Monday, January 12, 2009

How to Stimulate the Economy

This MoJo article has some good information on the ways to stimulate the economy. I was first struck by their explanation of the myth of the free market:

"In fact, the economy has no natural, "free" state; it is shaped by the society in which it exists. For the past 30 years, it's been steered toward unlimited profit taking at the top, book cooking, management for short-term shareholder return at the expense of actual viability, maximum greenhouse gas emissions, and so on. Washington wrote the rules. Wall Street and Detroit followed."

Secondly I was struck by this analysis of rates of return on investment (ROI):

"Whatever the butcher's bill ends up being, we better be damn sure we get the best possible return on investment. And here's where things get interesting. Turns out that putting money into the hands of corporations or wealthy individuals has a negative roi—we get no more than 37 cents to the dollar. (See "Bang for the Buck.") By contrast, a dollar spent extending unemployment benefits prompts $1.64 in economic activity; building roads and bridges (or the new utility grid we so badly need) brings $1.59. The very best return? Food stamps, which provide a full $1.73 in return for every dollar's worth of stimulus, with the added benefit that we're investing in the well-being of actual people—the same people who have borne the brunt of the past few decades' corporate and political chicanery."

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