The “cycles” of growth and recession of the economies of Western nations. (ALAIN DE BOTTON)

The “cycles” of growth and recession of the economies of Western nations. (ALAIN DE BOTTON)

The history of the economies of Western nations has, since the early nineteenth century, been one of repeated cycles of growth and recession. Typically, four or five years of expansion have been followed by one or two years of retraction, with occasional massive retrenchments lasting five or six years. Graphs of national wealth resemble the profiles of angular mountain ranges. Behind all the dips of the graph lie the bankruptcies of long-established firms, the lay-offs of workforces, the closures of factories, the destruction of stock. It may be tempting to attribute these events to unnatural and perhaps even one day avoidable dimensions of economic life. But, despite the efforts of governments and central banks, there seems little that is preventable about such turbulence.

Every cycle is marked by similar themes. It begins when growth picks up and companies invest in new capacity to meet perceived future needs. Production costs tend to rise as do asset prices, especially equities and property, in part driven forward by speculators. The cost of credit is low at this point, which encourages businesses to commit to large capital-intensive factories and offices. But while demand and current output begin to slow, rates of consumption continue to rise. With savings low, personal and commercial borrowing also expand.

To satisfy domestic demand, imports rise and exports fall, triggering a balance of payments deficit. The economy is now out of kilter: over-investing, over-consuming, over-borrowing and over-lending. From here, a slide into recession begins. Prices increase because of a combination of the use of less efficient productive capacity, and the growth in the money supply and of speculation. Tight and expensive credit increases the cost of outstanding debt. Asset prices, over-valued in the upswing, fall in value. Borrowers cannot meet payments and the collateral for loans is reduced. Incomes, investment and consumption fall. Companies and entrepreneurs are in distress or go bankrupt; unemployment rises. As confidence evaporates, borrowing and spending continue to fall. Long-term investments made in the previous upswing come on line, which increases supply while depressing prices just as demand is slackening. Companies and households are forced to sell assets at reduced costs, deepening the crisis. Potential buyers wait for the bottom of the market before purchasing, further delaying recovery.

Rather than a sign of hysteria, steady anxiety may seem a plausible response to the real threats of the economic environment.

 

 

 

 

 

Status Anxiety
Alain de Botton



Facebook

Instagram

Follow Me on Instagram
  • There is only one journey . Going inside yourself .

    lecturesbureau: "There is only one journey .
Going inside yourself ."
    271
    2
  • Love is composed of a single soul inhabiting two bodies .

    lecturesbureau: "Love is composed of a single soul
inhabiting two bodies ."
    273
    1
  • Little by little , one travels far .

    lecturesbureau: "Little by little ,
one travels far ."
    131
    0
  • What the caterpillar calls the end , the rest of the world calls a butterfly .

    lecturesbureau: "What the caterpillar calls the end ,
the rest of the world
calls a butterfly ."
    246
    0
  • Whatever you do , DO WITH ALL YOUR MIGHT !

    lecturesbureau: "Whatever you do ,

DO WITH ALL YOUR MIGHT !"
    253
    1
  • Love responsibility . Say : It is my duty , and mine alone , to save the Earth . If it is not saved , then I ALONE AM TO BLAME .

    lecturesbureau: "Love responsibility .
Say : It is my duty , and mine alone , to save the Earth .
If it is not saved , then I ALONE AM TO BLAME ."
    250
    0
  • The perfect Love is the one that gives everything and never expects anything in return .

    lecturesbureau: "The perfect Love is the one 
that gives everything
and never expects anything in return ."
    1734
    6
  • Liberty means Responsibility . That is why most men dread it .

    lecturesbureau: "Liberty means Responsibility .

That is why most men dread it ."
    282
    1
  • It is better to be envied than pitied .

    lecturesbureau: "It is better to be envied
than pitied ."
    257
    1
  • We are what we repeatedly do .

    lecturesbureau: "We are what we repeatedly do ."
    374
    0