Growth Through Increase in Real Purchasing Power!

I know, doesn’t have quite the same ring to it as “Change We Can Believe In” or “Yes We Can!”

But nevertheless, economic growth through increase in real purchasing power is a seriously policy alternative that ought to be seriously considered. As this post by John Quiggin shows, economic growth in the last 20 years or so have come about as a result of increased leveraging of capital, not real purchasing power:

“Overall, the main factors sustaining growth in living standards for American households outside the top 20 per cent have been an increase in the labour force participation of women and a decline in household savings. Over the period since 1999, consumption financed by borrowing against home equity has been the main factor offsetting stagnant or declining median household incomes.”

 But of course, when asset values go down, like they did during the housing crisis, the growth becomes unsustainable, and the bubble burst, and now we are living through the consequences.


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