After a bubble you get deflation as there is too much capacity.
I've always pretty much felt the concept of "too much capacity" is often misrepresented.
Afterall, some could say that excessive profits were made by deliberately limiting the availability of a product or service and artificially propping up the price beyond its useful or productive value (broadband for the home) limiting demand since customers can't justify the expense. Thus, prices SHOULD decline, but aren't because of monopolization of the service being provided.
In other cases, it can be argued that too much money was spent building the "highway" without sufficient time dedicated to making the equivalent of a "Model T" for the telecommunications industry (providing the vehicle for making mass communications afforable and useful to the common consumer). We can imagine what the result would be if the nation had embarked upon building the Interstate system solely as "toll basis", but only a small segment of society possess the skills, or the money, to make use of it.
Thus, it can be argued that, just like the telephone or highway system, the overall telecommunications sector should be treated as a public good, in which private market control restricts economic benefit.
Deflation may be bad for corporations with poor business structures, but it's NECESSARY for a technology or product to become sufficiently ubiquitous that the average consumer can justify spending money on it.
And btw, by killing the weak companies, you create monopolization and limit price competition. And that can often cost the overall economy even more. I personally believe there is a public interest in maintaining inexpensive communications, just as there is in maintaining low fuel prices. Those services/products influence the cost of everything else in the economy.
Hawk |
