dl021
Posts: 10836
Joined: Fri May 21, 2004 12:04 pm

How Does An Economy Work?

Tue Aug 09, 2005 6:55 am

I want to get some different perspectives on how people here think economies work.

Tell us how an economy works, and what makes it better and worse.

Tell us what you think of the world economy and the one from your country.

If you post please include the answers to the questions here, not just some quick comeback designed to avoid having to think, but trying to sound snappy.

Try not to get sidetracked, and please avoid flaming or instigating.
Is my Pan Am ticket to the moon still good?
 
mrniji
Posts: 5382
Joined: Sun Feb 29, 2004 11:51 am

RE: How Does An Economy Work?

Tue Aug 09, 2005 3:19 pm

An economy definitely does not work as economists say, with A+B=C C+D=E etc..

And economy is a complicated system, having millions of factors, that distort any attempt to make simple equations, as neo-liberls tend to do. And if their theory does not work, they call it "Market Failure", which is an integral part of their theory 

Doing some abstract calculations and using stats is fine though, if the person who does it and if the readers are aware of the "danger".

Free market forces are strong and good! But they need to be regulated accordingly in order to redistribute welfare. Otherwise the stronger one will win. See the infant industry argument (Kaldor and many others).

Ricardo's theory of comparative advantage (building on A Smith's absolute advantage) is accepted amongst all generations of economists - a brilliant story of thought.

But one thing I like is Kaldor's argument that a healthy agriculture is a basis of every healthy economy. Loss in agriculture otherwise has to be compensated by the industry. One reason why India never had a drought after independence - in that sense. the Greem revolution was successful..

The neo-liberal approach under the banner of the World Bank is dangerous! We Americans try to force other nations to take our system. Every country needs her own system - world trade is wonderful but should not result in the demise of domestic industries and the local economy.

There is nothing more impornant than local markets and economy: "Glocalization", as some call it. It as a lot of power. We need to be careful that these eonomomies, from which many peole live, don't die. We should tell our MNCs to refrain from contributing to this demise and to refrain from making people "victims" of their brutal approach. Hence, liberalism needs its borders.

Local and regional markets are the future. This does not stand in contradiction to a global economy. The Western-led bretton Woods trade system has done a lot of harm to developing countries (keyword: textile agreement). Now, services are slowly-led ecomomies replacing the industry.


I better stop now before writing for another ten hours. I just wanted to bump our friend Ian's interesting thread up again. I hope I did not go too much off-topic    - give some polite feedback to what I have written, I am more than happy to emphasize this brainstorming. And tell uns your opinion


Edit: Small example India: India lives from the informal sector, the unorganized sector. more then 90 % of people are employed here. This sector is hardly covered by statistics (it is impossible to do so)! Btw, the informal sector has some neo-liberal elements, as it is unorganized. A very interesting case study to show how shitty neo-liberalism can be (labor rights, redistribution of income etc)...

[Edited 2005-08-09 08:26:33]
"The earth provides enough resources for everyone's need, but not for some people's greed." (Gandhi)
 
komododx
Posts: 1734
Joined: Tue Jan 27, 2004 4:40 am

RE: How Does An Economy Work?

Tue Aug 09, 2005 6:45 pm

Read "The Wealth of Nations" by Adam Smith. Great read!

Stefano  wave 
I'm homeless and unemployed
 
B744F
Posts: 2927
Joined: Sat Jan 21, 2006 4:52 pm

RE: How Does An Economy Work?

Wed Aug 10, 2005 4:52 am

And it works like this.

There are a small group of people who have money. They use the rest of the people to keep their money multiplying, and the Federal Reserve, World Bank, IMF, etc. make sure this money always grows and inflation squashed because in the future with inflation their money will be worth less.

What money falls through their hands goes to the rest of the population, who are blinded by the dream of themselves "making it" in the future. Now this money supply has to be heavily regulated, because the more people you have making good salaries, the more inflation you have. These smaller people do not notice inflation very much because they don't own many investments. They do notice rising prices, but these 2 do not go hand in hand, contrary to the myth of the Adam Smith clones.

The government is heavily involved in regulating the money even though people want to pretend the market is a truely free market. The Fed buys and sells securities to indirectly raise and lower interest rates, they set short term rates and overnight rates, they allow banks to borrow liquidity in times of crisis if they feel the system itself would be threatened, the Fed also decides how much money to print. The money supply has become untrackable since the runaway inflation of the 70s and early 80s, also the outrageous deficit spending has turned most theories on their heads because our economy is now run with bad credit, it can collapse at any time.

