Is There a Shortage of Savings in the United States? The Role of Financial Institutions, Monetary and Fiscal Policy in Capital Accumulation During Periods of Stagflation

Abstract

It has been argued by a number of economists that the recent poor performance of the United States economy is due to a policy bias against saving by the private sector of the economy. Government policy, it is claimed, which taxes income and capital gains while distributing social welfare benefits, discourages private saving and therefore leads to economic stagnation. Unfortunately, this argument confuses the role of private saving with the role played by finance in a modern, capitalist, market-oriented production economy. If the United States has been hobbled on the ‘supply side’ in recent years, it is because of a shortage of finance and not because of a shortage of saving. In point of fact, to the extent that government policy did directly inhibit the private sector’s tendency to save out of income during the 1970s, the greater has been the actual growth of GNP.

Special Study on Economic Change. Vol. 4 Stagflation: The Causes, Effects and Solutions (Washington: Joint Economic Committee, 1980).