Can we have a civil, thoughtful discussion on this?

You keep touting the benefits of the supply side pointing to the obvious growth of the economy. So let me say this, the economy has grown under supply side economics, but most of the benefits have gone to the minority.



Now, I'm sure you've heard the saying that the problem with socialism is that "eventually, you run out of other peoples money to steal", or something like that.

Looking at these charts, it would appear that the top 20% (which I rest comfortably in btw) will eventually run out of money to take from the bottom 80%. This illustrates the abject failure of the supply-side policies, well, unless you are in the top 20% (or hold on to the hopes that someday you will be), then perhaps I could see why you might believe it's a success.

Source: http://www2.ucsc.edu/whorulesamerica/power/wealth.html

 

What came first was the production of food. And the desire to produce more food with less effort.

 

LOL...

Again, wrong. First, there was a need/ desire, people were hungry, this is the problem. The solution was to create food. The creation of food didn't cause people to be hungry, hunger caused people to create food. Do you understand the causal nexus here?

If people need/desire to create more food it's because there is a problem that people need a solution to. Products created to facilitate the creation of more food were the result of the need/desire for a solution to a problem. When people have money, they can demand more solutions to problems that result from their needs/ desires.

No matter how you try to spin this in order to hold on to your ideology on this, your going to be wrong.

 

And production preceded consumption. QED.

 

Let's review....

And your reply:

And I thought it through and realized you skipped a step. Now that I've pointed it out that you are essentially arguing that you can't drive before you press on the gas and I'm correcting you by reminding you that the gas pedal won't do anything until you start the car. I pointed out that you've chosen to begin in the middle of a cause and event chain and you've chosen to ignore it. Now I don't expect to convince you, but others here should see how I've easily dismantled the argument you're really making and instead chose to ignore it and double down on something I've already conceded.

Better World rightly pointed out that people have to have to means to consume before producers will produce. Something I easily demonstrated when looking at the third world. A place packed with the need for solutions. If production was the cause of consumption, then the third world would be the best place in the world for business.

The means to consume precede production, which of course was Better World's real point.

Then I went on to demonstrate how the "supply-side" theory you tout is an abject failure as eventually, the top 20% are going to run out of consumers (as demonstrated by the loss of wealth over the last 35 years of the bottom 80%), i.e. people to sell to and unless you think the top 20% can consume what it already consumes plus make up for the lack of consumption by the bottom 80% (and in the process create what amounts to another China here in the US) as their share of income and wealth declines under supply-side policies.

Lastly, I should point out that much of the "growth" since the 1980's has been in finance. An industry that accounted for 11% of GDP around 1980 and accounts for 26% of GDP today. So the economy, specifically those at the top have grown their money but haven't done much to grow the middle class and the kinds of jobs they need to earn the income they need/ want to solve problems and create demand for products.

 

I have not skipped a step. Production always precedes consumption. Think it through.

And supply side economic policies produce economic growth and jobs far more than command control economic policies. The Reagan, 41, Clinton, 43 years compared to the Obama years clearly show this.

 

You're just saying what I already conceded and continue to conspicuously ignore the points I've made as if ignoring it will make it go away. Now either you understand the consequences of my response, so you're in denial, or, you aren't fully understanding the point I'm making.

Next, I already thoroughly debunked your claim with respect to supply-side economics. I showed, quite clearly that the bottom 80% has fared off worse under supply-side economics. I've also pointed out that most of the growth in the economy has been in finance, an industry that produces very little relative the money that it generates.

 

I'm in reality. Think it through. Where do the means to consume come from ??

You've debunked nothing. Economic growth is the way to improve the standard of living of everyone.

 

Could we not all agree that the means to consume result from first exercising the means to produce? If money was eliminated completely we could return to bartering which If you think about it results in a more rational means based living. The economic standard of living of each of us is relative to the value of our production assessed by others.

 

EXACTLY

 

"Better World rightly pointed out that people have to have to means to consume before producers will produce. Something I easily demonstrated when looking at the third world. A place packed with the need for solutions. If production was the cause of consumption, then the third world would be the best place in the world for business."

It would appear the third world is proving to be the best place in the world for business as many businesses have/are moving. The businesses are producing, employing many persons who still may not afford the products they are producing, but their labours are being put to use in providing them with the means to consume much more than before. Can you deny that their production has not created the means for them to consume.
With the exception of those who are totally disabled, the initial means by which we become consumers is our labour physical/mental which until put to use provides us with no benefit at all.

