[JumpCrisscross]

The logical flaw is equating consumer demand with aggregate demand. There are other economies, e.g. Germany (industrial economy) and China (state economy, albeit transitioning), that aren't as reliant on consumer demand as America (consumer economy).

His entire argument flows from this assumption.

[gchpaco]

Funny you cite Germany as not as reliant on consumer demand; one of the things that keeps being cited as hurting Germany right now is that the rest of the Eurozone is its major customers, and they can't afford German goods on account of depression.

[JumpCrisscross]

I didn't say not reliant - I said not as reliant. At 57% of GDP, Germany's economy is still very reliant on consumption compared to, say, China at 35% [1]. Note that many government expenditures, e.g. Medicare, are counted as consumer spending.

The speaker's argument revolves around inequality, by leading to lower consumption by the lower classes, making an economy unsustainable. This assumes domestic lower class consumption is the driving force behind GDP, which further assumes a diminishing consumption function (consumption as a function of household income). The consumption function is, in fact, quite linear [2]. The speaker also ignores investment, public sector spending, industrial investment (firms buying from other firms), and export industries.

Thus, the notion of consumers being the only pillar of economic activity and by proxy job creation is faulty.

A better argument would be wealth concentration compromises meritocracy and the social trust that binds society together. This isn't a new argument. So the speaker elevates novelty over accuracy in pursuit of a perception of profundity, fallacy be damned.

[1] http://data.worldbank.org/indicator/NE.CON.PETC.ZS?order=wba... (2010 countries ranked by consumption/GDP)

[2] http://wps.aw.com/aw_miller_econtoday_12/0,7965,904285-,00.h...