On Sat, 13 Jan 2001 13:09:35 -0000 "Mark Jones"
<[EMAIL PROTECTED]> writes:
> [well, some of us said so at the time... Mark]
>
> Editorial comment: New economy myths
> Published: January 12 2001 20:16GMT | Last Updated: January 12 2001
> 20:28GMT
>
>
>
>
> On analysis, four narrower notions emerged: that the business cycle
> was dead; that
> capital markets now worked in unprecedented ways; that we were
> living in an era of
> unique technical progress; and, finally, that information technology
> had
> fundamentally altered the way the economy works.
>
> The business cycle is decidedly alive. That should not surprise
> anybody. Yet the
> view that business cycles were dead rested on several correct
> presumptions about the
> US economy: labour markets had become more competitive; global
> competition had
> reduced the pricing power of both trade unions and big business; the
> need for
> inventories had diminished; and monetary policy was far more
> credibly oriented
> towards price stability than in the inflationary 1960s and 1970s.
>
> What this analysis forgot, however, is that cycles can occur - and
> frequently have
> occurred - in flexible economies with credible monetary anchors. All
> that is needed
> is a big investment expansion fuelled by expanding credit and a
> strong stock market.
> Indeed, the firmer the belief that the business cycle is dead, the
> greater the
> confidence and the likelihood of business cycles.
>
Indeed, that should come as no surprise to anyone who is the
least bit familiar with economic history. After all, Marx lived and
wrote in a time of competitive capitalism, when markets were
by and large quite flexible and in which the gold standard
and the British pound provided global capitalism with a secure
monetary anchor. And yet, as Marx noted, business cycles were
very much a fact of life.
Jim F.
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