Before the economic crises of the early 20th century, including the great depression, the economic system was not directly concerned about the level of labor employment. However after these crises it became apparent that some economic intervention at the national level was necessary to keep the economy growing and to keep people employed. Management of the economy became a new science. Macro economics came into existence.

Classical economics made the assumption of full employment and in fact that was a tenable assumption to make till the later stages of the industrial revolution. Lower populations and the availability of natural opportunities to work in the vast and rapidly opening up territories all around the world allowed classical economics to make assumptions of full employment. Employment was a bye product of economic activities to maximize wealth and income; it was not an issue or a social or economic objective by itself. Population growth and greater formal structuring of society changed that; and labor employment became a major political and economic objective in the 20th century.

The economic problems and crisis of the 21st century brought forth new issues that were not considered as problems or issues till late 20th century.

The assumptions of our economic system, particularly those related to global resources and the environment, are no longer true. Some economically critical resources of the planet (fossil fuel and other minerals, forests, fish stocks, etc.) are no longer limitless relative to their global demand. Environment is no longer a factor external to the economic system (an externality). The far reaches and the limits of the planet have been reached. The limits of the planet have to be part of the economic system in the Third Millennium. Scarcity has to be globalized.

The current economic crisis is fundamentally the result of the breakdown of the “limitless planet” assumption of the current economic system. Solving this economic crisis obviously requires correcting the assumptions of the economic system. Free Capitalism is new model of capitalistic economic system that corrects the assumptions of capitalism and makes them true for the Third millennium. It accordingly builds a new structure of mainstream economic incentives that take into account the limits of the planet.

 

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