What's Left Of The Market?

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What's Left Of The Market?

Since inflation and unemployment are so important, maybe we should stop occasionally to see if we are making progress in understanding them. Obviously, if trade unions win power over the incomes of their members and corporations have power to set their prices, an increase in union wage scales can be passed on to the consumer in the form of higher prices. And you can be pleasant and generous with the boys on the shop floor if you don't have to pay them yourself and especially if you know that the increases will affect the other firms in the industry and that they, too, will respond, as the common interest requires, with higher prices.

So you see at least the possibility of a wage/price spiral - wages bringing higher prices and higher prices bringing higher wages.

If the market were still functional, unions couldn't raise wages; there wouldn't even be unions in the pure market condition.

And if there were unions, employers would have to resist them.

For prices being determined impersonally in the market and being beyond control, they couldn't be raised.

So inflation is a plausible result of people escaping the market and getting control of their own prices and incomes.

When industrial wages, accountants indemnity  and prices rise, the government will also be under pressure to raise wages and the prices of the things that it sells or controls - postal services, railway services and air fares.

Here too the market has gone.

And farmers, you can bet, will be pressing for higher prices.

If all of these prices go up, then we're going to have something that will look very much like inflation.

So you see that the decline of the market bears rather directly on the prospect for inflation.

Interested in Money And Monetary Policy?

Can Small Firms Succeed?

Yes. Polaroid did; it became very large and remained independent. More often, though, the successful small firm, especially if it has some new product, gets taken over by a big one in the same business. The large firm can afford to pay handsomely to get control and be free of the worry and annoyance presented by its smaller competitor.

What about the socialist countries - Poland, Yugoslavia, even the USSR and China? Don't they also make a certain use of the market? To some extent. There's a fascinating parallel here. In the western economies the orthodox don't want to admit that the market has... see: Can Small Firms Succeed?

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