Is the American economy still in recession or pulling out? Or is it just entering the second phase of a “double-dip” recession? Economists and politicians debate these questions endlessly and reams of statistics can be marshalled to support each point of view. Despite the debate there’s at least some agreement: recessions are evil, they bring great harm to our country and its people and need to be battled with all the fiscal and monetary weapons at our disposal. As the day of reckoning—Election Day, 2012—approaches, the Obama administration and Congressional Republicans wrestle over their differing strategies for defeating this dreaded enemy.
But guess what? All the weeping and gnashing of teeth is unnecessary. At the risk of outraging economists everywhere may I venture the view that recessions are actually just fine? Only our hostile reaction renders them painful and destructive. The economic cycle, just like all of nature’s rhythms, is a pulsating cycle; it has dips and curves, expansions and contractions. Though the long-term movement of the cycle is upward (unless human resistance becomes too great), it’s not a straight line upward. Rather it’s more akin to a spiralling process, a twisting movement with highs and lows, ebbs and flows.
As with almost every other aspect of living, human beings seek to defy this natural cycle. They want to eliminate the pulsations, specifically the lows, to achieve a constant high. They want to avoid the natural contractive phase and experience perpetual expansion. They want to forgo winter in favour of eternal summer. In economic terms this means hefty annual increases in GDP (gross domestic product), high employment and rising exports, capital investment and per capita income. Any dip in these indices raises recession fears and, if the dip persists, provokes cries of “stimulate, stimulate!” And the government activates such stimulative mechanisms as expanding the money supply, lowering interest rates, increasing public works spending and reducing taxes. In extreme cases nations may even resort to currency devaluation or war to somehow prime the pump and regain the high.
In the current U.S. recession the Federal Reserve has pumped billions into the money supply and lowered the discount and federal funds rates to induce banks to lower their prime interest rates. Congress has voted to extend the period of eligibility for unemployment benefits and enacted a payroll tax cut to put more money in take-home paychecks. All of this so people will consume, consume, consume, thus activating the sluggish economy and ending the recession.
But tax cuts simply reduce federal revenue, aggravating a budget deficit estimated to reach somewhere around $1.3 trillion in the current fiscal year. And what if consumers are just plain tired of spending? What if they’re already up to their necks in dishwashers, iPhones, personal computers and SUVs? What if they’d rather use money from a tax cut to pay off old bills? But no, “Spend now!” is the word. Growth at all costs! Expand or die! And so even though the economic cycle desperately wants to relax after the torrid pace of past spending, we won’t let it. And if rest is permanently denied, the result is inevitably the economic equivalent of a heart attack or nervous breakdown.
Recession as a normal phase of the business cycle wrings inflation, sometimes called “economic cancer,” out of the economy and provides opportunity to restore appropriate fiscal discipline and restraint. Stimulus thwarts this natural correction. Wouldn’t it be wiser to forgo stimulus and other forms of manipulation, readily welcome corrections when they’re needed and let the business cycle expand and contract at its own natural pace? If there was a willingness to put greed, fear and, most importantly, economic theories on the shelf, restoring the economic cycle to natural market forces, I do believe the contractive phase would be no more difficult to endure than a normal winter.
I don’t know about you, but I enjoy winter. There is something special, even delightful, about it. In winter, the rest cycle of the year, contemplation rather than action is emphasized. It’s a time to reflect on the year that has passed and prepare for the year to come, a time to monitor and consolidate material, mental and spiritual resources, a time for stillness so that energies at the deepest levels of being may be renewed. If there’s anything that isn’t appropriate during this time, it is stimulus.
What economists call recession is economic winter. It’s just as normal to the business cycle as winter is to the cycle of the seasons. Nature couldn’t function properly without the rest/contractive phase of winter and neither can the overall pattern of production/consumption we call the economy. So why on earth would we fight it? Do we strive mightily to stop winter from coming? Most of us are sensible enough to accommodate it without undue resistance, and the most discerning among us actually embrace winter for the unique opportunities and beauty it brings.
Economic winter presents similar opportunities. It’s time to draw back from frenetic activity and prepare body, mind and spirit for the coming pulsation of expansion. Instead of a struggle to maintain or even increase production and income, recession is a time to conserve and utilize resources accumulated during the expansive phase, just as in winter we eat stored and canned garden vegetables. It’s a time to assess and consolidate resources, tie up loose ends, eliminate excess baggage and pay off old debts. Most of all it is a time to reflect on the central values of living itself, as opposed to earning a living. Obviously, injecting stimulus at this time in an effort to force more production, spending and consumption is totally contrary to the movement of the business cycle and life itself.
Yes I am aware that what is being suggested here runs contrary to sacred economic principle and the core values of Western materialism. Good. Failure to examine and at least modify the more-is-better, growth-or-bust assumptions that inform humanity’s economic decisions may doom the economy and the planet as a whole. Job stress, cigarettes, cocaine, media hype, academic pressure, sales gimmicks, expressways, ultraviolet and nuclear radiation, growth hormones, food additives, credit default swaps…the list of stimulants is long and everywhere we’re witnessing the destructive effects of unrelenting and unmitigated stimulation.
Relax. Rest. Night follows day and winter follows summer for this purpose. And the contractive phase of the economic cycle follows the phase of activity. Have we so distorted the pursuit of happiness that these fundamental rhythms are no longer honoured? In perpetually grasping for more will we end up with nothing? Surely the true worth of a nation cannot be measured by consumption curves and growth statistics, nor an individual by per capita income/consumption graphs and cars in the driveway. Relax. Rest. It is winter—time for home, hearth and a long winter’s