Question

O'connor argues that the crisis of overproduction stems from a "contradiction" in the structure of the economy. what does this mean?

Answer 1

The existence of periodic overproduction crisis is a main characteristic of the market economy system.

In general, the more than an economy can produce, the better as the GDP (Gross Domestic Product) figures increase, there is economic growth and high income and employment figures .

But if an excessive quantity of production is offered in the markets in relation to the amounts demanded, there will be situations of excess supply. If such situations cannot be balanced, a big crisis arises, as producers will have large unsold stocks, factories with an enormous capacity if compared to the amount they can sell according to the demand, and much more workers than they need.

In this situation many plants have to close down, workers are fired and sometimes even the whole business goes bankrupt.

The contradiction happens because high production figures are not leading to economic growth or recording positive figures. Alternatively, an overproduction crisis takes place with the very negative consequences described above.