This essay Why the Wall Street Bubble Must Burst has a total of 3037 words and 11 pages.
Why the Wall Street Bubble Must Burst
Why the Wall Street Bubble Must Burst?
In 1938, and in the teeth of the longest and fiercest depression that the United States had ever known, capital spending hit an all time high. That’s right! In 1938 the men who owned America began to pour millions of Dollars into new plant and equipment as if there was no tomorrow. We don’t think much about it today, because it has been a long time since the United States has experienced a real bone jolting economic slowdown. The fact is, however, that the very best time for the industrialist to invest in new technologies is in the middle of a depression. This is because it is at such times that labor, raw materials, and new equipment can be purchased at rock bottom prices. Henry Ford may have jumped the gun a bit. He shut down his River Rouge plant for two years starting in 1932 so that it could be completely rebuilt. Being a bit of a genius, Ford used his time and money to redesign the plant to create one of the most powerful little engines ever built: the Ford V8. This engine was so good that it was modified only slightly to equip certain aircraft for use in World War II. It also powered a series of red hot Ford cars all the way through the 1950s. At the same time that Ford was rebuilding his River Rouge plant, Joseph Alois Schumpeter, an Austrian economist who had migrated to Harvard University, was hard at work on a book that would explain the paradox suggested above, namely the timing of business cycles and technological change. In this all but forgotten work one of our most famous economists spelled out the secrets of the business cycle, that is the same old pattern of boom and bust that may be coming back to haunt us now.
Many, if not most, American college students know Schumpeter\'s name because of his work in defense of free enterprise called Capitalism, Socialism, and Democracy. This was not, however, the book that Schumpeter was working on as America slogged through the mean and hungry 1930s. The book published by Schumpeter in 1939 is called " Business Cycles: A Theoretical, Historical, and Statistical Analysis of the Capitalist Process. " Not only is Schumpeter\'s definitive two volume study of the business cycle not on college reading lists today, but, indeed, it continues to languish in its first edition. The embarrassing truth is that Schumpeter\'s real masterpiece remains almost unread. The present writer checked out this forgotten work from one of our leading university research libraries to discover that Schumpeter\'s book had been borrowed only a total of fourteen times in the nearly four decades from June 1961 to the present!
There are probably two reasons for this. In the first place, Schumpeter\'s magnum opus on the business cycle came out on the eve of the Second World War. As the dark clouds of war began to cast their shadow over Europe, Asia, and eventually the United States, economists (and everyone else) clearly had more pressing concerns. Not only that, but it was also clear to Americans that the US Army would soon take care of the problems of excess supply being experienced in the labor market. It was also quite obvious to everyone that the factories were about to start humming again, this time to produce for war.
After the conflict, of course, and all the way through the 1970s, it was widely believed that the business cycle had been "repealed" by means of the clever economic manipulations suggested by the British Lord John Maynard Keynes. College kids in the halcyon 1960s were taught by their professors that the economy was not one of scarcity, but, rather, of endless abundance. The Great Society had arrived. Keynesian economics was in its glory days. This new body of thought and practice was one of the British Empire\'s last and most influential exports. If Keneysianism had, indeed, hung the business cycle by the neck until dead, then the only decent thing to do was to bury the corpse. Schumpeter\'s text, unfortunately, was placed alongside the remains of business cycle it its tomb. Some things, however, will not simply and decently
Topics Related to Why the Wall Street Bubble Must Burst
Fellows of the Econometric Society, Joseph Schumpeter, Kondratiev wave, Creative destruction, Business cycle, John Maynard Keynes, Edward R. Dewey, Nikolai Kondratiev