Posted by: CS | February 19, 2014

Bottom-Up Stimulus

As Western economies stagnate, with GDP growth barely matching population growth due to mass Third World immigration, China and other Asian economies grow with a doubling time of less than ten years.

It is widely believed in the West, or at least stated,  that China’s growth is due to insane infrastructure investments made with borrowed money that can never be repaid, which means that China’s economy is bound in time to crash and burn, at which point, we in the West will be able to resume our complacent sense of  superiority over the Rest.

But so what if the financing for all those empty Chinese cities, those thousands of miles of freeway and high-speed rail, is never repaid? The money was created out of thin air by the Bank of China and back to thin air it may return. As far as the Bank of China is concerned, there’s plenty more where that money came from: an amount limited only by the number of digits in the universe. The problem for China, will never be a shortage of cash, but the danger of too much cash leading to social unrest provoked by inflation.

But avoiding inflation is not difficult when you have a few hundred million rural workers ready to migrate to the centers of urban development to satisfy any demand for additional labor in construction, manufacturing and services.

For the West, therefore, without effective economic stimulus, the outlook is for continued relative economic decline. To date, stimulus in the US and Europe has consisted almost entirely in the provision of cheap credit that boosts the profits of corporations and investors, while doing little or nothing to boost economic growth.

Instead of such top-down stimulus, economic growth requires bottom-up stimulus that provides the mass of people with additional purchasing power that will drive economic expansion. But current policies have the exact opposite effect. Jobs are off-shored to cheap labor areas, while the cost of domestic labor is driven up by minimum wage laws. The result is rising unemployment and a sharply declining work-force participation rate.

To counteract these effects, what’s needed is a reduction in minimum wages or the elimination of minimum wage laws, and the restriction of welfare for the able-bodied to those holding jobs. The simplest implementation of such a program would be to provide every worker a wage supplement via the tax system. To illustrate the mechanism and its economic consequences, I will briefly run some numbers for the UK.

The program would be as follows: there would be a cut in the minimum wage from seven pounds per hour to three pounds fifty, while there would be wage supplement delivered via the tax system of five pounds per hour for up to 1500 hours per year, thereby setting a floor for wages above the currently mandated minimum wage, while lowering employers’ minimum cost of labor by 50%.

Assuming that the program increased the UK employed workforce from the currently depressed level of 30 million to 35 million, as businesses took advantage of a supply of cheap labor, the cost of the income supplement would be around 150 to 200 billion pounds per year out of a national budget of around 800 billion. But there would be an immediate saving in welfare of 100 billion or more, and the income supplement would be clawed back from those earning more than, say, 20,000, at a rate of around 10%, which would lower the program cost by another 20 or 30 billion per year.

Thus the net program cost would be around 75 billion pounds per year, or comparable in size on a GDP-adjusted basis to Ben Bernanke’s QE for the rich, that ran initially at $85 billion per month.

But unlike a top-down stimulus, which does little for domestic demand, much of it being deployed abroad to create further competition for domestic workers, bottom-up stimulus will translate almost one for one to increased consumer demand and hence GDP growth. Moreover, by reducing low-end labor costs, bottom-up stimulus will result in new domestic investment in manufacturing and services that in turn generate income and taxes that boost national revenue.

It should be noted, however, that this modest proposal will never be implemented because it works counter to the globalist agenda. Instead of driving wages in the West toward parity with those of the Rest, it tends to maintain the standard of living of workers in the West.

Moreover, instead of sucking immigrants from the Third World to the West, a key globalist strategy to make their program irreversible, a bottom-up income supplement for which only the native-born are eligible would so advantage the native population as destroy the economic incentive to mass immigration.

But if bottom-up stimulus is out of the question, understanding its potential for restoring prosperity to millions throughout North America and Europe is, nevertheless, useful in drawing attention to the underlying globalist agenda, that is impoverishing tens of millions in the West and destroying the Western nations as unique racial, cultural and religious communities.

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