[OPE-L] [Jurriaan] Re: A class dimension of aggregate demand

From: glevy@PRATT.EDU
Date: Sat Nov 26 2005 - 09:26:21 EST

---------------------------- Original Message -------------------------
Subject: A class dimension of aggregate demand
From:    "Jurriaan Bendien" <adsl675281@tiscali.nl>
Date:    Sat, November 26, 2005 5:52 am

If you look at the table following the link I provided, you will see that
the *average* after-tax income of those consumer units (households)
earning less than $70,000 was $28,752 . Yet, the total consumer
expenditure of those households averaged $31,737 . In other words, on
average, these consumer units purchased consumer items in 2003 to a value
*greater* than their net income. We're talking 73.6 million households,
here, or about 190 million people or so.

This discrepancy is conceptually possible, because the survey includes
durables bought during the reference year on hire-purchase, installment,
credit etc. such as cars, appliances and furniture (even although it
excludes expenditures on repayments of items bought.

I am not exactly sure, what is included in the largest single item of
consumer expenditure - housing - but presumably it includes only actual
payments made by consumer units during the year in respect of housing.

I think you can find some evidence of Engel's curve in the data, but
high-income households evidently spent e.g. more money eating out rather
than cooking at home, with the consequence, that they spent
proportionately more money on food, than if they ate at home all the time.
And, of course, they'd be more likely to buy a BMW rather than a little

One thing that is remarkable about this data set is how low the average
disposable income of the majority of US households actually is, i.e.
they're more or less forced to buy on credit. Thus, when bourgeois
intellectuals complain about the "low savings rate" of Americans
(disregarding their payments on social security, health insurance and
mortgages, "saved" from gross income), what they forget is the real
household distribution of disposable income among the population, and its
average level for those households earning below $70,000.

It''s almost impossible to disaggregate "luxury consumption" reliably from
official data, and I agree that what is regarded as "luxury" and what is
"necessity" is to some extent dependent on your point of view and

Keynesians will talk about aggregate demand, Marxists will decry the evil
of Keynesianism, but socialists seek to study the distribution of income
among social classes, in which case, quantative and qualitative questions
arise about "whose" demand it is, "what kind" of demand it is, and "how"
this demand is realised/manifested. Obviously it takes much more research
to allocate income quantities to social classes defined in terms of
relations of production.

Although Marx defined the economy as the totality of the spheres of
production, distribution, circulation and consumption, he did not write on
the political economy of consumption. But of course that does not need to
imply that there is no class dimension in aggregate demand, unless one
believes that the critique of political economy should stop when the ink
dried on the last page Marx wrote on. The point is that aggregate demand
is a concept which conveniently spirits away the differential propensity
of social classes to save and consume, in accordance with their incomes.



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