Economics 101

Where I try and explain things as simply as I can (really long post)

We live in very interesting times, say the Chinese, and they’d be correct. For things have come full circle. In 1989, a wall, and an Iron Curtain, came tumbling down. Along with that, the Specter that hung over Europe also disappeared. Communism had failed. Capitalism had won.

And so began the heady decade of the 1990s. A period where America, Europe and Southeast Asia prospered, China gained momentum, and India finally woke up, to a non-‘Hindu growth rate’. Looking at the abject failure that was, and is communism, the world realised that ‘Capitalism’ was the only way forward.

Well most of us thought it was, at any rate. Except for those who insisted on keeping their blinkers on. These blinkered folk continued to plod on, spewing their nonsense, talking about how we needed to think about ‘The Poor’, ‘The Common Man’ , and tried to expose the ‘seedy underbellies’ of many a success story. But they fought a losing battle.

Until now. 2009, and the world finds itself in a crisis. Unemployment rates are high, growth rates are low, and General Motors is owned by the United States Government. Our old blinkered folk have come out of the woodwork saying the time has come at last, and what they had been saying all along has come true and that ‘Capitalism’ has failed, or the ‘Free Markets’ have failed. In saying so, they reveal their ignorance about Capitalism, Free Markets & Economics.

Before delving into any technicalities, let’s begin at the beginning: What the Hell IS Economics.

A ton of people have tried to answer this question, most have done so with the simple sentence I am about to write below:

Economics deals with the ‘allocation of scarce resources’.

Basically, there is a fixed amount of chocolate cake in this world. Say about 10 Kilograms. But there are a 100 people (and growing) who want that cake. Now…

  • what is the ‘best’ way to distribute that cake?
  • Can we bake more cake?
  • Can we bake something else which takes the place of that cake?

Economics tries to answer that question. Now, when you talk about Economics, you are likely to come across many ‘-isms’. Capitalism, Communism, Socialism, otherisms.

In the view of this author, Communism and Socialism aren’t economic theories. They’re religions, kinda like Scientology. You will find people who believe in these last two, in the face of 100 years of solid evidence that they don’t work, and yet, they still feel this is the best way to live. Again, if you try to argue against the fanatics who believe in Marx, Guevara and any other murderer, the feeling one gets is the same as when one tries to tackle religion.

Now I don’t consider Capitalism an ‘-ism’ either. Why? Because many of its tenets are simply human nature. More on this later. if you got this far, it’s time you moved on to my next post: the definition of a Free Market.

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