Italy sucks world toward winter of recession
The sick man of Europe is even worse off than first thought – and countries around the world are bracing for a new freeze. But some unorthodox thinkers can’t wait for a recession.
Italian industrial output has been falling twice as fast as previously anticipated, it was revealed yesterday. The debt-laden country, which came close to collapsing less than one month ago, now faces an even grimmer winter than anyone had thought.
This is not just a European problem. Italy’s frozen economy is creating a global chill. Only this week, for example, it was announced that Brazil’s once turbo-powered growth had stalled because of difficult conditions in Western consumer markets.
And even China’s vast economy may get caught up in the oncoming storm, as demand for cheap goods slows down and the country’s dangerous property bubble grows.
But surprisingly, amid such grim forecasts, a few thinkers are saying ‘bring on the financial blizzard.’ With suffering, they claim, comes strength, and with hardship, opportunity.
Why such optimism? There are two linked arguments.
The first is that, in boom years, the world economy grew fat. There was too much money floating around, based on easy lending. That money was often invested in wasteful, unprofitable projects or companies, with unproductive methods and ineffective staff.
Worse yet, easy lending meant people – and governments – got addicted to borrowing and spending at unsustainable levels. A recession is harsh medicine, the argument goes, but nothing else will cure the disease.
The second thought is that hard times encourage creativity. When jobs are scarce, people – especially the young – are more inclined to start their own new businesses than to scrabble for what little work they can get from big corporations.
And these small, newly created businesses face ferocious competition to survive. Many fail. But those that succeed are stronger and tougher than ever, and will reap huge profits when the easy years return. As one recession optimist, Luke Johnson, writes: ‘such creative destruction is at the heart of capitalism’s ability to act as the engine of progress.’
Survival of the fittest
So could the next recession really be a good thing? Some entrepreneurs and investors will answer yes. Among animals, pressure from predators causes prey to adapt and evolve in a permanent race for survival. That is what drives evolution forwards. In the same way, pressure from economic crises drives societies forwards towards efficiency and excellence.
What does that gain us in the end, opponents will ask? This sort of harsh, Spartan ‘excellence’ is not what makes societies great, and we should not aim to model human affairs on the behaviour of wild animals. What matters is not that the strongest in society forge ahead but that the weakest do not get left behind. It is the weakest who suffer most in a recession.
- Would a recession be a good thing or a bad thing?
- Based on this story's Q&A, would you rather be a Spartan or an Athenian?
- What effect, if any, has the ongoing world financial crisis had on your life? Write a short newspaper article based on your experience headlined: ‘What a recession would mean for me.’
- Do some further research on the way young people were treated in ancient Sparta. Do you think you could have survived this upbringing? Might it have made you a better person? Report your findings to the class.
Some People Say...
“That which does not kill us makes us stronger.’ (Friedrich Nietzsche, 1844-1900)”
What do you think?
Q & A
- Why ‘Spartan’ excellence?
- The Spartans of Ancient Greece were famously strict with their children, subjecting them to a severe training regime designed to test their endurance and determination. Not all survived – and the weakest looking infants were simply left out on mountains for the wolves.
- What was the point of all that?
- To create the finest army in all Greece. It seems to have worked. For years, the Spartans were invincible on land. After a long war, they defeated their rivals, the Athenians, to become masters of the Ancient Greek world.
- So they won?
- In a way. But the age of Spartan supremacy passed quickly. And, while the Spartans were building their super-efficient army, the ‘soft’ Athenians were creating art, drama and literature that would endure for more than two thousand years.
- Debt-laden country
- The Italian state is €1.9 trillion in debt; that’s more money than the entire country earns in a year. Concerns over Italy’s ability to pay back that money recently pushed the Eurozone to the brink of collapse.
- Property bubble
- In economics, a ‘bubble’ occurs when some asset becomes over-valued. When prices of an asset keep rising, more people try to buy that asset as an investment, hoping to turn a profit. That increase in demand then pushes prices up further, which in turn creates more demand. The trouble with bubbles? They pop – and then investors are left with nothing.
- A recession is a shrinking of a country’s economy. It is usually defined as two consecutive quarter year periods in which gross domestic product, or GDP, actually shrinks. Recessions are generally accompanied by stagnating wages and high unemployment.