6. The global market and the market's inherent weaknesses.
Companies which compete in the new global market are finding that competition there is not everything it was expected to be. If they believed that the ability to turn out better products at a faster pace was the key to success, they are discovering that overproduction by large numbers of competing companies is limiting their markets.
The "efficiency of the market" is believed to be what separates the market from socialist economies. Yet, it is not clear that the market is that efficient as a system or that all the parts of the market system are equally efficient. If the market can generate output, it contains a number of inherent weaknesses:
- The agricultural sector has shown signs of economic weakness from ancient times.
- The market exerts a continual downward pressure on wages.
Keeping labor costs low may seem the ideal solution for employers. Unfortunately, low wages reduce the purchasing power of labor, undermining the demand which helps sustain markets.
- The market exerts a continual downward pressure on costs.
Buyers benefit from lower costs, but sellers lose income.
- Innovations in manufacturing, such as automated production, have increased productivity, but have also reduced the demand for labor.
- The market is not universally efficient.
- Demand is subject to distortion.