18 April 2009

Jefferson vs Hamilton

Market economies honor balance and equilibrium as embodied in market-clearing prices. That the market-clearing price is the result of a highly unstable process of adversarial competition is not something the neo-classical economists are ready to address or admit. The instability of the market-clearing price mechanism comes from the fact that the losing adversary in the competitive process is typically eliminated. Once the losing adversary is eliminated, the logic of the competitive marketplace -- that there will be many players competing myopically against each other over price -- breaks down and the price mechanism begins to fail.

The deeper flaw in the system is the problem that triumph in the marketplace and the elimination of one's competition is seen by the world as a good thing when, in fact, it likely injures the victor more than the vanquished. The arena where a marketplace has wiped out the adversarial life-forms is what we call big business. China is a political/economic order that is more congenial to the interests of big business than America. There's a new struggle coming. It's not between capitalism and communism but between big business and small business. The battle between Jefferson and Hamilton has gone global, and it has just begun.

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