Recession: Unusual, unconventional actions the need of the hour

Everybody dreads the R-word! But why dread the thing that you are living?

You heard me right: recession is still there in our backyard (if not in the bedroom), which Paul Krugman dubbed as nasty recession. But certain media outlets, through their analysis, are creating the impression that recession is approaching anew, once again, out-of-the-blue!

By assuming that recession is here for a “second” time, media outlets give out the false impression that it has already been ended and has started off “once more”. By creating that impression, they simultaneously fan the fire of hope and cold-water the same in people’s mind in a stroke of matchless mastery (that recession had ended and we are facing a “new” crisis).

“Recession has been here and is expected to continue for the short-term...” said Dr.N. Ajith Kumar, an economist with Centre for Socio-economic and Environmental Studies, a Kochi based think-tank.

The fact is that the political drama staged as the debt-ceiling debate unveiled in the United States was too compelling for the media community to miss. As a result, many of the high-profile analysts who have had a lag in writing when it came to the topic of recession, in due course, forgot that there has been a recession, and when the drama ended, wrote about recession with some nostalgia. A pardonable offence!

So, if recession has been here for a while, then what can we be doing about it?

“See, the raising of debt-ceiling did little to add to the confidence of the industry participants.”, said Martin Patrick, an economist from Kochi.

One cannot pay off debt by contracting additional debt! Given this aspect, it may happen that the United States will, today or tomorrow, announce a slew of austerity measures.

“This may not bode well for the economy.” Martin Patrick added.

He points out that there is a fundamental flaw with the so-far-announced US’ monetary measures to tackle recession. A significant portion was utilised to bail out the heavily-struck institutions. The ordinary people who lost their wherewithal did not receive anything.

“Unless the Purchasing Power Parity or PPP of these people are restored, recession cannot be hoped to rein-in. This is just one of the measures.”

Pump priming, as the measure is termed, can be extended to include regions where unemployment is rampant.

“The governments should identify sectors where there is the need for additional capacity creation and pump money to them, creating employment opportunities. India is already having welfare measures like NREGA which helped it.” said Martin Patrick.

The political will of the governments are often tested in times of crises. Failure of governance and policy paralysis can add to the current woes.

“The US government can consider bringing in youngsters to jobs which are being carried out by old people nearing retirement. This can be a temporary arrangement, say for five years until the economy rebounds...but can sufficiently infuse some amount of money into the hands of those who are unemployed. The old people can, for the time being, live out of what they already have.” Martin suggested.

Of course, the myriad nuances of this scheme has to be worked out.

But measures like this would need some unusual and unconventional thinking from the part of the political class.

Is the world ready?

As published in: http://www.commodityonline.com/news/Recession-Unusual-unconventional-actions-the-need-of-the-hour-41335-3-1.html