In Reply to: Dominos posted by Alexandra Polly on November 11, 2001 at 21:27:33:
I agree, Alexandra. It is very interesting that a change in the thinking of people on boards of directors can cause a big fall in employment and then a fall in consumer spending that leads to even more pessimism by boards of directors. It is like a self-fulfilling prophecy, isn't it? If capitalists think the USA economy is going to do badly, then they do things that make sure it does badly. Then they feel they were right all along. But, like you say, a policy of supporting higher wages could help to keep the economy afloat and avoid depressions. What kind of public policies would be best to reduce the negative effects of the business cycle?
: Another thing I found interesting in class that was discussed on thursday was the capitalist business cycle. I guess I had never realized how much one action could effect all of the other actions in this cycle. I never realized that one could get to a point of over investment, and when people realize this they begin to have it affect their decisions about other aspects of the cycle. The negativity feeds on itself, companies over invest and then less factories and investments happen, people get laid off and the economy slows down. It was comforting though to hear that there is also a positive domino system. I believe that "wage led growth" is a very good theory, the fact that people that have good wages spend more, and the final end is that the economy thrives. Also when people own houses and need to keep their jobs to pay off their homes and to pay for all they need to furnish their houses, they are generally happy and work hard to pay for the things that they want. I thought though that the "wage led growth" is a true and effective theory with specific relation to the business cycle? Do you think this is true or another theory is more reasonable?
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