Supply policy
Supply policy (also supply-oriented economic policy ) is an economic and growth policy concept. It is based on the assumption that employment and growth in a market economy depend primarily on the conditions on the supply side of the markets. The opposite is the theory of demand-oriented economic policy .
The improvement of conditions on the supply side lead (according to the theory) via the creation of new jobs indirectly to an improvement in conditions on the demand side. This indirect effect is also known as trickle-down theory .
A study by the IMF indicates counterproductive effects of supply policy.
Theoretical foundations
The engine of economic development (so the theory goes) are the investments of the company . An improvement in the framework conditions (lower taxes, dismantling of regulations ...) improves the companies' expected returns , which leads to higher investments and job creation.
Supply-political considerations go back to an early proponent of neoclassical economic theory , Alfred Marshall , who developed limit value theory in 1890 . According to this doctrine, companies have an interest in hiring workers until the wage that the company would have to pay another employee is as high as the profit that this employee would generate. If the conditions for companies improve (so the theory goes), so that profits rise, the productivity of workers increases. This gives companies an incentive to increase employment and pay higher wages. In this way, the employees also benefit.
Supply policy instruments
In order to achieve the theoretically described effect of improving the supply side, the concept of supply policy includes a number of instruments.
The core of supply policy consists of the demand for deregulation , i. H. removing regulations that could prevent companies from investing. Corporate taxation and a more flexible labor market are of central importance here .
Since taxation has a negative impact on the behavior of actors on the labor market (higher wage demands, lower employment volume), it makes sense from the perspective of supply policy to aim for a relatively low state quota that allows tax cuts.
Monetary policy is of particular importance . A stable currency system is essential for companies. Hence inflation and deflation are harmful. The central banks' task is therefore to ensure price level stability. Supply theory approaches that deal with this aspect are grouped under the term monetarism .
If the companies can benefit from a better trained workforce, the promotion of education , research and development are desirable.
Reception history
After the Second World War, Keynesian concepts initially dominated the western market economies . H. a more demand-oriented economic policy . When the economic and growth effects that were expected from this policy failed to materialize, supply-side economic policy gained in importance in the 1970s. The best-known examples in which supply-policy ideas have found expression in government programs are the USA ( Reaganomics ) and Great Britain ( Thatcherism ).
criticism
Supply policy is criticized for initiating a race for the lowest standards ( race to the bottom ). The attempt to weaken the bargaining position of workers in order to push wage and price increases below the level of productivity growth leads to a vicious circle. To the extent that weak demand is reducing economic growth, each individual country tries to generate export surpluses by increasing price competitiveness through wage restraint, in order to reduce unemployment (at the expense of other countries), whereby demand is weakened even further. The result is weak global demand and weak economic growth that is far below potential.
Representatives of the Center for American Progress believe that policy measures based on trickle-down theory will have a counterproductive effect. Accordingly, the financial resources that are freed up by tax cuts for the rich are not used by them for consumption or invested in means of production. Rather, they would be saved, used for capital investments or transferred to tax havens. This leads to higher inequality and a lack of financial resources in the middle and lower income groups. This financial shortage lowers demand and ultimately economic growth.
Empirical Findings
A study by the International Monetary Fund , taking into account data on the flexibilization of the labor market by the World Economic Forum , indicates a relationship not with increasing but rather decreasing economic growth. The flexibilization of the labor market goes hand in hand with a higher share of the richest in the national income. However, if the income share of the rich rises, then in turn, in the medium term, GDP growth will actually decrease.
literature
- Wolfgang Cezanne: General Economics . Oldenbourg 2005. ISBN 978-3-486-57770-9 , pp. 490-494
Individual evidence
- ↑ a b Era Dabla-Norris, Kalpana Kochhar, Nujin Suphaphiphat, Frantisek Ricka, Evridiki Tsounta: Causes and Consequences of Income Inequality: A Global Perspective . Ed .: International Monetary Fund. June 2015 ( imf.org [PDF]): “Easing of labor market regulations is associated with higher market inequality and income share of the top 10 percent. In particular, a decline in organized labor institutions and the resultant easing of labor markets measured by an increase in labor market flexibilities index by 8½ percent — from the median to 60th percentile — is associated with rising market inequality by 1.1 percent. ”
- ↑ a b Era Dabla-Norris, Kalpana Kochhar, Nujin Suphaphiphat, Frantisek Ricka, Evridiki Tsounta: Causes and Consequences of Income Inequality: A Global Perspective . Ed .: International Monetary Fund. June 2015 ( imf.org [PDF]): "if the income share of the top 20% (the rich) increases, then GDP growth actually declines over the medium term, suggesting that the benefits do not trickle down" [while] " an increase in the income share of the bottom 20% (the poor) is associated with higher GDP growth. "
- ^ Marshall, Alfred: Principles of Economics . 1890.
- ↑ Sedlacek, Tomas. The economy of good and bad. Munich: Hanser, 2012. p. 318.
- ↑ Duden Economy from A to Z: Basic knowledge for school and study, work and everyday life. 4th edition Mannheim: Bibliographisches Institut 2009. Licensed edition Bonn: Federal Agency for Civic Education 2009 Keyword: supply policy
- ↑ Productivity growth closely matched that of median family income until the late 1970s when median American family income stagnated while productivity continued to climb . Source: EPI Authors' analysis of Current Population Survey Annual Social and Economic Supplement Historical Income Tables, (Table F – 5) and Bureau of Labor Statistics Productivity - Major Sector Productivity and Costs Database (2012)
- ↑ Mammo Muchie, Li Xing, Globalization, Inequalities, and the Commodification of Life and Well-being , Adonis & Abbey Publishers Ltd, 2006, ISBN 9781905068029 , p 101
- ↑ The wealth that failed to trickle down: The rich do get richer while poor stay poor, report suggests. In: independent.co.uk. The Independent , January 19, 2015, accessed January 3, 2018 .
- ↑ Era Dabla-Norris, Kalpana Kochhar, Nujin Suphaphiphat, Frantisek Ricka, Evridiki Tsounta: Causes and Consequences of Income Inequality: A Global Perspective . Ed .: International Monetary Fund. June 2015 ( imf.org [PDF]): "We also include a measure of labor market flexibility from the World Economic Forum that measures the extent by which regulations govern firing and hiring, collective bargaining, and minimum wages."
- ↑ Larry Elliott Economics editor: Pay low-income families more to boost economic growth, says IMF . In: The Guardian . June 15, 2015, ISSN 0261-3077 ( theguardian.com [accessed May 27, 2020]).
- ↑ Tobias Kaiser: Income distribution: IMF warns of inequality and poverty . In: THE WORLD . June 15, 2015 ( welt.de [accessed May 27, 2020]).