An Underconsumption Crisis

Abstract

The characteristics of an underconsumption crisis are a recessionary climate, unused capacity, excessive debt and pessimistic expectations that block further accumulation. An underconsumption model has the hallmarks of a weakened negotiating position of labour, wages that have not kept pace with productivity increases, weak demand caused primarily by a lack of reinvestment and consumers preferring to save rather than spend, that is, the situation in the West today. As Keynes explained, the only way to escape from such a downturn is to increase demand, and it falls upon today’s countries with positive trade balances, like Germany and Japan, to provide that stimulus for the world economy.