Modern (American) Capitalism: A Three Act Tragedy

Abstract

This paper examines the process of demand formation in capitalist economies characterized by high levels of household indebtedness, with a particular focus on contemporary developments and their sustainability. The thesis developed is that over the past 35 years, supply-side economics hollowed out the core of the demand-generating mechanism in US capitalism, with disastrous consequences. Particular attention is focused on the interplay of growing inequality, emulation effects, the erosion of social provision, household debt accumulation, and the evolution of consumption spending. The unsustainability of these processes gives rise to a discussion of initiatives that might alter the process of demand-formation so as to make it both more equitable and more sustainable.

Keywords: Neoliberalism, Supply-Side Economics, Zapping Labor, Incomes Policy Based on Fear, Household Debt, Financial Fragility

JEL Classification: E12, E21, E24, E25, E61, E64