Essay: Stagnant Theory of Economics

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Essay: Stagnant Theory of Economics

Sample Essay

The limited profits arising from the productive economy makes the economy to become dependent on debts and speculative finances. The stagnant tendencies that characterize the mature economy are a major catalyst to the great financial crisis. The mature capitalistic economies refer themselves as Marxists. Foster and Magdoff argue that Marx did not make sufficient contribution on finance and money but they accredit themselves for having made a great contribution about stagnant theory along with other economists who include Keynes, Minsky and Kalecki among others.

Stagnation does not mean that there is no economic growth, however, it measures the differences between the potential and actual output. The limited profitable investment alternatives result to excessive accumulation of capital. The over-capacity of the economy make the available profitable investment decreases the achievable profits. The fiscal and monetary policies do not take note of the low interest rates and do not stimulate fixed capital investments in the economy where the available capital is being underutilized, thereby resulting to an economic stagnation. The over accumulation of capital results to economic surplus that tends to rise and lack of counteracting tendencies makes it hard for the capitalistic economy to absorb.

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