Middle out economics (Ofer Abarbanel online library)

Middle-out economics is a branch of demand-side macroeconomic theory. It identifies the buying power of the middle class as the necessary ingredient for job creation and economic growth.

With consumption typically responsible for two-thirds of the Gross Domestic Product in the Americas[1][2] consumer spending is key. Middle-out economics maintains it is only the middle class that can create the aggregate demand necessary for business to support full employment levels. Given the wealthy’s high propensity to save,[3] middle-out economics holds that large concentrations of wealth are not sufficient cause for job creation. Middle-out economics maintains companies don’t hire when they have an abundance of profits; they hire when they have an abundance of customers.[4]

The middle-out economic framework is rooted in the scientific fact that economies are complex, adaptive, and eco-systemic. Economies are characterized by the same ‘circle of life’ like feedback loops found in natural eco-systems. Middle-out economics claims a fundamental law of capitalism must be “if workers have no money then businesses have no customers”. In this sense, it claims that the true “job creators” in a capitalistic economy are customers and not rich business people. It maintains that a thriving middle class is the cause of growth and not the consequence of it.[4] Therefore, the only way to prosperity is from the middle-out.

Middle-out economics favors governmental policies that help to ensure the buying power of the middle class.[5]

Middle-out economics is held in opposition to Reaganomics, sometimes referred to as trickle-down economics.

The term middle-out economics was coined by Eric Liu, a former speechwriter for Bill Clinton, and Nick Hanauer, a venture capitalist.[6]

References[

  1. ^“Don’t Expect Consumer Spending To Be the Engine of Economic Growth It Once Was” (PDF). Stlouisfed.org. Retrieved 7 August 2018.
  2. ^“Household final consumption expenditure”. The World Bank. Retrieved April 24, 2018.
  3. ^Samuelson, Paul; Nordhaus, William (1992). Economics (Fourteenth ed.). New York: McGraw-Hill, Inc. p. 437. ISBN 0-07-054879-X.
  4. ^ Jump up to:ab Liu, Eric; Hanauer, Nick (2011). The Gardens of Democracy. Seattle, WA: Sasquatch Books. ISBN 978-1-57061-823-9.
  5. ^Liu, Eric; Hanauer, Nick (2011). The Gardens of Democracy. Seattle, WA: Sasquatch Books. p. 141. ISBN 978-1-57061-823-9.
  6. ^Pethokoukis, James. “Fact-Free ‘Middle-Out Economics'”. National Review.

 

Ofer Abarbanel online library