A Look At The Effects And Response To The Recession
To get a clear understanding of the current recession, you only have to look at the depression of 1929-39 and the many similarities and impacts of these two catastrophes on the world. Most people in the US are unaware of the fact that the depression, just as the current recession had a global impact. Industrialized nations throughout the world were affected by the depression just as the world is affected now.
While a minor recession is a normal event in a healthy economy, it is not as abrupt or long-lasting as the current depression. Under normal circumstances the economy will constantly make fluctuations, expand and contract as the markets change. These fluctuations are called “corrections” and happen with the flow of industry. When an event lasts longer than two quarters or six months, it is no longer a “correction” it becomes an official “recession.” The difference between a recession and depression is best described by an oft used economists joke that a recession is when your neighbor loses their job, a depression is when you lose your job. The differences between the two are subjective and for many individuals living and struggling today, we are in a depression.
A recession/depression occurs when there is low employment and low living standards. This occurred during the last depression and as more people have found themselves homeless as a result of foreclosure, the living standard has taken a very hard hit. In California the current “official” unemployment figures are 12%, however this figure does not account for people who have given up looking for work, have taken part time jobs because they can’t find work, or who are working completely out of their field to make ends meet. When these numbers are added, California has a unemployment rate that is closer to 20%. In the last great depression, 1929, the unemployment rate in California was 28%. California is not unique to other states that have fallen victim to government regulation and restrictions. Which leads us to another factor in depressions.
A market, or recession corrects itself when the normal forces of supply and demand occur. As demand is reduced, businesses lower wages which allows them to hire more people and product more supplies for less money. This increases demand and the market corrects. In the last depression, as with this recession, the government has prevented the natural flow of supply and demand by forcing businesses to maintain wages at a static level, increasing fees and regulations, and raising taxes. The result has been, as it was in 1929, that businesses have had to close and people have been laid off. The cost of products have remained high, but the demand is gone because the people who buy the products are unemployed and cannot buy the products.
One of the arguments that come up when people compare the last depression with the current recession/depression is the fact that money is different now than it was in 1929. However, when one compares the money, the similarities become very apparent. In 1929, the average yearly income was $6,000/year, in 2009 the average income was $30,000/year. In 1929 the average fully loaded car was $695 out the door, in 2009 the cost for a car was $23,000. The average home in 1929 was $3,500, before the crash in 2007, the average cost was over $400,000. Wages for the average American between the last depression and the recession increased five time, however, the cost of living increased significantly higher. This imbalance when calculated results in the realization that people today have less spending power than they did in 1929.
The result of the significant impact of the recession on families has been a change in priorities and lifestyles. Many people have had to develop unique skills and begin using ingenuity and creativity to survive the loss of homes, jobs, and lifestyles. Some people have found that the recession has resulted in the loss of everything that they had previously validated their lives with. They have been left floundering as jobs have been loss, house payments have exceeded their ability to pay, and taxes have risen. While the economic melt down has been felt on a global level, the tragedies taking place in our own back yard have had the greatest negative psychological impact.
There have been multiple recessions in history and there will continue to be recessions, however depressions are long lasting and cause an impact on both the government and people who must survive and adapt to the circumstances in which they find themselves. While many politicians will deny that this is a depression, there will undoubtedly be historians in the future who study the Great Depression of 1929 and the Great Depression of 2007 as sister events that played a dramatic role in the changes that affected the people of the nation and world.
An economy’s growth and corrections are often cyclical. When there are deliberate adjustments made to an economy to create a false increase in the economy the inflation that results creates a balloon that bursts suddenly and abruptly. Through the use of false interest, economic incentives, and inaccurate reporting by major financial institutions many people were led to believe that the investments they were making were sound. The sudden growth in the housing market, car companies, financial institutions were not prepared for the sudden correction that was made and thus fell farther and harder.
In re-evaluating priorities many families began to identify those parts of their lives that were critical to maintain. To the detriment of many retail outlets, most families have found that they do not need many of the material items that they owned before the recession. People who could, took advantage of the ability to buy a home they could afford right before the home they were priced out of went into foreclosure. Other individuals downsized their family vehicle before the car with the high payment was repossessed. Staying one step ahead of repossession and foreclosure, many families were able to salvage and maintain a standard of living they could afford.
Other individuals who have had to be creative have found that, although they may be unable to find a job in their neighborhood, state or nation, they are able to generate an income by working for a company in another country via the Internet. Through the Internet the world has become a much smaller community where people can easily work in another nation without the problems that were once present when people were land-bound.
As the only industrialized nation in the world with national healthcare, the United States has people dieing and ill that cannot receive necessary medical care. The individuals ardently opposed to national healthcare have some type of insurance or subsidy that pays their health bills. The exorbitant costs of healthcare do not affect these individuals. One must wonder if they would feel differently if they were unable to attain healthcare for a dying child, or were forced to buy their prescriptions one pill at a time because they could not afford a supply of medication. The cost of healthcare for most newly indigent, homeless individuals is a result of the cost of healthcare that they could not afford.
With recover from the recession will come some significant changes in the face of the nation. People who historically were validated by their jobs and companies will no longer seek validation from these forums but rather will turn inward to family, relationships and themselves for the validation that makes them feel fulfilled. This will result in the need for companies to generate personal investment among their staff through strategies that have not been utilized in the past.
To get out of the last depression the government ended many of the regulations and restrictions that had stopped free enterprise. They also imposed rationing, started a six million defense worker program, drafted six million soldiers, and ran massive deficits to put more money into the hands of the citizens. This has not happened in the current recession as banks have been bailed out, federal money has been stopped at the state level, and money for jobs have been diverted to state programs that do not increase jobs, but further support the government agencies and departments that regulate business.
During the last depression many people made their way to California seeking the opportunities that the state had to offer. This depression has resulted in a massive exodus of individuals who have been seen taxes rise, homes lose, cost of living increased and restrictions and regulations put into place that place a strangle hold on small business. When the dust has settled on this depression/recession, many states that had taken advantage of their citizens for several years through increased regulations and taxes will find that they are left with a state government unable to support itself with the loss of money they will not be able to retrieve.
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