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The invisible hand of monopolies

Sunday, March 11, 2012

The invisible hand of monopolies


By BENJIE OLIVEROS
Bulatlat.com
The law of classical economics dictates that when demand exceeds supply, prices go up and dampens demand until it reaches equilibrium with the supply. On the other hand, when demand is low and supply exceeds it, prices would go down until demand increases and achieves equilibrium with supply. This is called the invisible hand of the market. This is the logic of neoclassical or neoliberal economics, thus, the push for limiting government intervention in the economy through deregulation, liberalization and privatization.

However, stagflation hit the world economy in the 1970s and this baffled economists. Stagflation, or stagnation coupled with inflation, should not have occurred because in a stagnant economy, unemployment is high and demand is low so why do prices increase? The response of economists and governments of advanced capitalist countries is to push for more deregulation, liberalization and privatization plus controlling inflation through raising or lowering interest rates. But still, this did not solve the problem of rising prices even during these times when the world is suffering from a Great Recession, which progressives say is more aptly described as a Great Depression comparable to what the world experienced in 1929.

So what is wrong with the world economy?.... MORE

SourceBulatlat.com

URL: http://bulatlat.com/main/2012/02/27/the-invisible-hand-of-monopolies/

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