Ironically the best thing they can do to create new investment opportunities is pay their workers more, but they never will because they are too short sighted.
The real issue is that we live in such uncertain times it's very difficult to plan ahead, both employees and employers have become quite risk-averse.
Why are workers not an investment? Are your workers only encouraged to hit nails with hammer or can you think of ways to incentivizee them to innovate and do better than competition?
Oh wait, you must be a short-sighted employer.
And besides, it's just as likely that instead of your employees buying your cars, their landlord/medical insurer/kid's college will take whatever wage gains they make.
Tragedy of the commons.
So having more customers is… bad?
> instead of building you a factory.
Where do you think cars get built?
> We have a limited amount of capital.
Not really. The entire point of the article is that the available capital exceeds the available investment opportunities.
If it's coming at the expense of higher prices for building out new capital, yes.
The market will naturally calibrate the amount of consumer spending for it to be optimal for long-term economic growth. If we artificially boost consumer spending at the expense of capital investment, we will hurt long-term economic growth.
>>Where do you think cars get built?
Resources that go to building cars at a factory are not going to building a new factory.
>>Not really. The entire point of the article is that the available capital exceeds the available investment opportunities.
The hypothesis is based on the fact that corporations are sitting on a lot of cash, which totally neglects to account for the huge growth in debt, and how cash reserves are important for absorbing economic shocks that can occur in over-leveraged financial systems.
>>What’s a capitalist supposed to do if nobody can afford their stuff?
Investing in new capital equipment is how you allow more people to afford your stuff.
More consumers will afford your stuff in the future when you've built your factory and you can churn out more stuff for more people.
Capital investment is why 2.5 billion people can afford smart phones today instead of 50 million people, like 12 years ago.
Money is not wealth. It's how we measure it. Real wealth is goods/services. And the only way to increase the volume of goods/services produced is to invest in the capital equipment that increases our productivity in producing them. More goods/services means more purchasing power, which means higher wages.
What you might be talking about is how economies of scale result in increased productivity but your rule of thumb is a pretty poor model. Every industry has it's own learning rate. PV for example reduces costs by 28.5% on every doubling of production capacity.
[0] Ok, ok, this is actually the business model of Uber and pretty much all modern unicorn startups but they do it to drive out competitors, not because it makes economical sense.
>>If everyone has half as much money then the supply gets cut in half.
No, money is not wealth. If everyone had half as much money, each unit of that money would double in value.
>>Likewise the supply will only be doubled if everyone has twice as much money.
If we expanded by the money supply 20X, we wouldn't get 20X more production. Money is not valuable in and of itself. It's only a claim on the real goods produced, and each unit will adjust in value based on how many currency units there are relative to real goods produced.
The limiting factor in the value of money is the number of goods/services that the economy is capable of producing. And that capability can only be improved with capital investments.
We got here by setting policies based on the bottom rather than the middle. The problem isn't that the bottom 5% needs a modest raise, it's that the middle 50% should be making enough to afford to buy a house and they're not.
Price floors don't change that. If anything they make it worse, because most of the new cost of that comes from the middle class in the form of higher prices.
What we really need is to do something about the cost of housing, education and healthcare. And not just subsidizing it -- that's how we got into this mess to begin with. Actually reducing the underlying cost.
The alternative would be combining significant inflation with high interest rates, so that asset prices don't rise from the inflation because of the high interest rates, but wages do.
Maybe entrenched parties with lots of cash need special incentives to spur investment. I don’t know what those would be, but if all this cash is not being used to invest in public projects or new ventures, we may be witnessing the beginning of a huge socioeconomic shift.
Remember war bonds? We need road bonds. Bridge bonds. Something.
Or outsource to the shoppers: just drop the palette of stuff where it should be and let the customers find what they want.