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Demand Side Economics

Posted by Bob on August 2nd, 2011 under Coaching Session, History

You have heard a plenty about supply side economics, based on the fact that when taxation reaches a certain level government revenue from it goes down if it increases. People do not produce when taxes are too high.

On the Nero Wolfe mysteries, which were written from the 1930s into the 1980s, Wolfe would take cases only until he hit the $200,000 income level for a year, and then he would quit for the reminder of the year. I cite this example because it shows how common it was for people to work up until they were in the high brackets and quit.

Joe Louis the heavyweight champion for many years, almost ended up in prison. Since boxers received straight incomes that couldn’t be hidden, almost all of his income went to Internal Revenue.

We knew about supply side economics at the University of Virginia twenty years before Reagan was elected and passed his supply side tax cuts.

Economics also has what I call a demand side.

When I was in Europe, the European middle class, which earned less than half of what Americans did, vacationed in Spain. You could stay in a bedroom with shared bath for ninety cents. Beer was nine cents a bottle in a bar. You could get local wine, which wasn’t bad, for about twenty cents a liter.

In fact, when my British girlfriend came down I wanted to do the American thing, get champagne. I said I wanted the most gorgeous, expensive champagne they had,

It turned out that the most expensive they usually had cost under a dollar. Then after I insisted, the guy went back and got a huge bottle which cost almost three dollars. It had a big pink ribbon on it, but he actually looked guilty for charging that much for one bottle of anything.

When I took my first time off in Spain, I faced a problem. In each town people from one country tended to flock. I found that where Americans went were at American prices and the hotels looked like American hotels. Where the French went was cheap but filthy.

So I followed the Germans. The place I went was where German tourists went. They did not pay a pfennig more than they needed to, but the place was clean.

In other words, I bought German because of German demand. German products were good because Germans would settle for nothing less. The supply in any country lives up to the expectations of the demand, though I haven’t seen any economist discuss that.

Soviet products were famously awful. But it should be remembered that Marx based his whole system on the idea that a product’s worth is not decided by the market, but by the objective amount of labor put into it.

The Soviets in sixty years never produced ONE consumer product they could sell abroad. They could only dump these goods on a captive population behind their borders. It was a special privilege of the upper class in this classless society to go to the places that sold foreign goods.

And, in places like Communist Hungary, they refused to accept Hungarian currency in those shops.

Like the rest of the quality of life, it is the population, not the Wordism in power, that gives products their reputation.

  1. #1 by BGLass on 08/02/2011 - 9:17 am

    Hard not to notice how people get money does influence how they think; which rationalizations they use to hold onto personal morality while stealing.

    Small business relies on keeping their own client base tax-payouts high. But a Respectable will be like “OMG, how can a haircutter support the left?” (B/c they are supposedly a “small business owner-entrepreneur”) But that haircutter might have academic clients. Like how ny real estate sweats over wall street bonuses.

    Nobody ever talks about what these central systems do to people internally (whether collections from people are called taxes or tithes) “citizens” move into a state of usury with all other citizens, and it is made livable by defaming others, patronizing others, bossing others, bullying—to make it easier to take things from them, just the way a sociopath would do; the usurious thought processes are the reason there are so many books on the market with titles like “The Sociopath Next Door).

    All thought processes become related to justification for taking.

    Like, how Respectables make the poor hyper-accountable. They are called stupid, or lazy, or whatever if they go under (the usual Respectable diatribe on t.v. shows). “They should contribute, get jobs like us. I pulled myself up! I got no free ride!” How many times has one heard this robotic cannard repeater from “right” wing t.v.?

    So Respectables create self esteem (they value being real contributors!) They support taxation, just don’t want the poor to have the money. (The sincere, younger people often join the “left” due to that, since it’s just so gross and they’d rather support even the worst kind of ghetto poor than feed a Respectable). They –the Respectables– blather on about the others, the “freeloaders” and how they, themselves, “did it right.” Why can’t everybody be like them? (

    For some, it would be embarrassing to have their head so far up their ass that they really believed it’s a free-market situation while so publicly milking another kind of system.

    Or blathering arrogantly on about how the world would be a beautiful place if only everybody was just exactly like them.

    Frequently, the “Respectables” live entirely off taxes, anyway, but just rationalize it to themselves as if it is not, or on some other money-shaving scheme— the agents, the Realtors, etc. Those “taking a cut.”

  2. #2 by BGLass on 08/02/2011 - 9:27 am

    Completely differently to what many people think— class alliances come out of from where people “get their cut” in such systems. The way military can shift from “corporate” to the educationally-oriented “peace keeping” missions. “Channels of distribution”

    Pink bows on champagne, though. That’s always good, no matter how much it costs or how it’s rationalized, imo, lol

  3. #3 by Genseric on 08/02/2011 - 10:44 am

    In other words, I bought German because of German demand. German products were good because Germans would settle for nothing less.

    A good friend of mine used to work in one of the larger, still USA-based, manufacturing industries.

    From time to time, he would make the remark that had I “noticed how all of the GOOD tools came from Germany?” I told him I had “some good tools of my own and many of them came from places other than Germany.”

    He told me that everything from the Siemens controllers on the CNC machinery to the various German-made hand tools to much of the German-written, proprietary software were The Industry Standard.

    He showed some of these German tools to me once. I compared them to some of the Japanese-and even American tools-I had bought at the local Big Box Store.

    Let me tell you, there is nothing ‘standard’ about German ingenuity.

  4. #4 by rdc75 on 08/02/2011 - 11:43 am

    Actually the Soviets exported quite a lot: natural gas, oil and timber. That’s what kept communism going for so long. – And western engineers (ask almost any engineer from Germany who was born shortly after the war – that “iron curtain” was quite permeable for engineers, I sometimes wonder for what reason they were so proud of their universities when they needed thousands of engineers from the West.). Oh and of course western loans, because even all that money from natural gas was not nearly enough to keep communism going.

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