Economic Growth and the Public Essay

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The private sector tends to be against public sector funding, since it represents a basic redistribution of wealth from the ground up. Private sector economics has always held that the trickle-down economic models work best, where businesses and the very rich are given tax cuts and stimulus that is supposed to trickle down to the workers and the economy through renewed monetary business incentives. However, this form of economics, popularly labeled "Reaganomics" since President Reagan was one of its biggest advocates, has failed utterly and has led to one of the largest global economic collapses in modern times.

The growth of the economy can often be linked to the growth of the money supply, or what economists commonly refer to as M2. When M2 shrinks, the economy tends to follow, since there is less money available for investment and reinvestment in the public sector. Accordingly, when M2 grows, the economy tends to grow with it, signaling higher inflation but lower interest rates. The availability of money, or indirectly, M2, can be a bell-weather of economic condition from the Keynesian standpoint. As more, cheaper money is pumped into the economy, more people tend to spend and consume with this cheaper money, creating economic activity and generating wealth not only in the short and medium terms, but also in the long-term.

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The Keynesian economic model has led to some of the highest growth rates during the 20th century, immediately following World War Two. As long as the Federal Reserve is able to regulate the flow and cost of money, it can effectively manipulate the rate of growth of the U.S. economy. When governments are able to regulate the money supply, they can slow or speed up the effects of inflation, and generate economic activity through lower interest rates and printing more money. This form of basic, ground-up economic stimulus helps economies to regenerate after recessions and slowed activity. It is only through proper regulation and required transparency that the public sector can be effectively manipulated to help economic growth. The next decade of economic activity will help to make the case that Keynesian economics is here to stay and that through direct government stimulus and support for the public sector, economics can turn themselves around in the face of enormous economic recessions. Government entities like the Federal Reserve and the Securities and Exchange Commission, which acts to regulate and encourage private sector transparency, have leading roles in this form of economic….....

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