Each year, a business needs to grow faster than it did the previous year.

If business owners get wealthy more rapidly than workers, then eventually the business will not be able to maintain increasing rates of growth, as its profit velocity exceeds the wage velocity of households. Think of a car fuel pump: you can accelerate all you want, at least your until the engine explodes, but if your fuel pump can’t pump more than 50mph of fuel, uour acceleration will crater into the negative and then flatline at 50mph when you hit that threshold — unless your efficiency gearbox has another upshift in it.

The only solutions that maintains profit growth velocity in that scenario is for the business to decrease wage velocity relative to profits velocity, and to decrease labor dollars per product. Namely, wage stagnation (which leads to wealth inequity), enshittification (which reduces customer brand investment), and layoffs (which decreases customer spending).

If, instead, businesses ensured that wage velocity matched profit velocity, then households wouldn’t have increasing wealth inequity and would be able to continue funding the growth velocity through spending. Businesses are prohibited from this by their fiduciary duty to shareholders.

AI is a last ditch attempt to discard 95% of the human creative labor force in all industries rather than face the rapid deceleration of profit growth going negative market-wide as household spending power (after inflation) continues to decrease. If AI succeeds, the eventual crash of growth velocity is delayed a few years until AI saturates the market. If AI fails, the market crashes, as investors can no longer expect positive growth acceleration from the market as a whole.

For any economic system where business profit growth acceleration exceeds wage growth acceleration, the eventual collapse of business is assured unless a miracle of productivity delays it. That’s why AI workers can get paid a quarter billion dollars: pocket change, compared to the wage inequality reckoning. That’s also why economists can’t explain inflation: they’re not yet willing to confront profit growth vs wage growth acceleration inequity as a primary cause of inflation.

Job growth has decelerated rapidly because otherwise profit growth decelerates rapidly. If this seems like killing the golden goose, that feeling typically correlates with a lack of faith in AI providing the necessary efficiency factor to permit sustaining profit growth after the one-time, profit-accelerating, inflation-spiking layoffs.

This begs the question of how many rich people there actually are, though.

When poor people receive money, they tend to put it to circulate in the economy, by spending it. When super-rich people receive money, it goes mostly to tax havens, removing it from circulation. Business lose scale, as there is less consumers, raising unitary prices.

i'm not the person you asked, and i'm just spit-balling, but here's a way: wealth inequality means there's a group that has substantially more wealth than normal, let's call that group A, and the complimentary group of people who don't have substantially more wealth than normal, let's call them B. A's wealth ultimately comes from B-- you know, you got workers who make you more money than you pay them, you extract rent from them, they buy your stuff.

past a certain point of inequality, A controls so much wealth that they could exert power over the market to squeeze B even more-- wages lag further behind productivity, rents go up, goods cost more. this is inflation, yeah?

A restaurant is limited by the amount of food a person can eat in a meal. So this hypothetical restaurant can sell a $20 meal to 100 people (with $20 expendable income to spend,) and thus will generate $2,000 revenue for that meal service.

However, if fewer and fewer people have $20 expendable income, then obviously it becomes harder and harder for that restaurant to generate that same $2,000. Especially as the cost of bills, ingredients, and employee wages increase, for example.

So they are left with a dilemma of: 1) Raise prices knowing that there will be fewer customers with enough expendable income to buy the expensive food, or 2) Lower prices and hope that more customers will offset the lower prices (this usually does not happen.)

Also it's important to point out that 1 person with a lot of money won't come in and order 100 people's worth of meals. The human stomach doesn't scale in that way.

This example is obviously oversimplified for the sake of showing the point

Increasing wealth inequality means fewer owners of more assets and market share, which means there's less competition and more monopoly pricing that cause higher inflation.

It's hard to square that with "less consumption", though...

Plus the fact that in last 5 years assets have gone up so much means there's just a lot of wealth being invested.

How much does a bottle of water cost?

- Supermarket? - Festival? - In a drought, when you're standing in line behind a thirsty billionaire?

People with a large relative net worths, drive asset prices up, like bids in an auction - even if they aren't the final bidder.

But you could pitch a startup idea to replace those workers with agricultural robotics and collect some of that sweet AI venture capital!

That's it, really. All the "hiring" money is being spent on building data centers, at least in the US tech field. Better hope AGI is really around the corner, or that's a lot of money chasing nothing that could have been put to productive use.

If for some reason someone smart (with an education and who did something other than default to praise Trump's ego in press conferences) were to decide we should go to the mattresses wildly with tariffs to fight globalization:

I would hope they would care to actually evaluate if it is working / the impact, and not fire government workers when they report one thing that didn't sound good.

If you're not bound by any results you don't like then you can't know if you're even winning.

Granted ... that might not matter as I suspect market manipulation and bribes is the only real measurement with this administration.

I don't think it's true that there's no other goal than to cause harm, at least with the tariffs.

By the same token, though, while I think deglobalization is something that people around Trump would say they're shooting for, it's not really something Trump cares about in that sense.

No; I think Trump's primary goal with the tariffs is to flex his power and enjoy the feeling; he doesn't really care what the effect is on everyone else. With the ICE crackdowns, he definitely wants to hurt everyone nonwhite in America.

Doesn't this apply to globalization as well? Saying "learn to code" to people who lose their jobs due to globalization is not great execution either and sets the stage for backlash.

I realize that not all countries are big or diverse enough to accomplish this, and that's a reason why loose confederations like the EU exist. The US started much closer to that itself.

The politics angle is unavoidable because Krugman is commenting on the impact that the economic policies of the current US administration is having on the US economy.

This is the same US administration that fires staticians for reporting numbers that render bare the impact of their own economic policies, which they are actively trying to censor.

We live in a day and age where in the US reporting facts leads to political persecution. Of course mentioning stagflation, as Krugman does, is deemed political.

Personally, I would feel like a discussion about economics that completely avoids politics would be missing something, and I would enjoy it a lot less.

This is also why capitalism and democracy become progressively more clearly opposed the farther the status quo environment you are working in gets from feudalism or absolute monarchy, under which both seem to be changes in the same direction.

Krugman does a decent job of not letting his opinions about the political aspects color his analysis too much.

Things like

"Contrary to what many people believe, tariffs don’t necessarily lead to high unemployment. America had a high average tariff even before Smoot-Hawley — 15.8 percent in 1929 — but the unemployment rate in 1929 was under 3 percent."

He doesn't like the tariffs, he (and pretty much any serious economists) think they're bad, but he tries to be clear about why they're bad rather than just waving his hands at everything.

I think this needs some context. Remember that in 2016 we didn't know how Trumps rhetoric works and how seriously he will push his agendas. Now we know about TACO and how he was held back by the adults in the room. How would you feel about the future if you thought the POTUS will annex Greenland and Canada, and impose tariffs of 100-200% globally?

Judging policy solely by the their promoter would normally be wrong (book by its cover, eh?), but these days there's been some consistency in the quality (and lack of same) by various groups so challenging them out of the gate isn't unreasonable.

MMT is left-side, and he's highly critical of it. Not a fan of rent control, a favourite of many left-leaning folks.

What right-side policies—especially perhaps ones that are being pursed by Trump / Project 2025—are working well?