Working-Class Households and the Burden of Debt

Abstract

It is an old axiom, common to both Marxian and Keynesian economics, that uneven, class-based distribution of income is a determining factor of consumption and investment. How much is spent for consumption goods depends on the income of the working class. Workers necessarily spend almost all of their income on consumption, with relatively little left over for savings or investment. Capitalists, on the other hand, spend only a small percentage of their income for personal consumption. The overwhelming proportion of the income of capitalists and their corporations is devoted to investment. It follows that increasing inequality in income and wealth can be expected to create the age-old contradiction of capitalism: on the one hand, sluggish consumer demand narrows the marketability of the goods that capital needs to sell; on the other, profitable investment opportunities depend ultimately on vigorous growth in the effective demand for consumer goods.

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