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Some facts, and claims, about the 21st Century Economy

Summary:
In the process of working on my book-in-progress, The Economic Consequences of the Pandemic, I’ve been trying to integrate a number of facts about the economy of which I’ve been more or less aware for a while, along with claims I want to make, and put them together into a coherent account of the economic system prevailing (in advanced/developed economies( in the 21st century and how it differs from the industrial goods economy of the 20th century. As a step towards this, I’ve put together a list of factual claims which I think can be established reasonably firmly, along with claims I want to make that will be more contentious. My plan is to put this together into a coherent analysis, including supporting evidence. So, I’m keen to get good supporting links for any of these points

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In the process of working on my book-in-progress, The Economic Consequences of the Pandemic, I’ve been trying to integrate a number of facts about the economy of which I’ve been more or less aware for a while, along with claims I want to make, and put them together into a coherent account of the economic system prevailing (in advanced/developed economies( in the 21st century and how it differs from the industrial goods economy of the 20th century.

As a step towards this, I’ve put together a list of factual claims which I think can be established reasonably firmly, along with claims I want to make that will be more contentious. My plan is to put this together into a coherent analysis, including supporting evidence. So, I’m keen to get good supporting links for any of these points (I have quite a bit, but more would be helfpul). I also want to be sure I’m not missing contrary evidence, and to adjust the claims if necessary, so please point this out also.

Facts (I think)

  • Most economic activity in the 20th century, including services such as wholesale and retail trade, was fairly directly related to the production and distribution of goods
  • This is no longer true: most economic activity is now related to human services, information services and finance, and these are at most indirectly related to goods production
  • Real interest rates for government debt and high-grade corporate debt have been below zero since the GFC and seem likely to remain there permanently under current conditions
  • Massive issues of government debt during the pandemic crisis haven’t changed this
  • Net private business investment (non-residential) has been declining relative to GDP/national income since at least 2000
  • Service industries less capital intensive than goods industries
  • Information economy firms (Facebook, Google etc) invest very little even counting R&R
  • Government investment in traditional infrastructure has been falling since 1970s, at most partially offset by private infrastructure
  • Corporate profits high, mostly derived either from financial sector or from “intangible” assets in IT.

My claims

  • Finance sector profits even higher if payments to managerial level in finance sector are treated as part of profit
  • Intangibles = monopoly
  • Revenue and profits in finance and Internet do not arise from sales to final consumers, and bear no obvious relationship to consumer welfare
  • Implies similar regarding wages for market work
  • Incentives don’t work in in this kind of economy (if they ever did)
  • Unmet needs for public investment in human services: health, education, aged care, early childhood, social work
  • Capacity to meet these through short term increase in public debt, long term increase in taxation
John Quiggin
He is an Australian economist, a Professor and an Australian Research Council Laureate Fellow at the University of Queensland, and a former member of the Board of the Climate Change Authority of the Australian Government.

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