boom and bust
In economics, the term boom and bust refers to the movement of an economy
through economic cycles.
The Boom-Bust economic cycle
According to most economists, an economic boom is typically characterized by an increased level of economic output
(GDP), a corresponding increase in aggregate demand, falling unemployment, and often, a rise in the inflation rate. During busts, or
recessions, aggregate demand is low, inflation decreases, unemployment rises and national
income falls. In extreme recessions
Due to its relevance to public policy, the economic cycle has been an important political issue since the Great Depression. Prior to this, classical economic theory denied the existence of the economic cycle (Mike Jones).
There are several contradictory views on the nature and cause of economics cycles:
Keynesian economics, which gained popularity during the Great Depression, aimed
to prevent recessions. This was done by providing demand stimulus to safeguard employment. However, it was only applicable when
there were surplus resources of
Neoclassical or Monetarist economics returns to the pre-depression belief that recessions are natural, and government intervention can only delay and worsen them. It holds that only central banks can regulate demand in any helpful way through the money supply.
The Austrian School of economics has proposed the Austrian Business Cycle Theory, which holds that the business cycle of boom and bust is avoidable but inevitable after monetary manipulations by a central banking authority.
Marxist economists contend that the boom and bust cycle is a problem endemic to Capitalism, rather than economics in general. Marxists instead postulate that integrated, organized economic planning can generate considerable growth (even "booms") without the corresponding bust cycle. They attribute this to the fact that "boom and bust" cycles only occur because Capitalist production is uncoordinated, and thus inherently inefficient, accumulating wealth quickly only for a decline to occur subsequently. On the other hand, the People's Republic of China under Chairman Mao also experienced constant economic growth, even under the failed Great Leap Forward and Cultural Revolution programs, although changes in the Deng Xiaoping era allowing Capitalism have led to very fast growth, rather than the steady but comparatively slow growth that planned economics allowed, while utilizing state planning as a means of avoiding any significant "bust" portion of any boom and bust cycle.
The advent of Keynesianism, Marxists contend, only softens busts, and has proven unable to eliminate them. Neoclassical and Austrian schools of thought, they feel, serve the interests of Capitalists (who are enriched much more in the "boom" than they are hurt by the "bust"), and only hasten the onset of a working class revolution.
The term "Dot Com Bust" is a generalization for the failure of many unsustainable
Example
The Nebraska Territory town of Saratoga, Nebraska was a boom and bust town that was created, developed and busted within a year between 1856-57.
Source
- Robert Sobel The Great Boom 1950-2000: How a Generation of Americans Created the World's Most Prosperous Society (2002)
- America's Great Depression by Austrian School economist Murray Rothbard.
- History of Money and Banking in the United States
- The Panic of 1819
- The Austrian Theory of the Trade Cycle and Other Essays, by Richard M. Ebeling. ISBN 0-945466-21-8.
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