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Economy

Boosting Consumption is not Enough to Ensure Recovery

Translated Sunday 17 October 2010, by David Lundy and reviewed by Henry Crapo

None of the problems facing the people in developed capitalist countries have been, or are anywhere near being, dealt with. On both sides of the Atlantic, the pace of recovery is slowing down. In the United States, there are at least some stimulus attempts. In Europe, however, governments and EU authorities are engaged in austerity drives so severe that even the most conservative economists fear that measures to reduce public spending growth are stifling already weak growth.

In Europe, few people still believe medium-term government forecasts. Ireland and Spain expect to see GDP growth of 3% and 1.3% in 2011, while evidence suggests that economic activity may again decline like in Greece, an economy burdened by a structural adjustment programme laid down by the IMF and EU leaders. In France, the forecast of 2.5% average growth between 2012 and 2014 seems unrealistic.

Faced with such abuse and risk, the temptation may be strong for the left to stick to calls for a revival of consumer spending. Sure, it constitutes an important factor, accounting for almost 60% of the €2,383,800,000,000 that makes up gross domestic product and imports. But an increase in household demand may well preferentially benefit the latter. Moreover, the current systemic crisis of capitalism does not affect only wealth distribution, as the Socialist Party has recently asserted, it also represents a challenge to wealth creation and business management, and their basis in European and national policy.

Likewise, if one wants to act effectively on household demand, we must also act on supply, not only on the type of products justifiably singled out by environmentalists, but also on how the technologies used to produce them are applied, the investment choices, the criteria for access to resources, and finally the place reserved for people in this process of wealth creation. Rather than reducing the cost of labour, we must reduce the cost of capital. This means that we must focus on human development - which, with its components, goes far beyond mere consumption.


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