Strangely circular. Got any good chicken-egg jokes?
Hmmm, so let's consider a start-up? In some cases, an individual or group has a vision for a new product/service that doesn't yet exist. There are no consumers if there is nothing to consume. But to bring that product/service to market, they need to first (wait for it...)... hire some people (AKA - create jobs)! Now, which came first, the chicken or the egg?
-ERD50
I hesitate to even start here, but this is so basic. The inventor doesn't make the investment to bring the new product to the market unless the inventor believes there are customers with money in hand who will buy the product when they see it. Inventing jobs don't exist without consumers. Any company thinking about investing in a new product tries to estimate the market size before they put money into the product.
(I've heard that private drug companies haven't been big on anti-malarial drugs for the smple reason that most people who could use them are so poor that the total potential dollar sales won't repay the development costs.)
Yes, the economy is circular. Which came first, the consumer or the producer? Both. They both appeared the first time two cavemen traded an arrowhead for a leather "shoe". Workers earn money by producing things, they become consumers as soon as they walk out the door and spend their money, which gives firms the revenue to pay the workers who will produce more stuff, and who then become consumers again who will buy more stuff, etc.
Our economy isn't working because the cycle isn't completing itself. Some money gets parked on the sidelines instead of going around another time. Firms lay off workers because they don't see enough customers, laid off workers cut back on spending, firms lay off more workers becuase sales dropped again, etc. Our problem isn't a shortage of willing workers, or a shortage of tools (capital goods) for the unemployed workers, it's a shortage of customers with money.
Yes, we're coming off a period when we were accelerating the cycle with borrowed money, so that's one of the causes of our problem. But a sudden change in the borrowing rate throws the engine out of whack. Now we're stuck at a recycling rate that doesn't use all the willing workers and already-built tools that we've got.
