Goals of Macroeconomic Policies

Macroeconomics is about achieving full employment, achieving stable prices (no inflation) and about achieving rapid growth. There are controversies about how to achieve these goals. Different schools of thought have different ideas about what is the policy required to achieve these goals. Every school has a point to achieve full employment but what it means and how it can be achieved is very much controversial. As far as stable prices are concerned everybody agrees that inflation is not a good thing so we should try to achieve zero or small amount of inflation but how it can be achieved is controversial. Rapid growth as a goal is now subject to controversy because although it has been widely believed and still confused to be widely believed that we need to have rapid growth in GNP per capita to eradicate poverty but there is lot of evidence that this is not true. Basically the idea of the rapid growth is that if we increase income then it will help the poor. But the fact is over the past thirty years enormous amount of growth has taken place but all of the gains have gone to the top one percent. If we have even more growth and gains from it keep going to the top one percent the bottom 99 percent don’t benefit from it. So there is no point to achieve such growth.

Here the real issue is the redistribution, how can we get the wealth from the top one percent and give it to the poor. This problem is not looked at all by economists. The main problem of economics is the redistribution but this is systematically ruled out. All economists believe in trickle-down theory. As long as the wealth accumulates it automatically benefits the poor but this is not true empirically over the last thirty years as the labor class in USA has remained more or less constant and similarly the living conditions of bottom 25% of the people of planet become worse. But the wealth of top 25% has increased tremendously and has made all the gains. In 2015 the gains to 0.01% have been much larger (300%) whereas the bottom has got 10% loss. In this year fifty people became billionaires in USA because wealth is concentrating at the top. The issue is why to worry about growth when all the fruits of such growth go only to already rich and wealthy. The point is that we need to worry about how benefits of growth can go to everybody.