ECONOMICS Oil offers resistance to free market’s operation

In the late 1930s John Maynard Keynes’ general theory of economics turned orthodox economic thinking on its head. Orthodoxy proclaimed that price flexibility in a free market would ensure that all output of goods and services, including labour, would be fully utilised. Although the price of crude oil may drop, there is no guarantee that the price of petrol at the pump will follow it down. Accordingly, they insisted, unemployment was impossible. Keynes disagreed. Economies, he argued, could settle into a permanent state of unemployment. Recovery was impossible without government intervention to stimulate demand. The 1930s Great Depression proved him…