Aggregating this collapse is the fact that industry in general has moved away from the big countries to take advantage of the simple life 3rd world countries have, and the cheaper pay they can get away with. This, in the long run, leads to no actualy assets owned by said big country, thus they are at the mercey of the world market, and when one country goes through unstable periods (as Japan did, and the US does every decade or so), they all go through unstable periods.

Speculation is the leading "industry" currently, with companies who have never made a profit seem to keep getting more investors giving them their capital. This reliance on speculation has driven companies to compact into bigger corporations to control the biggest market share because there aren't many people who can afford to be consumers any longer.

In the long run, people will find that globalization and other forms of winner take all competition, cannot work for the world, only for the select few. And once the invisible money cannot stand on its own(fiat money, because it has no backing with actual valuables such as Gold) because of either a long term oil crisis or something else, the whole system will need to be re-examined to find a way to benefit everyone, not just the lucky few
 
erikwilliam
Posts: 2122
Joined: Fri Mar 12, 2004 12:30 am

RE: How Does An Economy Work?

Wed Aug 10, 2005 5:03 am

Quoting Mrniji (Reply 1):
with A+B=C C+D=E etc..

but it should be, if governments didn´t put their hand onto everything.

Quoting DL021 (Thread starter):
Tell us what you think of the world economy and the one from your country.

In Brasilian case:
Bad and weak, no consumption, too few people with too much money.
Government can´t handle the money so they have to make debts to pay older debts, and to prove that they can pay for the new loan, they have to rise taxes and cut pays, wich it´s not completely done, making a new debt to pay an older debt. It´s vicious cycle, with an unpayable debt.
That beeing done, the procutive sector, does not have acess to cheap money, banks rather loan to the government that pays more, making expensive to get money, making production expensive making the final product expensive, and with an expensive production, hiring isn´t the best thing, making not many people with jobs to buy the final products.
EX: Brasil sells 2milion new cars/year with a population of 200mil.
USA sells 15mil cars/year with population of 300mil
Dida, Cafu, Lucio, Roque Junior, Roberto Carlo, Emerson, Ze Roberto, Ronaldinho, Kaka, Adriano, Robinho, Ronaldo
 
mrniji
Posts: 5382
Joined: Sun Feb 29, 2004 11:51 am

RE: How Does An Economy Work?

Wed Aug 10, 2005 4:17 pm

Quoting Erikwilliam (Reply 5):
but it should be, if governments didn´t put their hand onto everything.

Even if governments don't have their hand in, it does not work.. an economy has more than A,B and C.. they forget D-Z - and they forget that A has A1, A2, A3, while A --> eternal.. same with B - Z

What I want toi say: Society is too complex to put it in equations solely. There aree so many distorting factors. F.i. to talk about THE consumer is wrong.. consumers behave differently (psychology, sociology, ....), so 2 consumers does not mean double revenue etc...
"The earth provides enough resources for everyone's need, but not for some people's greed." (Gandhi)
 
dl021
Posts: 10836
Joined: Fri May 21, 2004 12:04 pm

RE: How Does An Economy Work?

Wed Aug 10, 2005 9:15 pm

OK......so here it is.

We have dozens of people who post regularly here, and only a couple are willing to post their opinions or conclusions?


C'mon guys......you're always posting your opinions about the economy. Explain it in your own terms.

Only now tell us why you think yours is good or bad.
Is my Pan Am ticket to the moon still good?
 
mrniji
Posts: 5382
Joined: Sun Feb 29, 2004 11:51 am

RE: How Does An Economy Work?

Wed Aug 10, 2005 9:34 pm

Quoting DL021 (Reply 6):
We have dozens of people who post regularly here, and only a couple are willing to post their opinions or conclusions?


C'mon guys......you're always posting your opinions about the economy. Explain it in your own terms.

The point is, Ian, that you have put a question where it requires to think, write, explain, give reasons (theory, empirical data etc) and post an opinion out of that rather than criticizing (=easier than being constructive) and making 2-sentence statements when it comes to a controversial question.. so no surprise people stay away  Wink
"The earth provides enough resources for everyone's need, but not for some people's greed." (Gandhi)
 
dl021
Posts: 10836
Joined: Fri May 21, 2004 12:04 pm

RE: How Does An Economy Work?

Wed Aug 10, 2005 9:42 pm

Niji.....I believe you have stumbled upon the point of the thread.

I hope to be disproven, but it doesn't look like it's gonna happen.
Is my Pan Am ticket to the moon still good?

Who is online

Users browsing this forum: wagz and 26 guests