Do you know what the chief problem is with communicating the Just Third Way, even with an incredibly erudite blog such as this? You'd think that with a neat name like "Center for Economic and Social Justice" we wouldn't have any trouble. Well . . . maybe not. Even so, it's not trying to get across what we mean by "economic justice" or even "social justice." Those are easy — just go to our glossary.
No, the hard part at this time (as least as this writer sees it) is to get across the idea of binary economics, and the potential for real full employment of all resources through ownership financed with pure credit, not just fake full employment of human labor financed with deficits and redistribution of existing wealth. And you thought explaining Einstein's theory of relativity ("I have this theory about my relatives . . ." — Albert Einstein as "Al One-Rock, stand-up physicist") was hard.
Anyway, here's our commentary on the usual proposal to increase effective consumer demand and thus the demand for capital by cutting consumer demand, thus taking away the incentive to finance new capital. (Don't try to figure it out. If you're a Keynesian, Monetarist/Chicagoan, or Austrian, you accept this on faith. If you're a binary economist, you're hopelessly baffled by the contradiction.) This is a letter we almost sent last week to the Wall Street Journal, but figured they wouldn't get it, or would print it by mistake as a "Pepper and Salt" cartoon.
In "Why the Old Jobs Aren't Coming Back" in today's Journal (p. A11), Michael Spence makes some interesting, but contradictory points. He claims that we can grow the economy by reducing income growth, increasing savings to finance investment, and expanding exports.
Increasing savings and slowing income growth both contribute to a decline in effective demand. This, in turn, makes new capital investment less financially feasible. Trying to increase exports at the expense of meeting domestic wants and needs simply sets up the economy for a Japan-like economic implosion if other countries prove unwilling or unable to purchase U.S. exports.
Rather than relying on cutting domestic consumption in order to accumulate savings for investment, a sounder approach would be to use the commercial and central banking system as intended to finance growth, pay out earnings to increase effective domestic demand, and meet the consumption needs of America first.
Generica P. Thunderblast