Despite his pox on both your houses conclusion, something I endorse whole-heartedly, I found a lot to dislike in Dean Baker’s latest article at the Guardian. He of all people should realize that consumption is not a fixed, static thing. In 1905 there was very little demand for automobiles in the United States. Only 8,000 of them were sold nationwide. Despite initially low demand over the period of the next several decades there was an enormous amount of capital investment that resulted in more employment, more consumption, and the largest industrial sector the world had ever seen. And that happened without federal stimulus packages or bailouts.
Yes, we need more end user consumer demand. End user consumer demand is not the only kind of consumption or demand. The road to more end user consumer demand lies through capital investment and the reasons for doing that will be what they have always been: you have a better idea, you can do it better, you think you can make a buck doing it. Take away those incentives as we have done with our current system of intellectual property, bailing out floundering dinosaur industries, and taxes or the fear of taxes and you get less of what we need.
What really irked me was this:
The world doesn’t work that way. Firms create jobs when they have more demand, not because we are nice to their rich owners.
On what basis can he tell me how the world works? He’s never been there. He’s either been an elected official, a worker at a not-for-profit, or an academic. How does that prepare you for lecturing on how the world works?
I think there was a reasonable argument three years ago on Keynesian grounds for a WPA-type program in which people who were unemployed were given a government-created job. Instead of Keynesian “government as employer of last resort” we got neo-Keynesian “government as consumer of last resort” dragged through the filter of cronyism and politics. The result was pretty much what could be reasonably expected: not nearly as much as its proponents had hoped or claimed.
I thought we needed structural reform then. The need is even more intense now.