That Robert Reich doesn’t know much economics is one of those things that Paul Krugman was making a note of back in the 1990s. Reich’s most recent Guardian column sorta proves the point:
Policymakers and the media are paying too much attention to how quickly the US economy will emerge from the pandemic-induced recession, and not nearly enough to the nation’s deeper structural problem – the huge imbalance of wealth that could enfeeble the economy for years.
Seventy per cent of the US economy depends on consumer spending. But wealthy people, who now own more of the economy than at any time since the 1920s, spend only a small percentage of their incomes. Lower-income people, who were in trouble even before the pandemic, spend whatever they have – which has become very little.
Consumer spending is usually taken to mean discretionary expenditure. Shall we buy a new couch or not my lovely? It’s personal consumption expenditure that makes up that 70%. So, including those less voluntary payments like keeping the lights on etc.
But OK – now consider what needs to be true if that concern is to be valid. That back when we had less concentration of wealth then more of the economy would be that consumption, that PCE, right? That is the insistence, isn’t it? That the wealthy don’t spend, therefore consumption expenditure will be lower when wealth concentration rises?
We’re also told that wealth concentration has risen – terribly so – in recent decades. Hmm, OK:
Ah, OK, it’s bullshit, isn’t it? Consumer spending, personal consumption expenditure, has been rising as a portion of GDP even as wealth concentration has been rising. There’s something wrong with Reich’s assertions then – they’re bullshit that is.
But the underlying imbalance will remain. Most people’s wages will still be too low and too much of the economy’s gains will continue to accumulate at the top, for total consumer demand to be adequate.
Well, yes Robert, it’s just that reality disagrees. Back when we had that inclusive growth you’re so keen on then consumer expenditure was fully 10% of GDP lower. You’re spouting nonsense.
Until the structural imbalance is remedied, the American economy will remain perilously fragile. It will also be vulnerable to the next demagogue wielding anger and resentment as substitutes for real reform.
Yes, well, but who’s the demagogue here Bobby?