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  1. #1
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    Question Would the economy collapse if...

    Not sure where to put this, so I'm putting it here.

    I don't 'get' economics. So I'm hoping there might be some more knowledgeable people out there who can answer me these questions!

    Firstly: is continued positive growth realistic? Doesn't positive growth rely on primary production, so theoretically if we used up all the natural resources then how could the economy continue to grow? If it continues to grow and we use up all the resources faster than necessary, isn't that a bad thing?

    Secondly: I think many of us - probably most of us - use far more than we need to. What if everyone started buying less consumer goods and groceries? Would this be incredibly bad for our economy, or would the social and environmental benefits outweigh the economical negatives?

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    The capitalist system is based on production when it boils down to it. Not old school supply and demand but more like risking supply and creating demand. Of course, it becomes a hell of a lot more complicated with the inclusion of capital etc.

    Personally, I think you are right on both points. Point one, production needs resources, resources are finite, when resources run out, production stops, economy can collapse.

    Point two, the global economy seems to be a mix between two theories; laissez-faire and Keynesian. Laissez-fair is anything goes, Keynesian is a circular flow of money ie you spending means someone else is earning. However, point two tends to take us back to point one.

    But of course, since resources are not going to run out tomorrow, governments, MNCs and the general population are generally not concerned about what might happen a few years down the track.

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    The govt doesn't want us spending heaps less bc then business goes down and unemployment goes up. But then if spending is too high, inflation goes up so they need to increase interest rates so people have less disposable income to spend. I think people in the western world consume far more than they need, but like I say within reason the govt wants that unless inflation is too high. Sadly the environment suffers.

    Growth is usually based on a few factors. GDP, low unemployment and good exports. Decent spending and good profits for business.
    Last edited by delirium; 10-05-2012 at 21:57.

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    I know unemployment would go up, but if people needed less money (because they were spending less on stuff they didn't need) then there would be less jobs. I guess the problem would be that the wrong people would lose their jobs? Would that be a short term problem that would fix itself after a while, or would that end up a long term problem that we want to avoid?

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    I think human greed plays a massive role in the structure of economies unfortunately. Having high unemployment and wealth controlled by a small number of people would be a very volatile situation.

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    Capitlism relies on the growth of new markets. This isn't dependent on primary production. Entertainment, media consumption, development of new technologies, of social media, etc etc.... all these things still have a tiny root in raw resources but on the road to market have evolved and taken a very convulted path.

    Take this forum. This forum is a commercial enterprise. Thousands and thousands of Mums provide an audience for advertising. This is a new form of product, of capitalist endeavour, but it's dependence on primary production is pretty minimal.

    You need to understand that capitalism is so successful because it is premised upon evolutionary principles. It will *always* adapt to its environment.

    If we run out of one resource, then commercial enterprises that exploit another resource - or provide a solution to the depletion of that resource - will boom.


 

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