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An economy is a system, and a social system at that. A basic definition of the word system found in the Webster dictionary is “a regularly interacting or interdependent group of items forming a unified whole”. Thus, an economy contains certain units, responsible for specific functions of the entire system, which interact in an interdependent environment thus allowing the economy to operate as a single whole.

An economy operates within specific models, whether formed spontaneously or deliberately imposed by influential circles. Those models depend on endogenous and exogenous factors, both types of factors subject to a constant change together with social changes within a society. This raises the question of durability of economic models. As factors change, economic activity in its interdependent environment must change proportionally.

In order for an economic system to produce specific output, there must be specific input. As output cannot come from nowhere, neither can input. In order for someone to have something, someone else must produce it first (or take from some third party) in order to give it to him/her. It only points to the social origin of wealth and its distribution. It also points to the social origin of production in particular and economy in general.

Thus, the social aspect of an economy has to do with the way its operation affects the society. The above-mentioned Webster dictionary defines economics as a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services. But in today’s era of financialization, economics is rapidly losing its social relevance as the system turns to serving the needs of a limited circle of people instead of the society in general. But let me address this a bit later.

It must be mentioned that political economy has a serious issue with the above definition and argues that the description of the economic activity is what the current economic theory based on neoclassical microeconomic postulates does best, while the analysis is quite superficial and mainly based on a limited number of factors. This explains why mainstream economists kept ignoring obvious disproportions of the global economy and were defiantly insistent on optimistic scenarios prior to the current crisis.

As certain units within the framework of a capitalist economic system begin to dominate (e.g. income distribution disparity, transnationalization vs. national economic development, financialization, etc.), the entire system becomes extremely unstable and consequently faces two options: a collapse or an extensive expansion in order to identify new economic resources to sustain the hypertrophied development of the dominating elements.

In my opinion, although the ultimate collapse of capitalism claimed possible by some can be ruled out for now, the current world economy is having serious troubles with the second option.

Boris Anisimov

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