 

Yes. It's always far better to let people starve and die off for a few years rather than indulge in stuff like charity. That never causes political instability or anything.

Artificially holding wages down to around a third of what they would be hasn't slowed down the major causes of unemployment, automation, a process that goes on regardless of how low wages drop; wages in the U.S. have always been low and falling relative to productivity increases, and automation still increases at a rapid pace, and has since the 1840's, when massive immigration waves crashed wages the rest of the century and beyond, until the restrictions begun in 1920 slowed it down.

 

Ndividual, Thanks for joining the conversation with a thoughtful post.

Let's step back here a sec and let's think about the underlying claim and why this conversation is even important. Then once we've established why this conversation matters, I'd be happy to address your question.

Can we agree that the issue here is really about the rationale for supply-side theory? The idea that as you push money towards producers, it is the producers that make it possible for consumers to consume. The implication being that if you take financial resources from producers either via taxes or regulation, they will create less and this, in turn, will mean fewer jobs and less output?

Now feel free to correct me in any way you see fit. AFM, feel free to jump in as well.

 

Short term it does in some cases; the problem is in situations like mining booms for example, this increase in employment and capital in one sector severely retards investment and development in other sectors that also need to be developed in order to create a truly stable long term growth environment. Namibia for instance has some of the richest copper mines in the world, yet the country and its people received very little domestic benefit from the boom in copper prices; the international mining companies siphoned off the vast majority of the windfall and that ended up in Switzerland for the most part. The 'Cotton Kingdom' in the South is an American example of being a one industry economy, where capital chasing the highest returns isn't beneficial to any but a handful of people, though when one looks at convenient numbers like per capita income it was the wealthiest region in America before the Civil War. How the rewards for increased productivity are distributed matters. Currently the financial sector sucks up over 80% of the gains, only now they do it globally.

 

Exactly.

 

Yes, third world countries in general have an abundance of low skilled inexpensive labor. That is their comparative advantage and it is what those countries can build and grow their economies on. To deny their comparative advantage via developed nations policies is immoral.

 

But they can afford many other products which they could not afford if unemployed. Thus production always precedes consumption.

 

Do me a favor, please, start here: Post 588

Then we'll get back to the morality question.

 

But the international mining companies made the capital investments and should derive the benefit of those investments. Nambians benefited from employment and the wealth they created and were compensated for. Those wages were then used to purchase from the other industries in Nambia or globally. The Nambian government should have taxed the profits of the mining companies to the benefit of the people of Nambia which may not have happened or gov corruption actually stole a significant percentage of tax revenues.

The US example is really not applicable because the laborers were slaves.

 

I am attempting to show that production always precedes consumption. That is doing you a favor.

 

It is always better to have people working and supplementing wages via charity and gov social safety net policies where possible. Is it better for a person to be working in a factory 10 hours a day than digging through a garbage dump ?? Is it better for a person to learn how to function in a job than sit at home ??

 

Ok, I'll have this conversation with Ndividual and you can read along.

 

The conversation is over. Production always precedes consumption. That has been clearly demonstrated. All of your arguments have been shown to prove that production always precedes consumption. QED.

 

I'm afraid that I have to agree somewhat more with AFM, that production does precede consumption, although I see but disagree with what you seem to be promoting, which is economic growth (maintaining/increasing consumption) as a result of government spending.

 

Again, a point I've already conceded....The argument that's being made when people make that claim is that, if that's true, fiscal resources need to go to producers and producers will pay workers who then become consumers. The whole "rising tides lift all boats". That works pretty well in a closed economy where the number of employees needed to make what the nation is demanding is about equal. Today we import almost $1 trillion dollars worth of goods. That's productivity created by workers outside the country. That money isn't "recycled" back into the hands of a US worker. Furthermore, automation increases every day and it's increasingly putting people out of work, especially teenagers and those over 60. Now that automation can or will in the next 20 years, take over every link in the chain of production from harvesting of raw materials, transportation, manufacturing, repair logistics, design, marketing, ...High-level automation will even be able to create, manufacture and repair itself. It's already happening.

So when people are replaced they won't earn the money and they won't be able to spend it on the things producers are making unless you are an owner.

It is the people that demand that drive the productivity. It is their desire for things that drive the producers to produce.

So while productivity proceeds consumption, demand for that productivity comes before productivity. Creating stuff does not create demand, it supplies it. If you don't have an economy that ensures that the lower and middle classes have the money to demand/ consume productivity, the producers will have ever-smaller markets to sell to. The money needs to start at the bottom and work its way up to where producers can compete for it and use that money to create the goods and services people consume.