Middle-out economics is a branch of demand-side macroeconomic theory. It identifies the buying power of the middle class as the necessary ingredient for job creation and economic growth. With consumption typically responsible for two-thirds of the Gross Domestic Product in the Americas consumer spending is key.
Middle-out economics maintains it is only the middle class that can create the aggregate demand necessary for business to support full employment levels. Given the wealthy’s high propensity to save, middle-out economics holds that large concentrations of wealth are not sufficient cause for job creation. Middle-out economics maintains companies don’t hire when they have an abundance of profits; they hire when they have an abundance of customers.
The middle-out economic framework is rooted in the scientific fact that economies are complex, adaptive, and eco-systemic. Economies are characterized by the same ‘circle of life’ like feedback loops found in natural eco-systems. Middle-out economics claims a fundamental law of capitalism must be “if workers have no money then businesses have no customers”. In this sense, it claims that the true “job creators” in a capitalistic economy are customers and not rich business people. It maintains that a thriving middle class is the cause of growth and not the consequence of it. Therefore, the only way to prosperity is from the middle-out.
Middle-out economics favors governmental policies that help to ensure the buying power of the middle class.
Middle-out economics is held in opposition to Reaganomics, sometimes referred to as trickle-down economics.
The term middle-out economics was coined by Eric Liu, a former speechwriter for Bill Clinton, and Nick Hanauer, a venture capitalist.
- ^“Don’t Expect Consumer Spending To Be the Engine of Economic Growth It Once Was” (PDF). Stlouisfed.org. Retrieved 7 August 2018.
- ^“Household final consumption expenditure”. The World Bank. Retrieved April 24, 2018.
- ^Samuelson, Paul; Nordhaus, William (1992). Economics (Fourteenth ed.). New York: McGraw-Hill, Inc. p. 437. ISBN 0-07-054879-X.
- ^ Jump up to:ab Liu, Eric; Hanauer, Nick (2011). The Gardens of Democracy. Seattle, WA: Sasquatch Books. ISBN 978-1-57061-823-9.
- ^Liu, Eric; Hanauer, Nick (2011). The Gardens of Democracy. Seattle, WA: Sasquatch Books. p. 141. ISBN 978-1-57061-823-9.
- ^Pethokoukis, James. “Fact-Free ‘Middle-Out Economics'”. National Review.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.