This is Richard Wolff from Democracy at Work responding to another Ask Prof Wolff question
from our patreon.com community. And this one comes from 'Jack H.' 'Jack' asks me to distinguish
between supply-side and demand-side economics. What's going on? What do these terms mean? Well,
let me begin by making it very clear why I chose to respond to this particular question
among the many that come in. Not only because others have asked it too, but because it's a
wonderful example of language and words being used to disguise or to hide what's actually going on.
So let's begin. 'Supply and demand' is a very neutral set of words. It's a very neutral idea.
It's the way teachers describe to students what economics is all about. There's the supply
on the one hand and the demand on the other. Somebody supplies ice cream cones to the market
and other folks buy the ice cream cones. And that's how things get produced and distributed.
Isn't it all reasonable. And nobody's making hay at anyone else's expense.
The reality is far, far different. Yes, there are markets all over the place. Yes,
there are supply sides to the market and demand sides. Typically the supply side is the employer.
That is the person or group whose job it is to produce and bring to the market the supply
of goods and services we find in a market. On the other side are most of us: the demanders;
the people who need to buy the food, clothing, and shelter without which we can't live. And
so we come to market prepared and interested in buying. And markets bring suppliers and demanders
together. It would be a bit more honest if we acknowledged that the supply-siders
are usually the businesses of the country: the employers;
a class of people very different from those who do not own and operate any enterprise. And who
are there mostly to demand to buy the things they need for themselves and their families to live.
So what then is supplier demand economics? It's usually a set of policies, a very clever language.
You call a set of policies, something about the supply or the demand.
That seems sort of even-handed doesn't it? Well, it isn't. Supply-side economics has a better,
more honest name. It's economics that deals with problems of capitalism
by making sure you help, first and foremost, the employer. Let me give you some examples.
When the economy of capitalism goes down (and let's remember every four to seven years across
the history of capitalism on average there's been a downturn, a recession, a depression, a crash,
a crisis - lots of words for it) and when that happens the supply side people say
'oh my goodness, there's a crash, there's unemployment, the economy is going down,
and we want there to be a policy which we call supply-side economics.' You know
what it is? It's a set of policies that make businesses more profitable. And here's the idea:
if we make the businesses more profitable they'll expand, they'll grow, they'll hire more people,
and the benefits will - yeah, here we go - trickle down to everybody else. Supply-side economics,
trickle down economics - very close twins. It's a way of helping the supplier.
What's the alternative? More liberal type folks want there to be demand-side policies,
demand-side economics. Here the idea is: you want the economy to go better? Help the mass of people,
the working class, the employees; give them money, give them benefits of all kinds, give them jobs to
earn money. And then they will go into the market to buy things. And the benefit of that will,
yeah, trickle up to the businesses. Right-wingers want supply-side economics because it favors the
employers they serve. Liberal or left-wing economists tend to prefer
demand-side economics because it helps people who are average and coming into market wanting to buy.
By the way, capitalism, being an unstable system as it is, periodically has the opposite
problem. Instead of the economy going down, the economy is sort of exploding, like it is today.
With prices going crazy. Here again the same game: one set of policies wants to come in and leave the
employer class with the minimum of trouble. They just want the Federal Reserve to raise
interest rates a little bit. Or to pull a little bit of money out of the economy,
making it a little bit of pressure, a little bit on the employer to do something about
the inflation. The Federal Reserve has been raising interest rates, you probably noticed.
The impact on the inflation? nowhere to be seen. Which is exactly what the employer class wants.
What would a liberal or left-wing approach be? Go in there and do something that helps
average people: ration, wage/price freezes (the government comes in,
controls, stops the prices from going up.) That's the solution that the mass of Americans want right
now. But you won't hear about it. Because the Democrats and Republicans are all lined up on
the conservative side. Which has been true now for a long time, ever since Franklin Roosevelt.
Here's the conclusion to draw: supply and demand never explain much.
That's part of why they are taught all the time and emphasized. You know, businesses
have learned that if the supply goes down and the demand goes up, up go their prices and profits
in most cases. So the businesses play both sides, don't they? Advertising is the name of the game.
That's when businesses manipulate the demand. And they control production. So they can control
the supply. In other words, in capitalism the capitalist plays both sides. And that's what
has to be understood, because that's how they make the system work for them. Markets, like supply and
demand, are an institution that serves capitalism. And to believe in it, to take seriously the
language of supply and demand is to get caught up in an ideology favoring one class against another.
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