1 July 2019     home

Economic Systems

The state or private individuals of wealth buy the equipment, the supplies, and the labor that makes possible the industrial and agricultural products sold to members of society and abroad. It goes around — circulation — but imbalances can develop. Regarding a society as a whole, better circulation can make a better economy.

In the US, what became known as the Great Depression appeared as the ability to produce was out of balance with the ability to consume. What can be described as a nervous breakdown occurred. There were financial crises, people not willing to invest in anything that didn't promise a good return. Businesses were laying people off, and people were forced to buy less. There had been expectations of great economic growth, with many people buying shares in enterprises and a lot of borrowing to do so, but the expectations bubble burst. Optimism was an important part of the economic system, but the optimism hadn't been tempered by an understanding of what was happening and existing limitations. Speculators rich and not-so-rich lost a lot of money. Among common people, destitution expanded.

Capitalism as a system was blamed — while the economy of the state called the Union of Soviet Socialist Republics (USSR) had different problems. There, all that was produces as consumed. Its economy was planned — administered by a state bureaucracy. The state invested in economic development as best it could. Despite some inefficiencies. For awhile the USSR experienced economic growth and industrial transformation while economies elsewhere in the world were stagnating.

The Great Depression (1929-39) ended with capitalist states moving more in the direction of mixed economies (capitalist and state enterprise). The USSR's command economy had become slow at innovation. To the mid-1970s the USSR kept up with the United States in the production of steel, pig iron, cement, and oil, but the economy did poorly in satisfying common consumers. The USSR's command economy didn't keep up with innovations in a new era of technological development.


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Copyright © 2019 by Frank E. Smitha. All rights reserved.