Ask Prof Wolff: Supply vs Demand-Side Economics - YouTube

This is Richard Wolff from Democracy at Work  responding to another Ask Prof Wolff question  

from our patreon.com community. And this one  comes from 'Jack H.' 'Jack' asks me to distinguish  

between supply-side and demand-side economics.  What's going on? What do these terms mean? Well,  

let me begin by making it very clear why I  chose to respond to this particular question  

among the many that come in. Not only because  others have asked it too, but because it's a  

wonderful example of language and words being used  to disguise or to hide what's actually going on.

So let's begin. 'Supply and demand' is a very  neutral set of words. It's a very neutral idea.  

It's the way teachers describe to students  what economics is all about. There's the supply  

on the one hand and the demand on the other.  Somebody supplies ice cream cones to the market  

and other folks buy the ice cream cones. And  that's how things get produced and distributed.  

Isn't it all reasonable. And nobody's  making hay at anyone else's expense.

The reality is far, far different. Yes,  there are markets all over the place. Yes,  

there are supply sides to the market and demand  sides. Typically the supply side is the employer.  

That is the person or group whose job it is  to produce and bring to the market the supply  

of goods and services we find in a market. On  the other side are most of us: the demanders;  

the people who need to buy the food, clothing,  and shelter without which we can't live. And  

so we come to market prepared and interested in  buying. And markets bring suppliers and demanders  

together. It would be a bit more honest  if we acknowledged that the supply-siders  

are usually the businesses of  the country: the employers;  

a class of people very different from those who  do not own and operate any enterprise. And who  

are there mostly to demand to buy the things they  need for themselves and their families to live.

So what then is supplier demand economics? It's  usually a set of policies, a very clever language.  

You call a set of policies, something  about the supply or the demand.  

That seems sort of even-handed doesn't it? Well,  it isn't. Supply-side economics has a better,  

more honest name. It's economics that  deals with problems of capitalism  

by making sure you help, first and foremost,  the employer. Let me give you some examples.  

When the economy of capitalism goes down (and  let's remember every four to seven years across  

the history of capitalism on average there's been  a downturn, a recession, a depression, a crash,  

a crisis - lots of words for it) and when  that happens the supply side people say  

'oh my goodness, there's a crash, there's  unemployment, the economy is going down,  

and we want there to be a policy which  we call supply-side economics.' You know  

what it is? It's a set of policies that make  businesses more profitable. And here's the idea:  

if we make the businesses more profitable they'll  expand, they'll grow, they'll hire more people,  

and the benefits will - yeah, here we go - trickle  down to everybody else. Supply-side economics,  

trickle down economics - very close  twins. It's a way of helping the supplier.

What's the alternative? More liberal type  folks want there to be demand-side policies,  

demand-side economics. Here the idea is: you want  the economy to go better? Help the mass of people,  

the working class, the employees; give them money,  give them benefits of all kinds, give them jobs to  

earn money. And then they will go into the market  to buy things. And the benefit of that will,  

yeah, trickle up to the businesses. Right-wingers  want supply-side economics because it favors the  

employers they serve. Liberal or  left-wing economists tend to prefer  

demand-side economics because it helps people who  are average and coming into market wanting to buy.

By the way, capitalism, being an unstable  system as it is, periodically has the opposite  

problem. Instead of the economy going down, the  economy is sort of exploding, like it is today.  

With prices going crazy. Here again the same game:  one set of policies wants to come in and leave the  

employer class with the minimum of trouble.  They just want the Federal Reserve to raise  

interest rates a little bit. Or to pull  a little bit of money out of the economy,  

making it a little bit of pressure, a little  bit on the employer to do something about  

the inflation. The Federal Reserve has been  raising interest rates, you probably noticed.  

The impact on the inflation? nowhere to be seen.  Which is exactly what the employer class wants.

What would a liberal or left-wing approach  be? Go in there and do something that helps  

average people: ration, wage/price  freezes (the government comes in,  

controls, stops the prices from going up.) That's  the solution that the mass of Americans want right  

now. But you won't hear about it. Because the  Democrats and Republicans are all lined up on  

the conservative side. Which has been true now  for a long time, ever since Franklin Roosevelt.

Here's the conclusion to draw:  supply and demand never explain much.  

That's part of why they are taught all the  time and emphasized. You know, businesses  

have learned that if the supply goes down and the  demand goes up, up go their prices and profits  

in most cases. So the businesses play both sides,  don't they? Advertising is the name of the game.  

That's when businesses manipulate the demand.  And they control production. So they can control  

the supply. In other words, in capitalism the  capitalist plays both sides. And that's what  

has to be understood, because that's how they make  the system work for them. Markets, like supply and  

demand, are an institution that serves capitalism.  And to believe in it, to take seriously the  

language of supply and demand is to get caught up  in an ideology favoring one class against another.

If interventions like these strike you, as  they do us, important ways to shift and change  

the conversation in our country then please  partner with us, share these videos with friends,  

relatives, co-workers. Help us reach a larger  audience. And, of course, if you can be supportive  

financially (all of this costs money) that will  be enormously appreciated as well. Thank you.