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![\"Natural](\"https:\/\/synapse9.com\/issues\/NatDevl4.jpg\")
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The presently brutal and worsening job market in the developed countries is often discussed with a circular argument: that stimulus isn\u2019t working so we need more, but governments run a risk of collapse if the jobs are not productive\u2026 That is now heard over and over, and it\u2019s worth looking at it as painting a circle of common assumptions that everyone would like to escape.<\/p>\n
The problem caused by economies becoming unresponsive to Keynesian stimulus was actually brilliantly studied by Keynes\u2026 His simple conclusion was that when stimulus provided by governments filling in as \u201cspenders of last resort\u201d didn\u2019t work then investors would need to take that role, even to the point of ending the accumulation of investment to make economies physically sustainable. The assumption that is not variable is that we live in a finite world.<\/p>\n
The circular dilemma of *instability in every direction* that everyone now sees facing the world economy, comes from unemployment and the economies not being responsive to stimulus\u2026 That is what JM Keynes addressed in his \u201cwidow\u2019s cruse\u201d proposal, when conditions \u201cbecame so miserable\u201d that net returns on investment approach zero, due to systemic over investment. What he proposed, and was roundly criticized for and eventually simply dismissed as \u201cthe fallacy\u201d, \u2026 switching the \u201cspender of last resort\u201d from government to investors.<\/p>\n
From a political view it does sound crazy, but from a systems science view it\u2019s quite clearly the only choice. Kenneth Boulding pointed to the natural necessity of it when facing either temporary or permanent limits to growth too. I\u2019ve also written on it a good bit as systems physics. It closely matches one of the tricky changes of plan that apparently all natural systems that become sustainable figure out how to do on their own. They switch to using the surplus they devoted to auto-catalytic growth to something else that\u2019s productive when that self-inflation process becomes unproductive. (see development path model below)<\/p>\n
It may \u201csound crazy\u201d but it is actually a quite surprisingly practical solution. That is to persuade the Saudi\u2019s, Chinese, our own super rich and other investors to *spend the economy back to health*, giving back to the economic system that made them rich instead of continuing to sit around and expect the world to make them ever richer when it is in fact actually failing badly.<\/p>\n
It takes the kind of brilliance displayed by Barack Obama in observing that if the Republicans in the US Congress had decided to take over the government\u2019s ability to function, then they had implicitly assumed a responsibility to govern too. That brilliance didn\u2019t make them do it, of course, but at least it pointed to the problem. Today, investors have largely taken over control of the world\u2019s financial institutions and governments, in fact, and need to take responsibility for assuming that role.
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Sometimes it pays to recognize circular arguments with no escape, and realize one or more of the core assumptions causing that needs to be questioned. The presently brutal and worsening job market in the developed countries is often discussed with a circular argument: that stimulus isn\u2019t working so we need more, but governments run a … Continue reading Switching the \u201cspender of last resort\u201d when government goes broke\u2026<\/span>