That was a US-centric perspective, although I think it applies more generally. What you’re talking about is classic economic theory, which was a pretty accurate picture in the past. More recent developments suggest that some important things have changed in the actual economy over the last half-century, which have been reflected in new economic theories.
The central problem is that businesses are no longer as sensitive to traditional market factors. Monopoly, collusion, and the capture of regulatory functions have allowed businesses far more control over both their markets and their labor costs. Meanwhile, wealth inequality has drastically reduced the amount of discretionary income that is available. The traditional economic model still mostly applies to the wealthy and what’s left of the middle class. The majority of consumers no longer have the means to participate as they did.
Neither inflation nor deflation address wealth inequality. The relationship between salaries and prices is broken. Traditional economic indicators assume that businesses doing better means the average person does better, but that is no longer the case. Most of the gains now go to wealthy investors. That leaves us with a situation where the traditional economy looks great, but large numbers of people can no longer afford housing or food. Unless you are part of the 1%, that is not really a good economy.
That was a US-centric perspective, although I think it applies more generally. What you’re talking about is classic economic theory, which was a pretty accurate picture in the past. More recent developments suggest that some important things have changed in the actual economy over the last half-century, which have been reflected in new economic theories.
The central problem is that businesses are no longer as sensitive to traditional market factors. Monopoly, collusion, and the capture of regulatory functions have allowed businesses far more control over both their markets and their labor costs. Meanwhile, wealth inequality has drastically reduced the amount of discretionary income that is available. The traditional economic model still mostly applies to the wealthy and what’s left of the middle class. The majority of consumers no longer have the means to participate as they did.
Neither inflation nor deflation address wealth inequality. The relationship between salaries and prices is broken. Traditional economic indicators assume that businesses doing better means the average person does better, but that is no longer the case. Most of the gains now go to wealthy investors. That leaves us with a situation where the traditional economy looks great, but large numbers of people can no longer afford housing or food. Unless you are part of the 1%, that is not really a good economy.