On Thu, Dec 29, 2011 at 9:29 AM, Eugene Coyle <[email protected]> wrote: > Nathan and Sandwichman, > > There isn't much, if any, disagreement here between you, or with me > either, except for a perspecive on consumption and the resulting future. > > As income is re-distributed from current higher income recipients to > current lower=income recipients, WHAT will be purchased changes. The > implications of that seem to me to be profound but I'll leave most of that > alone for the time being. But with respect to jobs, if there is a shift in > what is consumed, where jobs are will also change. And my guess is that will > be for the better. > > But the shift in income from higher to lower means not only lower > income for the most affluent but also a big drop in the value of the > corporations they own, on the stock market. That is to say, profits will > decline and thus the value of the shares. This drop in wealth will be the > biggest financial hit for the 1 % and the top 20%, much more than the shift > in wages. > > The drop in the value of the shares will mean, in turn, reduced investment > and thus slower growth in GDP in the future. That slower growth, > anticipated, impacts the share price in addition to the drop in profits. All > that plays out in the future, changing things profoundly in my view. I think > that investment may shift in favor of worker-run co-ops or collectives as > investment is used to provided places to work rather that capital gains. > Lots to speculate about in that area.
This depends a lot on circumstances. The investor class right now is sloshing in investment capital, without enough safe places to put it, or even good bets to make. That is why Fed bonds can borrow money at zero real interest or close to it. A redistribution downwards creates demand. That in turn might lead to more investment not less, because all of the sudden there are, if not safe investments, at least good bets. Even if investors have less capital, what remains to them will have someplace besides treasury bonds to invest in. Again, this is specific to messes similar to our current one. I don't think it would apply the same way in prosperous times, though it is always true that income in the hands of the poor creates more demand than income in the hands of the prosperous working class, income in the hands of the prosperous working class creates more demand than income in the hands of the middle classes, and income in the hands of the middle classes creates more demand than income in the hands of the rich. But it is this particular kind of Keynesian crisis in which that factor overwhelms the other tendencies you point out, and makes it very likely that a reduction in working hours without a reduction in pay will likely lead to increased GDP (by conventional measures and even more so by measures that try to look at well-being) and increased employment. This is true of almost any measure that strongly decreases income inequality. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
