The Clock Slows Down


  • Harry Magdoff



Political Economy


Economists are faced with a simple question: how the hell does this economy work? Millions and billions of diverse transactions are made every day, and yet the system holds together. How does the circular process of production, distribution, and consumption coordinate? Despite differences of interpretation by various schools of economics, there is common understanding about the way the system reproduces itself and grows. Here is a simplified consensus of how it is supposed to hang together. (1) Goods (whether primary materials, intermediate, or finished products) are sold for money. (2) The money payments eventually end up in two main streams: wages to workers, depreciation reserves and profits to the bosses. (3) The workers use their wages to buy consumer goods. (4) The bosses use part of their income to replace worn-out machinery, and most of the rest to expand profits (everything but a small percentage for consumption), their businesses, or to start new ones. With more investment, more people get wages, more is produced, and still more money is available to expand production.