The U.S. recession has gone well beyond a correction in the formerly bubble-laden housing sector. The recession is now forcing reductions in commercial operations not because of some flaw in a business model, but simply because demand around companies (their clients and customers) is declining -- the so-called 'vicious cycle' that economists so adamantly and forcefully warn policy makers, executives, and investors about.
Recession: a thief
True, during times like these you'll hear some talk about the 'benefits' of a recession: a review of business models, increased efficiency, the elimination of needless expenses, and enhanced adaptability/resiliency are frequently cited, but keep in mind that these things can occur just as regularly when the economy is expanding, as when it's contracting. In that sense, recessions never offer 'unique' benefits.
What's more, the reality is that recessions end businesses, disrupt the production process, and rob revenue from otherwise perfectly fine operations. They result in lost potential and underutilized capacity. They also cause the loss of hundreds of thousands of jobs, disrupt lives, and of course increase a host of other social costs and ills. In that sense, recessions are never 'good.'
Moreover, there are those who dismiss a recession as an inconvenience, who seem to be oblivious to the reality of the real harm it causes. Scratch the surface of these individuals and you'll frequently find: a wealthy citizen, a person whose business (now rare) is little-affected by the recession, or (even rarer, today) someone whose livelihood is not affected by the downturn. More often than not, these individuals have never experienced deprivation in any substantive way.
Still, the gentry aside, know that recessions do not occur in a vacuum, and they almost always have social and political consequences. In Europe, recessions and disruptions in economic activity have led to enormous upheavals; one beauty of the United States has been that it's always had a safety valve to vent the social and political pressure, implement reforms, and then go about its merry way.
But it's the prospect of the former -- and research on economic activity in its normal state -- that makes the strongest case possible to view recessions as Keynes did - - as tragedies, as deviations from the norm, as policy errors, as wrong turns on the journey called expansion and progress, that must be corrected.
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Financial Editor Joseph Lazzaro is based in New York.
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Reader Comments (Page 1 of 1)
1-15-2009 @ 8:23PM
Iridium said...
If we let the mega corporations fail rather than prop them up the recession would have been hard for the next few years but it wouldn't have sent us into the depression we are heading into now.
The destruction of the mega corporation would have allowed for a boom in small business that would have brought us out of the recession far stronger than when we went in.
Instead the mega corporations have been rewarded for the behavior that destroyed our ecomony.
Any corporation too big to fail is too big to be kept alive.
1-16-2009 @ 8:08AM
CHRS34T said...
The root problem is that the petroleum cartel fleeced the stability of our economy at every level for 2 years reducing the wealth of our nation and its citizens. Severely diminishing the prosperity we used to carry around in our wallets .That IS what caused the housing and mortage crisis,not bad loans,nor the big 3 auto giants .we had the money to pay our bills before the price of everything went up and earnings went down.we could afford to drive our trucks until they waged economic war using the commodity that we cant go with out as a society. The supply and demand strategy of the powerful oil barons deliberately transferred an alarming percentage of our financial worth as a whole beyond our borders.the problem is we have been assaulted by a economic form of terrorism that is more subtle than the 911 attacks. they have our military busy chasing the ghost of ben laden (who probably died before 911). While engaged in door to door hand to hand combat in the middle east,our defenseless and vulnerable economy was dealt a heavy blow.
The marines need to track down where all 2 years worth of 4.00 a gallon gas money went and bring it back then bring that enemy to justice.Its done by cutting off the head of the terrorist snake not its endless expendable tails .
Our domestic wind power,natural gas potential voids .....iran,venezuela and all the other petroleum warlords their power over our future prosperity in the united states.period.
1-16-2009 @ 8:07AM
chrs34t said...
irridium,
we need our industrial might left intact, not broken down to small circles of select individuals.
a world war II era president was correct when he stated "when general motors (u.s. auto industry) does well, the nation does well".
united we stand and if divided,... the select few get rich.
are we better off now than before the price of gas drained the vitality from our economy?