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It's a bit subtler than that. On paper, if you increase wages and taxes to subsidize demand, you encourage consumption. And it actually works ... provided cons
by ddebernardy 8y ago
It's a bit subtler than that.
On paper, if you increase wages and taxes to subsidize demand, you encourage consumption. And it actually works ... provided consumers a) aren't over their ears in debt (which they are) and b) are buying from locals (which they aren't, at least for industrial goods).
The French learned this the hard way during a short period in the early 1980s. They did exactly that, and it drove consumption up as expected, but this actually ended up helping more competitive manufacturers from their trading partners.
- theredbox 8y agoKorea is already super consumerist and much more service oriented country than the US.
- ddebernardy 8y agoExactly. Such a policy should work, on paper at least, in places like China or some SE Asian countries. It won't in places like South Korea or other places where consumers are mostly indebted (in which case they repay them instead of consuming more) or buying cheap goods from China or SE Asia (in which case manufacturers from those countries benefit most).
- xupybd 8y agoDoes this hold up for an economy that is primarily export driven?