Recession
In macroeconomics, a recession is a decline in a country's gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year.
That private organization defines a recession more ambiguously as "a significant decline in economic activity spread across the economy, lasting more than a few months." A recession has many attributes that can occur simultaneously and can include declines in coincident measures of activity such as employment, investment, and corporate profits. A severe or prolonged recession is referred to as an economic depression.
Is recession good or bad?
The "job" of a recession is to clean the "fat" out of the system, mop up excess, and pave the way for the next expansion. Until that process is complete, there isn't much from which a legitimate expansion can arise.
While the world is frightened of a current recession, let me give you hope by sharing my thoughts. This article discusses the benefits of recession.
First is that recession puts weak companies out of business. In so doing, resources (skilled workers, capital) are freed up to be deployed more efficiently elsewhere. Weak in this case generally means the inability of a certain business (big or small) to survive resulting to closure (temporary or perpetually) and or has diverted its resources to another business that is considered to be economically viable considering the condition. However this may result to” human capital” disadvantage for an economy where unemployment rate is high and skills are highly concentrated.
Suppose that a certain economy is a major producer of electronics and has a skilful ITs that works efficiently and productively. Consider another concentration of labor force in Health Care where labor supply is quite high. Now suppose that electronic industry is first in line affected by recession, suppose that the impact is quite substantial resulting to force closure of several electronics company. As a result, unemployment rises in IT industry and unemployment now is doubled. While many are skeptical it is expected that economic activities during the time of recession is poor thus job creation would be low leaving no choice for ITs and Health Care provider either to look for job that does not fit their interest and skills.
This means that the first contention only applies to a labor industry where underemployment is high and underutilization of resources is prevalent.
Second is that stronger businesses that have used the contraction to firm up their bottom lines and grow more efficient are able to take advantage of these resources during the ensuing expansion. The economy emerges from a recession leaner, more efficient and in good shape for the next wave of growth and progress. This benefit is just a result of the first described benefit.
We know that competition drives companies to expand and contract, innovate, advertise, hires experts and is in constant firming of its bottom lines. If someone contracts as a result of recession, the other benefited through the increase in its share of market without even spending a penny. When someone laid off his expert worker, the other one embraces the person benefiting from his expertise. When advertisement cost is low sunk cost is avoided resulting to wise spending of resources. These are just few to mention but are worth knowing.
Another good contribution of recession is that it allows human realize better ways of life. Man realizes that there‘s not much enough resources to share for the entire economy. As a result, he will avoid waste and spend just enough. It also encourages savings.
Even in worst time such as recession, we can find hope. It maybe difficult to predict how badly we are affected, but surely there are good things to learn from this event. Loosing hope then is just a matter of judgement and understanding of the event. If you think that hope is almost too obscure, then think again.
