Is the recession really over? Here is a very interesting article I caught making a pretty good case.
The United States and the world are in the early recovery stages after a major recession. That is certainly not new information, the government spokespeople have been trying to convince the public the recession was over even as the economy was still falling. All major indicators are beginning to indicate the direction has reversed and the painful economic collapse has become a slow and tedious recovery. As we emerge from the recession it is time for some post recession evaluation. The climb out of this economic hole is a fragile process and subject to stumbling blocks along the way. The depth of this recession means the recovery will be slower than most historical recovery cycles.
The pain of a recession is felt differently at different levels of society. Those companies, countries and people who were weakest before the collapse will suffer the worst and longest. Well managed companies, countries with sound internal economies and people with fall back resources will recover quickly. Less well prepared entities will have long and painful recoveries. Some people at lower economic levels will never recover from the personal effects of the recession. These most directly effected people must not be left out of any post recession evaluation
Economics is a "soft science" to a certain extent. Unlike hard science where the rules are well established and everyone accepts the same standards, economics has a large opinion-based component. Economists commonly disagree on cause and effect factors. Their opinions are often influenced by individual focus. Some economists look at a global economy while others see only national economies. Very few economists are willing to look at the economic plight and the economic influence of the street-level consumer. Consumers feel the pain of recession more acutely. Many macro-economists fail to remember that any economic recovery must be supported by consumer spending or it can sputter to a halt.
An economy does not exist solely in the bank accounts of top banking executives or in the stock market. The economy has its foundation in consumer spending. Without the continued growth of consumer spending a recovery can sputter to a halt. When consumer confidence supports increased spending the economy will flourish. The stock market and the government together cannot match the positive influence of an energetic consumer base.
There are two major philosophical differences concerning the government's manipulation of an economic recovery. Both of these concepts have some validity and both have some flaws. One side believes the better approach is to promote business investment to drive economic growth. Another side of the argument believes promoting consumer spending is the most effective way to influence the economy. Years of statistics and research still leave the question unanswered. The proper application of both approaches is the best answer. The proper balance of supply-side and demand-side influences by the government requires research and planning.
In this most recent recession the economy was falling precipitously and immediate steps were needed to halt the decline. It was not possible to spend several months in research and planning before acting. Now that the recovery has begun there is a need to do some research and planning. Adjustments are needed to correct for inflationary pressures caused by deficit spending. It is important that adjustments are well thought out and openly explained to the public. Consumer confidence is bolstered by a government with a workable plan. It is important that the public regains respect for the government.
When the members of the government use the media to bash each other personally and use hyperbole to describe their opposition to policies the net effect is an erosion of confidence in the government as a whole. Disagreements are valid. Such disagreements should be discussed with mutual respect and a willingness to find a workable middle ground. This cooperation is an important component in the post recession evaluation.
Bickering like six-year-olds is not the way to gain respect and confidence. Mature and intelligent discussion with a common goal is a much better way to improve the economy. Publicly acknowledging differences and showing a serious effort to work out an effective approach will dramatically improve consumer confidence.
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Tags: Recession Economy Recovery
