George Reisman has an excellent essay that has tremendous relevance today due to the resurgence of Keynesianism under Bush and Obama. Here are the opening lines of Production Versus Consumption:
There are two fundamental views of economic life. One dominated the economic philosophy of the nineteenth century, under the influence of the British Classical Economists, such as Adam Smith and David Ricardo. The other dominated the economic philosophy of the seventeenth century, under the influence of Mercantilism, and has returned to dominate the economic philosophy of the twentieth century, largely under the influence of Lord Keynes. What distinguishes these two views is this: In the nineteenth century, economists identified the fundamental problem of economic life as how to expand production. . . .
In the twentieth century, economists have returned to the directly opposite view; . . . In the twentieth century, economists have returned to the directly opposite view; . . . the problem is erroneously believed to be how to expand the desire to consume so that consumption may be adequate to production.
My favorite part of this excellent analysis is under the sub-heading “Consumptionism and Parasitism.” Here are a few excerpts:
The idea that by consuming his product, one benefits the producer, by giving him the work to do of making possible one’s consumption, is absurd. . . . Only the use of money lends it the least semblance of plausibility. If it were true, then every slave who ever lived should have cherished his master’s every whim, the satisfaction of which required of him more work. A slave should have been grateful if his master desired a larger house, an improved road, more food, more parties, and so on; for the provision of the means of satisfying these desires would have given him correspondingly more work to do.
The belief that the consumption of the government benefits and helps to support the economic system is on precisely the same footing . . . as the belief that the consumption of the master benefits and supports the slave. It is a belief the absurdity of which is matched only by the injustice it makes possible. It is the means by which parasitical pressure groups, employing the government as an agent of plunder, seek to delude their victims into imagining that they are benefitted and supported by those who take their products and give them nothing in return.
. . . [T]he consumptionist is highly adept at bringing forth totally imaginary causes of economic catastrophe. Invariably, the solution advanced is consumption by those who have not produced, for the sake of those who have. Always, the goal is to demonstrate the necessity and beneficial effect of parasitism—to present parasitism as a source of general prosperity.
The consumptionist’s advocacy of consumption by those who do not produce, to ensure the prosperity of those who do, is, the productionist argues, a pathological response to an economic world which the consumptionist imagines to be ruled by pathology. The consumptionist has always before him the pathology of the miser. His reasoning is dominated by the thought of cash hoarding. He believes that one part of mankind is driven by a purposeless passion for work without reward, which requires for its fulfillment the existence of another part of mankind eager to accept reward without work. This is the meaning of the belief that one set of men desire only to produce and sell, but not to buy and consume, and the inference that what is required is another set of men who will buy and consume, but who will not produce and sell. In the consumptionist’s world, the producers are imagined to produce merely for the sake of obtaining money. The consumptionist stands ready to supply them with money in exchange for their goods—he proposes either to take from them the money he believes they would not spend, and then have someone else spend it, or to print more money and allow them to accumulate paper as others acquire their goods.
Hoarding is not the only phenomenon upon which the consumptionist seizes. Where nothing in reality will serve, the consumptionist is highly adept at bringing forth totally imaginary causes of economic catastrophe. Invariably, the solution advanced is consumption by those who have not produced, for the sake of those who have. Always, the goal is to demonstrate the necessity and beneficial effect of parasitism—to present parasitism as a source of general prosperity.
—George Reisman on Consumptionism and Parasitism from his essay Production Versus Consumption. The whole essay is worth reading and rereading. It’ll provide much needed clarity on how you view the modern economic debates. I know it has for me.
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