For my write-up today on Ron Paul's End the Fed, I'll use as my starting-point a question that Paul asks Ben Bernanke on page 100:
have a question about the GDP. In the first quarter, our GDP didn't do
so well. It was less than 1 percent [annualized]. Our population
growth average is about 1.5 percent. So, if we have total wealth
divided by the population, we actually have negative growth. Could this
not be part of the explanation on why some people feel inequality; that
they're not doing as well in the economy." Bernanke responds that this
was temporary and now growth is higher.
I'm interested whenever
Ron Paul addresses the issue of income inequality. Here, he appears to
argue that some feel it because the Gross Domestic Product is not
keeping up with the increase in population, and thus there are people
who have less. I agree with Ron Paul that, if people in the
middle-class were doing all right economically, there wouldn't be as
much of a concern about inequality: Why care about how much money the
rich are making, when you are doing all right? But I wouldn't say that
the concern about income inequality is only due to a growing
population and economic growth not keeping up with that, for I believe
that there are other factors as well: America's eroding manufacturing
base, for example.
Paul refers to this discussion with Bernanke
while talking about his exchange with Bernanke over whether Bernanke
regarded economic growth as inflationary. This did not set well with Paul, who believed that growth was a good thing.
Bernanke responds that he agrees with Ron Paul that productivity leads
to less inflation. At the same time, Bernanke said earlier in the
exchange that the growth needs to be sustainable---that "We need to have
a pace which matches the underlying productive capacity" (page 97).
This probably means that economic growth cannot outpace the resources
that we have to produce goods.
I can't say that I understood the entirety of the exchanges between Paul and Bernanke. But I do have some questions. Doesn't
Paul himself argue that economic growth is not necessarily a good
thing, when he decries that the Federal Reserve is pumping money into
the economy? The Federal Reserve, after all, is doing so to encourage
people to start businesses and to produce. While Ron Paul believes that
pumping money into the economy leads to inflation, couldn't the
increased productivity that results from doing so bring the prices
down? And shouldn't Paul be agreeing with Bernanke that growth
must be sustainable----for Paul himself argues that producing a bunch
of goods that few people buy because of their failure to save does not
help the economy. Moreover, Paul speculates that some believe
that there is economic inequality because population growth has exceeded
GDP. Couldn't that detail be useful to someone who wants to argue that
there should be more money in the economy, since there is currently not
enough money to go around?