Thunder Bay – Inequality Slows Growth

The IMF (Finally) Admits That Inequality Slows Growth | The Nati
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We know that low-income consumers are more likely to spend every last dollar, while high-income consumers tend to save. The idea is that, in a high-inequality economy, there’s less spending, and hence less growth, because the non-rich have lower incomes and thus less money to spend. In this paper, economists Heather Boushey and Adam Hersh cite research supporting this theory.

That is Thunder Bay in a nutshell.  There are the haves, people with high paying government funded jobs (see previous post) and the have-nots…everyone else.  How much will the haves spend in a new $100 million hockey rink?  Good question.

Research by political scientists such as Larry Bartels and Martin Gilens, which shows that Congress tends to be extremely responsive to the preferences of wealthy constituents and far less so to everyone else, lends support to this interpretation.

Exactly, in Thunder Bay money talks.  Who do you think is pushing for the City of Thunder Bay to spend $100 million on a hockey rink?  A facility that every other city is spending less than $60 million building? Who do you think pushed for the City of Thunder Bay to spend $60 million plus on the waterfront?  Not the poor. Not what little middle class that is left. Its the contractors who get rich from city contracts.

To keep from losing ground, many low- and middle-wage earners rely on credit and go into debt. At the same time, high-income households have more money and seek more investment opportunities. Both these developments—rising debt, and the increasing demand for investment opportunities—lead to risky financial innovations and a growing financial sector. Instability in financial markets results, and there are crashes and a “credit bubble-and-bust” cycle.

Yup…happened in 2008 and will happen again. The economy right now is running on debt. Once people can no longer borrow any more, or service the debt levels they have taken on, everything crashes…again.

Spending $100 million to create a couple of dozen low wage jobs while putting millions more cash into the rich’s pockets will do nothing at all to help Thunder Bay’s economy. It just keeps the reverse Robin Hood system of wealth redistribution we see in Thunder Bay, Ontario and Canada going.  Money is taken from the have-nots and given to the haves.

Property and stock investors are making money hand over fist.  Who is buying property?  Stocks?  The haves?  The have-nots?  Take a guess.

 

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