I was checking BBC business website and the words "Why recovery can be bad for you - and recession good" under the title 'Recovery hurts' caught my attention. Intrigued, checked it to learn what the author says. After reading the article I was wondering, what would be the response of a person who lost his job in recession. This post resulted as a consequence of that thought.In a recession, demand drops, causing drop in supply and with it taking down the price level. As a result inflation comes down and approaches '0'. A lower inflation means higher real income. You will have more disposable income. Also the government will cut taxes and private sector will offer discounts and other offers. All in all your cost of living will come down. So yes 'Recession' is good.
In Recovery, government will cut populist measures, increase taxes, tighten money supply, demand picks up, prices start to climb and the overall inflation will rise its head again. Your disposable income will shrink. Cost of living will go up in a recovery. Cost of living in growth will be higher than cost of living in recession. So why recover? Why should we fight hard to recover? That's a funny thought. If recession continues, businesses will close down, jobs will be lost and there will be no income leave alone shrinking real income. Recession is good for those who earn; not for those who don't earn. Recovery may be bad for those who earn; not for those who don't earn. Recovery creates jobs, fills more pockets, spikes up demand, cause higher prices and higher cost of living.
Economic growth brings more people on par with you. Recession causes more people on par with you to vanish. With less on par with you, your life improves and with more on par with you, your life becomes difficult. But all this is true only if you remain where you were. If you catch up with growth opportunities in growth periods and hang on to your place in recession, your life will always be bliss, economically.
I am sure you are not wondering where the government servant comes in here. :)
I think it is fair to say that people who have jobs and are making good money are better off during recession than recovery-
ReplyDeleteAnd this is yet another argument that supports my view that government policies should not be guided by what bureaucrats say- they know recession is good for them, so they will only try to make it worse.
We are better off when we listen to what the jobless and the unemployable say about who should do what- I think they are the ones in politics, and we don't have to worry a thing about our economy: it is recession proof.