Capitalism has been subject to booms and busts for at least the past 300 years, notable early examples of which were the Dutch tulip mania and the British South Sea Bubble of the early 18th century. Any market system – including market socialism, if that had ever got off the ground – would probably have been subject to similar fluctuations, based as they are on human cycles of greed and fear, and alternations between unfounded optimism and unreasoning pessimism. Attempts to establish a cycle of regular duration and amplitude have failed. These fluctuations can, with a bit of luck and good policy, be tamed but not abolished.
The decade and a half of steady low inflation growth enjoyed by the UK since leaving the European exchange rate mechanism in 1992 has been quite exceptional, as have even the four years of similar behaviour enjoyed by the Group of Seven leading industrial nations as a whole. The confidence of mainstream forecasters in predicting yet another Goldilocks period for the world economy should have made one suspicious, not because of the faltering in the second quarter of this year, but because experts are never as likely to be wrong as when they speak with near unanimity.
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