The Expanding Pool of Savings-Not Declining Unemployment-Is the Key for Economic Growth
- The key driver of economic growth is an expanding pool of savings
- Fixing unemployment without addressing the issue of savings will not increase economic growth
- An enhanced and expanded infrastructure permits an increase in the production of final goods and services
Unhampered Labor Market and Unemployment
- Unemployment can be fixed relatively easy if the labor market were free from government tampering
- In an unhampered labor market, any individual that wants to work can find a job at a going wage for his skills
- Monetary pumping by the central bank that is supposedly aimed at helping workers improve their living standards achieves the exact opposite
- Loose monetary policy undermines the pool of savings
- Workers productivity comes under pressure and their ability to command higher wages weakens
Is Fixing Unemployment Cost-Free?
- Some economists believe that the lowering of unemployment is going to be cost-free given that the unemployed individuals are idle
- Funding is not about money as such but about savings
- To maintain their life and well-being, people require final consumer goods and services, not money
- Money only helps facilitate trade among producers-it does not directly generate any real goods
The Fallacy of Insufficient Demand
- There is never insufficient demand
- An individual's demand is constrained by his ability to produce goods, and the more goods an individual can produce enables him to demand more things
- If a producer wants to succeed, they must produce goods and services in line with what other producers require
- No government and central bank tricks can make it possible to increase consumers' effective demand
Conclusion
- A reduction in unemployment is not the key factor for economic growth. The heart of economic growth is the expanding pool of savings
https://mises.org/wire/does-reducing-unemployment-through-government-spending-boost-economy
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