IDEAS home Printed from https://ideas.repec.org/p/lev/wrkpap/wp_332.html

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

Author

Listed:
  • Thomas I. Palley

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.

Suggested Citation

  • Thomas I. Palley, "undated". "Contradictions Coming Home to Roost? Income Distribution and the Return of the Aggregate Demand Problem," Economics Working Paper Archive wp_332, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_332
    as

    Download full text from publisher

    File URL: https://www.levyinstitute.org/pubs/wp332.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Muhammad Mazhar Iqbal, 2015. "Inclusive Growth with Zakat," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(4), pages 997-1010.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lev:wrkpap:wp_332. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lindsey Carter (email available below). General contact details of provider: https://www.levyinstitute.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.