It is simple math, really! The primary incentive for any Corporation is to make money, to make a profit. But in order for these companies to achieve their goal, their products or services must be in demand and then purchased. When the demand is there and consumers are able to purchase these products or services, companies make a profit then produce more to satisfy consumer demand, thus more profits.
The problem with this economy is not a matter of supply and demand. Records show that Corporations are sitting on a collective financial nest egg of about $2 trillion in cash, so the ability to produce is there. And the problem is not a lack of demand either, for as long as there are consumers, there will always be a demand. The problem with this economy is the ability of consumers to purchase. It’s a vicious cycle – take away consumer’s ability to purchase, and the company’s profit incentive is no longer achievable. If the company can’t see a way to be profitable, they lay off workers and sit on their nest-egg. These laid off workers then join a population of non-consumers who don’t have the ability to purchase and the cycle continues.
What then, is the answer? As far as I can see, the answer is simple – give consumers the ability to purchase.
The best, most ideal way to do this is with jobs. If consumers are working, they get a paycheck and thus, are able to purchase. But in this economy, jobs are becoming scarce because Corporations are trying to hold on to their profits and are laying off. If we can’t attack the problem by making Corporations hire, then we must attack it from the other end - creating the ability for consumers to buy, thus, increasing demand. When this demand is increased, the profit margin is realized by these Corporations, and hiring is increased to meet the demand of the consumers.
How do you empower the consumers? There are two ways:
- The government must pick up the slack and take the initiative. A perfect example of this was the actions of President Franklin Roosevelt during the Great Depression, where the government took more of an active role in The New Deal and was able to reduce unemployment by converting auto manufacturing plants into factories to meet the demands of World War 2. This action alone employed millions of unemployed Americans, giving them a paycheck and essentially reversing the effects of the Great Depression.
- A massive direct Stimulus Bill – This will put real dollars into the hands of consumers, thus, giving them the ability to consume. Because of the nature of this method, it is not a long-term sustained effort to get the economy going, but it will provide a necessary needed jolt that can get corporations hiring again to meet the sudden demand by these newly empowered consumers. More hires will eventually lead to more paychecks, thus reversing the effects of this recession.
So if a simple person like myself can figure this out, why can’t the elected elites in Washington do the same?