Jim Hlavac
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Economic Theory
| Economic Theory |
Depressions are the destruction of wealth and the
impoverishment of a people through the elimination of the
opportunity for economic activity. Depressions can be limited or
widespread. They come in degrees, and affect different people
differently. Depressions come in three types.
The first, rare and brief, is the destruction of wealth by natural
forces, like a hurricane or tornado, earthquake or fire. The people's
ability to survive is greatly impacted by these natural disasters. These
disasters always lead to a great fall off in economic activity of all
kinds. The depression affects only the area immediately impacted
physically by the disaster. However, the surrounding areas that
weren't impacted experience a surge in growth. As the people within
the impacted area labor to set things right they are compelled to go
to the surrounding area to get new supplies, new goods, and replace
the other things which they had.
Now it is true that many in the surrounding area will help those in
the depression through any number of ways, this does not lessen the
amount of economic activity within the surrounding area.
Depressions arrive because of technological change. This happens
when some industry is outmoded, and all the wealth generated
dissipates, and all the people involved in the industry must find other
employment. These are longer lasting, because change is hard and it is
often not possible to find another business to replace the existing
business.
This sort of depression is sometime wide spread, like say with
candle makers after the advent of electricity. Because it is wide
spread it is harder to notice, but it is easier to ameliorate. It is usually
short lived for most, who quickly adopt to the new technological
situation.
Technology change which eliminates the town factory, or a
region's resources that are no longer needed, affects a compact
region. Many people in the area are affected, and absent a new
factory or resource there is little the people can do but leave the
area. The rust belt of the Northeast United States is a clear example.
Buffalo, Pittsburgh and Cleveland were depressed cities because of
technological change. Many people left; in Buffalo, upwards of half.
But in Pittsburgh they were eventually able to find new businesses.
These depressions are limited to a region, but one much larger than a
natural disaster. Also, they are much longer lasting because their cause
is much less subject amelioration than a natural disaster.
There are places like Louisiana and Mississippi, which saw their
cotton and sugar industries destroyed by the Civil War, that still
haven't completely climbed out of their depressions.
The third type of depression is the most wrenching, affecting the
entire nation, often millions of people. And they are almost impossible
to get out of. They are caused by Government Actions, and nothing
less. Any number of wars, ethnic cleansings, fundamentalist and statist
beliefs cause the depressions and as long as the government is in
power these places are mired in a depression. Places such as North
Korea and Iraq and Iran are but a few of the worst examples. Though
Iraq is coming out of their decades of depression, yet will remain
stilted until the government there completely gets out of the way of
the entrepreneurs who would take advantage of the change in
government policies.
Our own Depression in the 1930's was caused by government
action to first curtail credit, then to shift taxes to the productive
portions still at work and subsidize those parts that failed, to prevent
the importation and exportation of goods and services. Virtually every
single factor leading to the Depression was caused by the government
doing something with the economy in the misguided belief that they
were correcting the situation. And it is true that the only thing which
brought us out of the Depression is the Second World War. The
destruction -- government caused elsewhere, but not alike in theory
from a natural disaster -- afflicted a region -- namely Europe -- and
the "surrounding area" was the United States -- we were the only ones
with the means to help. And thus their destruction allowed us to
prosper.
Had Europe not plunged into the war the United States would
have remained in the Depression for a much longer time. And that's
mostly because the government was not only not doing anything to
alleivate the problems, it was making things worse.
impoverishment of a people through the elimination of the
opportunity for economic activity. Depressions can be limited or
widespread. They come in degrees, and affect different people
differently. Depressions come in three types.
The first, rare and brief, is the destruction of wealth by natural
forces, like a hurricane or tornado, earthquake or fire. The people's
ability to survive is greatly impacted by these natural disasters. These
disasters always lead to a great fall off in economic activity of all
kinds. The depression affects only the area immediately impacted
physically by the disaster. However, the surrounding areas that
weren't impacted experience a surge in growth. As the people within
the impacted area labor to set things right they are compelled to go
to the surrounding area to get new supplies, new goods, and replace
the other things which they had.
Now it is true that many in the surrounding area will help those in
the depression through any number of ways, this does not lessen the
amount of economic activity within the surrounding area.
Depressions arrive because of technological change. This happens
when some industry is outmoded, and all the wealth generated
dissipates, and all the people involved in the industry must find other
employment. These are longer lasting, because change is hard and it is
often not possible to find another business to replace the existing
business.
This sort of depression is sometime wide spread, like say with
candle makers after the advent of electricity. Because it is wide
spread it is harder to notice, but it is easier to ameliorate. It is usually
short lived for most, who quickly adopt to the new technological
situation.
Technology change which eliminates the town factory, or a
region's resources that are no longer needed, affects a compact
region. Many people in the area are affected, and absent a new
factory or resource there is little the people can do but leave the
area. The rust belt of the Northeast United States is a clear example.
Buffalo, Pittsburgh and Cleveland were depressed cities because of
technological change. Many people left; in Buffalo, upwards of half.
But in Pittsburgh they were eventually able to find new businesses.
These depressions are limited to a region, but one much larger than a
natural disaster. Also, they are much longer lasting because their cause
is much less subject amelioration than a natural disaster.
There are places like Louisiana and Mississippi, which saw their
cotton and sugar industries destroyed by the Civil War, that still
haven't completely climbed out of their depressions.
The third type of depression is the most wrenching, affecting the
entire nation, often millions of people. And they are almost impossible
to get out of. They are caused by Government Actions, and nothing
less. Any number of wars, ethnic cleansings, fundamentalist and statist
beliefs cause the depressions and as long as the government is in
power these places are mired in a depression. Places such as North
Korea and Iraq and Iran are but a few of the worst examples. Though
Iraq is coming out of their decades of depression, yet will remain
stilted until the government there completely gets out of the way of
the entrepreneurs who would take advantage of the change in
government policies.
Our own Depression in the 1930's was caused by government
action to first curtail credit, then to shift taxes to the productive
portions still at work and subsidize those parts that failed, to prevent
the importation and exportation of goods and services. Virtually every
single factor leading to the Depression was caused by the government
doing something with the economy in the misguided belief that they
were correcting the situation. And it is true that the only thing which
brought us out of the Depression is the Second World War. The
destruction -- government caused elsewhere, but not alike in theory
from a natural disaster -- afflicted a region -- namely Europe -- and
the "surrounding area" was the United States -- we were the only ones
with the means to help. And thus their destruction allowed us to
prosper.
Had Europe not plunged into the war the United States would
have remained in the Depression for a much longer time. And that's
mostly because the government was not only not doing anything to
alleivate the problems, it was making things worse.