Inherent instability of the market

Author: Michael Perelman
Publisher:
Publish Date: 2003-01-01
Features: As socialist countries were, the United States underwent comprehensive privatization reforms from its education system to its police agencies. Meanwhile, the crises in Russia and East Asia demonstrated that the market economy is not flawless. In the haste to open their economies to gain the benefits of competition, economists overlooked the unstable factors inherent in competitive markets, tending to emphasize the regularity and stability of the economy—their blind veneration of the market economy could lead to its deification. Michael Perelman argues that the victory of the market economy is only temporary, as it is based on unrealistic assumptions about systemic risks. He analyzes the nature and causes of the inherent crises in market societies and reexamines the fundamental and unquestionable principle of the market economy—the more competition, the better the development of society. He believes that competition essentially only takes effect during recessions and depressions. During periods of intense competition, it indiscriminately destroys both the legitimate and the illegitimate, causing severe harm to society.