[nl]

'Increasing demand' is itself a supplier-directed activity; it's one of the primary functions of marketing. It seems baffling to consider this from a political/macroeconomic perspective; how would you increase demand but through marketing activity, without your methods becoming coercive or oppressive?

Wow, seriously?

As an extreme example, and something no one is proposing: give all unemployed people a $1 million cash payment. They'll spend at least some of that money, which will create demand.

More seriously as an actual example that happened, in December 2008 (during the worst of the GFC) the Australian government made cash stimulus payments to most Australian families. This is credited with stimulating spending (ie, demand) during the Christmas period[1], which of course keeps retail employment high, which in turn puts money in employed peoples pockets etc etc. A second cash payment was made in April 2009.

The Australian government also spent large amounts of money on infrastructure projects. Being government, this took longer to spend, so most of that spending occurred right as the effects of the cash stimulus was wearing off. Construction is a big employer, so that helped support employment too.

Finally, the (huge) Chinese stimulus[2] kept the Chinese economy growing, which in turn increased demand for Australian exports.

The outcome was mostly positive: Australia was one of the few developed nations to avoid recession in 2008-2010. Unemployment is at historically low levels and inflation is also low.

Note that NONE of this was supplier initiated. Businesses were worried and were laying people off, and it was increases in demand via economic stimulus that reversed that trend.

[1] http://www.canstar.com.au/global-financial-crisis/

[2] http://en.wikipedia.org/wiki/Chinese_economic_stimulus_progr...

[bhb916]

I believe you're misrepresenting the Australian situation. While it is true they experienced less of a slowdown that other nations, it's not entirely clear that the stimulus had anything to do with it. A few points:

(1) The data (when compared to the recession forecast) doesn't support the idea that household spending is what boosted the economy. Instead, business investment and exports appeared to prop up the Australian economy.

(2) The Rudd government didn't try anything (broad stimulus, cash payments, home rebates, auto stimulus) that wasn't tried in the United States. If you believe these things succeeded in AUS, you'd have to have a convincing argument as to why they didn't in the US.

Obviously this is a tough nut to crack and there are really too many sourced to cite. Here is an article that talks a little bit about the data:

http://www.theaustralian.com.au/business/opinion/how-mining-...

[nl]

The article you linked to started:

NO doubt the Rudd government's big budget stimulus helped keep Australia out of recession last year. But mining was at least as important in producing the unexpectedly good performance.

I agree 100% with that conclusion.

Also, at odds to your point (1) above the same article says:

So the stimulus cash handouts and capital works look to have done most of the work by pumping up consumer and government spending. Treasury suggests budget stimulus added 2 percentage points to GDP growth last year.

It goes on to point out that this was insufficient in itself to explain the growth in the economy.

Clearly, demand stimulus by government hand-outs isn't a sustainable, long term model to grow an economy. BUT contra-cycle government spending can be an important tool to stimulate growth, especially through periods of uncertainty. (To make it clear this isn't a political point: Australia was able to do this because of large surplus budgets run in the period up to 2008/09 by the previous government. That was good policy during that period, and the stimulus was good policy during the crisis).

Note that in the US the stimulus package was radically smaller (compared to the size of the US economy) vs the Australian package. Additionally, it actually did reduce unemployment[1]. It is unfortunate that the US didn't follow that up, and instead made things worse via austerity measures.

[1] http://www.cbo.gov/publication/42715

[snowwrestler]

In 2001, the U.S. passed a tax cut bill that immediately sent rebate checks out to most households. It produced a modest, short-lived bump in the economy but did not increase sustainable demand or create long-term growth. It certainly didn't prevent the recession after 9/11 or the financial meltdown.

Government-funded spending does spur economic activity--true. However it is merely temporary and is essentially borrowing money from the future to buy fake economic growth today--which is why governments reserve it for truly crisis situations like the ones you list above.

[nl]

Exactly.

My point is that money-in-pockets stimulated demand, not marketing...