A recession by any other name…

Edward Lambert writes that it might be a good idea to induce a recession if it means we can use it to fix the inequality problem that seems to have been caused by the previous one. And why not?

As I understand it, the 2008 recession provided various labor markets an opportunity to correct for an excess of relatively unproductive workers that were too hard to fire in good times. Again as I understand it, the reason why is was a bad thing and not a good thing is that it both flooded labor markets and caused a severe drop in aggregate demand on top of what had prompted companies to cut staff in the first place. Since the cuts were ever only intended to preserve profits, when aggregate production returned the economy was all set to charge right into a second Gilded Age.

This is why no one that actually matters (i.e. average people) seemed to notice the “recovery.” So how can anyone call it a recovery and keep a straight face? I think I’ve cringed at every macro-indicator-related newspaper article I’ve seen this year… and not because of the numbers being reported.

The point here is that policy makers and market makers do not fear recessions because they hurt common people, but because they hurt the bottom line. That’s fair and to be expected. What’s more is that the corporate bottom line typically does affect the people on the assembly line. That is, talking about GDP and bank lending is necessary, but only insofar as it matters for making a typical American’s life as good as it can get. But it seems that public discussion, which should at the end of the day only be about common people, stops short at the macro indicators and routinely fails to make the connection from business back to humans.

So then: who fears a second recession? The people who would lose something because of it. And who would those people be? I don’t have a good answer, but it’s probably not the people who think the last one never ended.

There’s research to be done here.


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