise among consumers who have the need and desire to improve their material standard of living, the market demand for products and services strengthens, which in turn increases production and results in a growth economy.
You can’t have mass production without mass human consumption. It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.
Binary economist Louis Kelso postulated: “When consumer earning power is systematically acquired in the course of the normal operations of the economy by people who need and want more consumer goods and services, the production of goods and services should rise to unprecedented levels; the quality and craftsmanship of goods and services, freed of the cornercutting imposed by the chronic shortage of consumer purchasing power, should return to their former high levels; competition should be brisk; and the purchasing power of money should remain stable year after year.”
