There is a lot written these days about the upcoming recession. There has been already a very long cycle without a recession (the last one in 2008 has been particularly strong though). But is a recession necessarily a bad thing?
From my perspective I do observe currently in the economy some ‘irrational exuberance’ to use the term coined by Alan Greenspan in the 1990s. There is a lot of money thanks to low interest rates, and it is sometimes or even often invested in ventures of dubious success probability. I observe this effect for example in the start-up financing field.
A recession is nothing more than a readjustment of the economy, a clean-up that removes activities that are not any more adjusted to the requirements of new era, and a number of activities that are only just marginally profitable. And from my observation that is probably needed now in a number of economic fields.
Unfortunately, it would appear that the complex economy does not manage to run this clean-up effort more effectively than through an overall recession from time to time.
Of course, this economic clean-up has consequences on employment and on the perspectives of individuals if they are impacted. A strong social support net is needed to amortize the effects of a recession for the individuals. Recessions also tend to remove from employment those whose skills are not adapted any more to the economy, and there needs to be ways to upgrade those skills to give them a new role to play. It can thus be felt negatively across consumption.
All in all I tend to believe that recessions are rather inevitable, a good thing in the longer term and policies that aim to avoid or postpone them will only create stronger and harder recessions at the end.
