Friday, 5 October 2012

An example

I've been looking this week at the Vickers's Report by the banking commission, which has looked at banking today and what should be done to mitigate future crisis.

It has been said by many commentators recently that capitalism is failing. If that is true what should it be replaced with? No one seems to know, which is a worry. I would like to simply one aspect of capitalism to see if it needs to be replaced.

An employer has a work force at a time when workers are scarce, he has to pay them more than he wants to, to be able to compete with other employers which in turn hurts his profits. If this happens across the entire economy then consequently employers are squeezed and eventually collapse, thereby putting workers out of work. Now we have a situation where there are more workers than jobs and employers start paying less and therefore make more profits.

If this circle was true, then why isn't it happening today?

One of the reasons is change. We need change, we cannot stop change, it is inevitable. So, what's next?

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