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Modern (American) Capitalism: A Three Act Tragedy

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  • Mark Setterfield

    () (Department of Economics, New School for Social Research)

Abstract

This paper examines the process of demand formation in capitalist economies characterized by high levels of household indebtedness, with a particular focus on contemporary developments and their sustainability. The thesis developed is that over the past 35 years, supply-side economics hollowed out the core of the demand-generating mechanism in US capitalism, with disastrous consequences. Particular attention is focused on the interplay of growing inequality, emulation effects, the erosion of social provision, household debt accumulation, and the evolution of consumption spending. The unsustainability of these processes gives rise to a discussion of initiatives that might alter the process of demand-formation so as to make it both more equitable and more sustainable.

Suggested Citation

  • Mark Setterfield, 2017. "Modern (American) Capitalism: A Three Act Tragedy," Working Papers 1722, New School for Social Research, Department of Economics.
  • Handle: RePEc:new:wpaper:1722
    as

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    File URL: http://www.economicpolicyresearch.org/econ/2017/NSSR_WP_222017.pdf
    File Function: First version, 2017
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    References listed on IDEAS

    as
    1. Barry Z. Cynamon & Steven M. Fazzari, 2016. "Inequality, the Great Recession and slow recovery," Cambridge Journal of Economics, Oxford University Press, vol. 40(2), pages 373-399.
    2. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2011. "Top Incomes in the Long Run of History," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 3-71, March.
    3. Laura Carvalho & Armon Rezai, 2016. "Personal income inequality and aggregate demand," Cambridge Journal of Economics, Oxford University Press, vol. 40(2), pages 491-505.
    4. Mark Setterfield & Ted Lovejoy, 2006. "Aspirations, bargaining power, and macroeconomic performance," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 29(1), pages 117-148.
    5. A. B. Atkinson, 2009. "Factor shares: the principal problem of political economy?," Oxford Review of Economic Policy, Oxford University Press, vol. 25(1), pages 3-16, Spring.
    6. Thomas I. Palley, 2009. "After the Bust: The Outlook for Macroeconomics and Macroeconomic Policy," Economics Public Policy Brief Archive ppb_97, Levy Economics Institute.
    7. Thomas I. Palley, 2002. "Economic contradictions coming home to roost? Does the U.S. economy face a long-term aggregate demand generation problem?," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 25(1), pages 9-32.
    8. Cynamon Barry Z. & Fazzari Steven M., 2008. "Household Debt in the Consumer Age: Source of Growth--Risk of Collapse," Capitalism and Society, De Gruyter, vol. 3(2), pages 1-32, October.
    9. Thomas I. Palley, 2004. "The economic case for international labour standards," Cambridge Journal of Economics, Oxford University Press, vol. 28(1), pages 21-36, January.
    10. Mark Setterfield, 2006. "Balancing the Macroeconomic Books on the Backs of Workers: A Simple Analytical Political Economy Model of Contemporary U.S. Capitalism," International Journal of Political Economy, Taylor & Francis Journals, vol. 35(3), pages 46-63.
    11. Barry Cynamon & Steven Fazzari, 2013. "Rising inequality, recession and slow recovery: A sad American tale," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 48(6), pages 379-380, November.
    12. Mark Setterfield, 2005. "Worker Insecurity and U.S. Macroeconomic Performance During the 1990s," Review of Radical Political Economics, Union for Radical Political Economics, vol. 37(2), pages 155-177, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Neoliberalism; supply-side economics; zapping labor; incomes policy based on fear; household debt; financial fragility;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy

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