In today’s explainer, The Economist embraces more socialism. This one is pretty straightforward. It’s Jean-Baptiste Say’s theory that supply creates demand:
Say and his intellectual allies pointed out that people would not go to all the trouble of producing a good or service, unless they intended to obtain something of equal value in return. So each addition to supply is accompanied by an intended addition to demand. Moreover, the act of production creates an additional item of value for which other things can be exchanged. In this way, production creates a fresh “outlet” for existing products (and 17 times as much production creates 17 times as many outlets).
In Milwaukee, the (original) sewer socialists built or brought under public control utilities, parks, housing, and the sanitation system. Rather than crowding out private business, Milwaukee thrived. During the New Deal, an active government managed demand in the public interest – and built a staggering array of public projects Americans still use today. They stop just short of the realization that this is true of many social organizations, not simply national governments, but municipalities, cooperatives, labor unions, and land trusts:
…over the long run Say’s law is largely true. And by increasing the supply of money to meet any excess demand for it, modern central banks can try to make it true in the short run too.
The only thing keeping the Economist from renaming itself the Social Economics Administration is their failure to imagine – as socialists do – demand management being carried out by anyone other than technocratic central bankers who serve the interests of private capital.
The Economist looks directly into the reptile eyes of senseless human misery, which stare back, pitiless, as the beast bears its yellow fangs. The Economist does not flinch, secure in the knowledge of the great truth that can slay the ancient foe: that no human being must go hungry in a land of plenty. Slow but resolute, the Economist draws a sword on whose blade are carved the words – the central bank ought to hold the interbank interest rate steady even after concluding the latest round of quantitative easing – just before it is devoured whole by the unsated maw.