“A panacea to economic recession”

One reason for economic slow down is the decline of money  in the hands of consumers, writes Samasi Anderson, 20, a Correspondent from Bayelsa State in Nigeria, while at the same time money is concentrated in other hands. Money at the disposal of an investor is mobile in the global economy, he writes.

When the income of consumers declines, consumer apathy flourishes in an economy. As consumer apathy increases, manufacturers reduce production to be within the window of an entrepreneur’s aim, which is to make profit.

With flourishing consumer apathy and manufacturers maintaining consideration of consumer apathy (lack of motivation to buy), a slowdown of economic activities such as buying and selling sets in for an economy. If the slowdown persists, it is known as economic recession. For an economy in recession or vulnerable to recession to leap out of recession, long-term financial investment should be made in financial institutions such as commercial banks by government, and small and medium enterprises should be provided with expansion funds by government.

A capitalist’s money is mobile globally. He moves his money to any environment which he believes to be more productive or with greater profit yields. In present day economies, most of the money in the systems are owned by capitalists. Any economy with most of its money owned by capitalists or privately owned is vulnerable to economic recession.

For example, in Zee economy, Mr. A makes thirty per cent profit on his total investment in the economy. In Vee economy, some business friendly measures are now put in place giving the potential of fifty per cent profit of the same volume of investment. Mr. A, knowing this, has a choice to move all his investment to Vee economy to make a profit of fifty per cent, or remain in Zee economy making just thirty per cent profit. Mr. A will surely keep the aim of an entrepreneur by choosing to make more profit.

If this scenario is experienced by Zee economy repeatedly and no measures that offset the movement of money out of economy are taken by policy makers or government in the Zee economy, Zee economy will surely find itself in economic recession.

The movement of money out of an economy increases unemployment in the economy, which leads to flourishing consumer apathy due to decline of consumers’ income. This is a call to manufacturers to reduce the production of goods and services in the economy. The production cut of goods and services by manufacturers due to consumer apathy in an economy is in accordance with the profit-driven law of being an entrepreneur. If manufacturers don’t cut production, they are prepared to make loss instead of profit. The production cut by manufacturers due to consumer apathy is on the train of economic recession.

To move economies vulnerable to or in economic out of recession due to most of its money flowing at the disposal of capitalists, government policy makers should make long-term investments in financial institutions. It is certain any movement of money out of an economy will lead to loss of jobs, but with long-term investment in financial institutions by government, they will have enough money to pay their customers and trade money in form of loans, which will undoubtedly lead to the expansion of the economy. With this, new jobs are certainly going to be created for people. Thus, movement of money out of an economy by capitalists will have little or no negative effect on the economy concerned.

The cause of slowdown in economic activities is due to decline of consumers’ income, caused by concentration of money at the disposal of globally-mobile capitalists or investors. In immunizing economies prone to economic recession and getting economies out of recession, government should provide special expansion funds for small and medium enterprises in the economy. There can be provision of funds for expansion and the government makes profit with time, because these would be investments, not grants.

Reach me on Twitter: @samasirock

photo credit: Steve Snodgrass No Sale via photopin (license)
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About me: Everything about me is how to create better society, replacing each and every theory that has not worked for us. I am searching for how to reform the structure of things in Africa for the better.

I am so interested in getting new ideas in economics and politics, and want to meet people who think critically. I write only because I have an idea or a theory that I believe will put society in a better place.

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Opinions expressed in this article are those of the author and do not necessarily represent the views of the Commonwealth Youth Programme. Articles are published in a spirit of dialogue, respect and understanding. If you disagree, why not submit a response?
To learn more about becoming a Commonwealth Correspondent please visit: http://www.yourcommonwealth.org/submit-articles/

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