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The Great Depression - First Downfall of A. Smith 2017-01-30 오후 4:20:00

The word "Market" is first used by Adam Smith, an 18th century economist. He insisted, on his book, , that if everyone pursuits one's desire without any hindrance, the demand and supply will naturally be manipulated. Here he uses one of the most famous terms in economics: The Invisible Hand. "Hand" may be referred as a type of 'control' that naturally increases and decreases the demand and supply. In that, the hand can be interpreted as government. "Negative State" is the phrase that comes from this. The government only has to do with the country's security. Others, such as controlling national economy, are not its duty. This is the principle of laissez-faire(a.k.a the "Let Alone" policy).

This may sound a little too radical. However, this is what Adam Smith claims: "The reason why we can consume enough bread and meat is not about the mercy of the merchants, but is about the will to earn profit." This means quite a lot to modern capitalism. If they are willing to obtain competitiveness in price, they would not be able to increase the price too much. Merchants need to seek a better quality with lower price to attract their customers. Therefore, customers are able to consume a number of products efficiently in a natural way.

The market economy was at its peak until 1929. Compared to 1921, stock market price had been increased four times larger. However, in October, 1929, the stock market price experiences a collapse. With many of the grand scale stock owners deciding to sell all of their stocks, a day known as "the Black Tuesday" comes to the Earth. In three weeks, the US economy suffers a $30 billion loss, similar that of the US World War I spending.

This collapse of the stock market also brought collapse to private economy. The aggregate demand has nosedived, and a lot of the enterprises suffered bankrupcy. This is "The Great Depression". Despite this economical crisis, capitalists, media and economists still insisted the Let Alone. Even the New York Times overlooked the danger of market economy. The Great Depression, which lasted for ten years, is the worst situation that can happen if the economy itself is not regulated by any governmental policy.

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