4 of 15

No

Write now Article Tools

Page 2 of 4

mass of people should not own capital. There would otherwise (according to Keynes) be no financing for new capital, because if ownership of the means of production were widespread, owners would use profits for consumption instead of investment. Therefore, as few people as possible should own the means of production, and most people should be confined to wages and welfare for their income.

Two, using ownership income (profits) for investment instead of consumption means that goods and services are produced that cannot be cleared (sold) at market prices. To solve this problem, Keynes declared that the State must print money ("create effective demand"), or tax away as much as possible from the rich in order to redistribute purchasing power.

This requires walking a tightrope: 1) If inflation caused by printing gets too far ahead of disposable income, people stop buying, and inventories of unsold goods and services build up, reducing producers' income and sending the country into a recession. 2) If the State taxes the rich too much, they won't be able to invest and form capital, decreasing the number of wage system jobs, and sending the country into a recession.

According to Jean-Baptiste Say, however, it's not a question of printing money or taxing the rich to increase the effective demand of the poor through tax rebates or otherwise. The issue is how to make it possible for people to produce more, either by their labor, or their ownership of capital. As Say explained in his book, "Letters to Malthus" (1821),

"All those who, since Adam Smith, have turned their attention to Political Economy, agree that in reality we do not buy articles of consumption with money, the circulating medium with which we pay for them. We must in the first instance have bought this money itself by the sale of our produce.

"To a proprietor of a mine, the silver money is a produce with which he buys what he has occasion for. To all those through whose hands this silver afterwards passes, it is only the price of the produce which they themselves have raised by means of their property in land, their capitals, or their industry. In selling them they in the first place exchange them for money, and afterwards they exchange the money for articles of consumption. It is therefore really and absolutely with their produce that they make their purchases: therefore it is impossible for them to purchase any articles whatever, to a greater amount than those they have produced, either by themselves

• << previous page
• 1
• 2
• 3
• 4
• next page >>

Add your voice

Know something about Tax rebates as economic stimulus: Will it work??
We want to hear your view. Write now!