10/26/2011 12:36 pm ET Updated Dec 26, 2011

Consumer Spending, Not Private Investment, Is What Drives Growth

AS an economic historian who has been studying American capitalism for 35 years, I’m going to let you in on the best-kept secret of the last century: private investment — that is, using business profits to increase productivity and output — doesn’t actually drive economic growth. Consumer debt and government spending do. Private investment isn’t even necessary to promote growth.

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