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Daily Connect: Interdependent Economics: Middle Class Based Job Growth

In a recent article for the Huffington Post, economist Jared Bernstein argues against "trickle-down" economics.  He gives many examples of the ineffectiveness of the philosophy, the most relevant to the topic of Interdependence being the "feedback loop" necessary between producers and consumers to sustain job growth.

To articulate the "feedback loop" he cites and article by venture capitalist Nick Henauer:

"I've never been a "job creator." I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.

That's why I can say with confidence that rich people don't create jobs, nor do businesses, large or small. What does lead to more employment is the feedback loop between customers and businesses
[my emphasis]. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be." 

This, to me, is a great example of thinking about our economic and political systems with more Interdependent awareness.  A business owner's financial success is in direct relationship to the financial well-being of a consumer who purchases her products, so naturally, we should support job growth by supporting both the producer and the consumer...maybe we all deserve tax cuts?  Or tax increase?

Here's an interesting graph from the Center for American Progress, which compares average employment growth to the top marginal income tax rates.

What do you think?  Does this "feedback loop" view of economics have anything going for it? Does it represent your values as either a consumer or business owner?

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Comments

More on Interdependent Economics and the Feedback Loop

Thanks for posting, Patrick :) Jared Bernstein is one of the voices of sanity I've flailed toward amidst the swamps of economic disinformation. A major factor in this crisis is that money isn't circulating through the global economy, but rather being hoarded by the super-rich. This alone gives us a clue that trickle-down isn't working.
The feedback loop between consumers and businesses makes sense to me. In terms of interdependent economics, it's also worth noting that both Bernstein and Paul Krugman have pushed for more government spending on infrastructure in proportion to tax cuts. When consumers receive tax cuts, many of us choose to save the money (if we can), rather than spend it. But when the government invests in infrastructure (developing renewable energy sources, improving public transit, repairing highways, bridges and electrical grids, improving education, and so on), this kind of spending creates jobs -- so that slews of middle- and working-class people earn tens of thousands in income. This ultimately means that middle- and working-class consumers as a whole have a lot more money to spend than we would if we received a one-time tax break of a few hundred or thousand dollars. Infrastructure investments also help businesses, because renewable energy sources and better airports, railroads and highways allow businesses to produce and transport their goods more efficiently and with less pollution. Thanks again for your thought-provoking post!

Metta,
Lisa Montanarelli (Need to switch my profile name from lisamont2 to my real name. It feels weird to post anonymously.)

trickle down

When i was in Agra, India, the river behind the Taj Mahal had been dammed to provide power to people of certain economic status. At that time, because of this dam, the river had become a little stream, where before it was a flowing nourishment to fisherman, villagers, Kingfisher birds, fish, trees and other creatures. The vultures that roost at the entry to the site are now covered in dust as there is no where left to wash there wings, Meanwhile at sunset, the people in the hills lite their dinner fires fed with dung; the acrid smoke rolls down out of the deeply impoverished villages (with little of the dammed power) to cover the Taj so that the famed moonlight reflected cannot be seen, and to the destruction of the white marble structure built in memory of Love...
Perhaps there must first be a puddle in which one can throw a pebble , so that the ripples can spread? Does a feedback loop exist without a puddle? I don't know.
what is employment? is "work" having money in an abstract bank account somewhere, that makes more abstract money in another bank account? Is that a feedback loop?
I don't know- I'm not particularly deft when it comes to finances. but if people eat all the Mangos off the trees- there will be none to eat for the elephants that pass by, so they can help consume and spread the seeds with their bodies.
I think the Dams in my community need to be let flow so that all beings can receive and give like the Rivers do; until then I will, consume the food made in my community(my puddle) and share whatever gifts I can, including paying taxes (trying my best to gauge where that money will go),continuing to pay attention, and realizing what other gifts perhaps i have to offer. washing as many wings as i can,
and try to remember that what goes up must come down.
thanks Patrick for posting this...xo Joren

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