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Decoding Recession: Through Nature

Updated on April 6, 2013

Recession, a term which was almost oblivious before 2000, became a household phenomenon to reckon with in the post 2000 era, at least in the urban society dominated by bourgeois. Amidst the golden years of liberalized economy, of which the urban middle class was most dominant participant and arguably the most benefitted section. nobody anticipated a natural consequence of open market economy called recession. Probably the most grotesque aspect of recession is job loss. This job loss is irrespective of country, status or even intellectual ability. In an integrated global economy anyone, anywhere can lose his/her job.

I am part of this open economy for 13 years now. Somehow I was never impacted by recession. Again it has nothing to do with my intellectual capability, a stereotype typically associated with job loss. When recession first stuck in year 2000, I was just a year old in industry. At that time it was very painful to see dear colleagues and friends losing their jobs just like that. At times I got guilty conscious just because I have job and someone else does not. An agonizing situation to be in!!!

Since then on I made attempts to understand recession. I am not an economist; hence don’t comprehend much of the economic explanation of recession. To understand recession, I resorted to nature and the surrounding ecosystem. Quiet often nature provides the most comprehensive explanation and possibly the most optimal solution to a sticky problem.

With my basic knowledge of economics in general and recession in specific, I could find a correlation. Recession has to do with the money flow in the economic system. It is very similar to the blood flow in a living creature. As both high blood pressure and low blood pressure are undesirable in a living body, high money flow and low money flow too are undesirable in an economic system. High money flow tends to cause inflation whereas a low money flow tends to cause recession, a situation which we are facing today. As moderate blood flow is desirable for a body so is the money flow for an economic system.

Let us stick to recession verses low blood pressure correlation for now. When there is low blood pressure in the body, it does not mean that blood is vanishing from the body. It is there in the body itself but probably blocked somewhere which is causing the low blood pressure. Similarly, when there is a recession in an economic system, all the printed money exists within the system but concentrated in few hands. All the cures for recession hence hover around mobilizing this blocked money into the economic system.

Once this correlation between blood circulation and money circulation is firmed up, I started looking at the cures which are put in place when the blockage happens. There is an astounding similarity there too. In case of blood blockage medicines or surgery is done to get rid of blockage and let blood flow again. In case of money flow, economic measures are taken so that the blocked money in the closets starts flowing into the system again. But as medicines and surgery have its side effects on the body so is the case with economic measures. Economic measures taken in response to recessionary trends often lead to lots of pain and heartburns. Let us look at some of the measures taken by world economies in response to recent recessionary trends.

Current round of recession started with the bankruptcy filed by Lehmann brothers, one of the most prominent and influential investment banking firm of its times. This event caused the near breakdown of American financial system with banks after banks getting into red. The circumstances were so severe that American government had to come out with stimulus packages to rejuvenate financial system. Questions were indeed raised by American society on the propriety of such packages to the banks which were doomed because of their own greed if nothing else. Why the taxpayer’s money should be used to keep these institutions floating? Well the fact remains that these institutions were indeed fed with taxpayer’s money eventually. However, this had a cascading effect on other world economies. Euro zone is struggling to keep its house in order with economies like Greece bracing for bankruptcy and others to keep up their economic momentum. Citizens in euro zone are asked to forfeit many of welfare policies resulting into wide spread protests and agitations. Developing economies such as China and India are juggling to keep a balance between growth and inflation. All in all recession is an international migraine now.

Amidst these pain points it is pertinent to ask, is cure the only option!!! Prevention is better than cure. We always hear this in the context of medicines. It is always better to exercise rather than be on medicines. I tried to explore the same principal in the context of economic system.

One fact to ponder though; how come the generis of every major recession is in US? I tried to find out a recession whose genesis was outside US. At least I could not find one. Does that mean that there is something fundamentally wrong with US economic system? Really speaking I am not qualified to answer that question. I also realized that as an Indian I am having the close shave with recession only after India is substantially intenerated with world economy in general and American economy in particular. In the current political and economic order, America is poised as the super power and India as an emerging power.

Was there any recession in Ancient India, the time when India was poised as developed economy? At least I have not heard of any such phenomenon in any of the epic or scriptures. But there is ample evidence that in Ancient India, there was a concept of globalized business and traders were roaming around the world to do business. Hence open market and globalization were not alien concepts to us than. If so than why recession did not stuck than and why it is bothering us so much now? What is that one thing which differentiates Ancient India from current world in the context of economic order? If I scrub my head hard, I realize that probably greed was not all that pervasive in those times. Value system was strong. Administrative, legislative and judicial systems were established around that value system. Such an order allowed fair business practices to flourish and allow every section of the society to reap the benefits of sound economic system. I wonder whether following that value system is possible now and if so, does it provide the preventive panacea for current distressing situation. Value system never changes, its implementation changes. Hence I am not suggesting that we should revert back to the system which existed in ancient times. I am probably suggesting reinforcement of those values in current systems.

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