Contradictions Coming Home to Roost? Income Distribution and the Return of the Aggregate Demand Problem

Thomas Palley

Macroeconomics from University Library of Munich, Germany

Abstract: It is widely believed that the current economic slowdown will be mild and temporary in nature, the result of a momentary wobble in the stock market. This paper argues that the slowdown stands to be more deep- seated, owing to contradictions in the existing process of aggregate demand generation. These contradictions are the result of deterioration in income distribution. They have been held at bay for almost two decades by a range of different demand compensation mechanisms: steadily rising consumer debt, a stock market boom, and rising profit rates. However, these mechanisms are now exhausted, confronting the U.S. economy with a serious aggregate demand generation problem. Fiscal policy adjustments may be the only way out of this impasse, but such adjustments should be accompanied by measures to rectify the structural imbalances at the root of the current impasse. Absent this, the problem of deficient demand will reassert itself, and the next time around public sector finances may not be in such a favorable position to deal with it.

JEL-codes: E (search for similar items in EconPapers)
Pages: 13 pages
Date: 2001-08-09
Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 13; figures: included
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0108/0108002.pdf (application/pdf)

Related works:
Working Paper: Contradictions Coming Home to Roost? Income Distribution and the Return of the Aggregate Demand Problem
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0108002

Access Statistics for this paper

More papers in Macroeconomics from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).