Economic Instability
The economy is subject to business cycles: although the average annual growth in gross domestic product (the most accurate measure of the total value of everything produced in a country) over the past 30 years is approximately 3.5%, economic activity (measured by investment, corporate profits, and – most importantly – employment) is subject to short-run fluctuations. Business cycles are a normal part of capitalism but they are unpredictable and, as John Maynard Keynes, articulated, there is no guarantee that the economy will correct itself in the midst of massive unemployment. So, a capitalist economy is subject to periods of “booms” (low unemployment, economic prosperity, wealth) and “busts” (high unemployment, insecurity, falling stock values). To what extent should the government “allow” unemployment? Some economists, in particular those who follow the theories and policy recommendations of John Maynard Keynes, advocate active government policies to fight recession and unemployment. Long periods of high unemployment are unacceptable to these policy-makers especially because
