“Learn by hindsight, live by foresight.”
People say this tenet all the time, and I totally agree. History can teach us invaluable lessons useful to navigate the treacherous journey into the future. Whoever does not heed the gems of the lessons contained in the past, it is often said, is cursed to repeat the pain and suffering of the future.
Let’s assume that the recession 2023 is not going to be the only recession that will happen in the future, we need to put ourselves in a backward gear and travel to the past to glean five important lessons that may help us in the present and foreseeable future. Let’s dive into five precious lessons coming from the highlights of history.
1. Always, Always Over Prepare
During the Great Recession in 2007-2009, the American government eased bank lending to prevent the worsening of a burst housing bubble and banking crisis on households’ income and wealth, which successfully stimulated consumer spending and business investment (Barnes, 2021).
This is definitely the first and foremost part to tackle any impending recession. By taking action on monetary policies and financial areas that need to be improved, updated, and revised, the country can be better prepared for the inevitable, no matter how adverse the repercussion can be.
2. Support Job Growth
The American government tackled the Great Recession by paying utmost attention to the Troubled Asset Relief Program (TARP) and the 2009 Recovery Act, both of which were substantial in “arresting an even sharper downturn,” leading to a rapid recovery (Barnes, 2021).
Let’s admit this fact: The population represents the biggest force, which can mean the greatest threat or the greatest opportunity. If the population has very little income and very few savings, it cannot contribute much to the turning of the wheel of the national economy.
Moreover, the recent impact of the recession also shows that “unemployment fell faster than expected as the economy began to recover” and that “early in the pandemic, joblessness was even worse than the official statistics indicated” (Barnes,2021). As can be seen, every recession will impact the economy’s first frontline, which is the employment sector.
Any risk to the national economy will impact the working professionals as a whole. This statement carries a very powerful message for all the government and policy makers.
3. Control the Trends in Prices and Wages
Nothing in the world can worsen the impact of inflation more than prices and wages. According to Barnes, since the war of Russia vs Ukraine, the changes of prices and wages were impacting the domestic situations of their countries, which had tremendous knock-on effects on those of the globe (Barnes, 2021).
Learning from this wisdom, we can understand the fact that because recession will make the inflation soar, any government can cope with this lethal blow by countering the prices of goods and services and the income of the people. When these two areas are addressed accordingly, we can have a relatively stable national economy that is only little impacted by any crisis.
This situation prompted the Federal Reserve to maintain “a level of aggregate demand for goods and services consistent with a high level of employment, and it has been taking steps to address inflation since late 2021” (Barnes, 2021).
In general, this can be seen in the discontent brewing in England and the rest of Europe, which manifests in the nation-wide strike of Border Force personnels, NHS nurses, and ambulance drivers as well as ground handlers.
Any wise government will most definitely address this issue first because they are the invisible hands that shape the economy of the nation.
4. Boost Disposable Personal Income (DPI) to Prevent the Rise of Poverty
Facing the crisis early on, the government dedicated much of its budget on social benefits to households in January and March in 2021, boosting the DPI by around “$115 billion each month since January than if it had grown at its trend pace” (Barnes,2021).
The social benefits are enormously crucial to help the first group of people first to be impacted by the crushing impact of the recession.
5. Launch Relief Programs on Delinquent Rent and Mortgage Payments
The efficacy of this action has been conducted in the United States with great success. To assist the American population struggling to pay for their mortgage and rent payment because of the much lower labor income, policymakers instigated a number of relief programs.
For example, Barnes reports that “the federal government has allocated $46.5 billion in relief to help renters make their back payments and to help landlords who are owed those payments” (Barnes, 2021).
This action has played a tremendous role in successfully tackling the recent recession. These five gems of lessons remain timeless and highly practicable for the Indonesian government and that of any other country.
Thank you for reading, guys! See you in the next article.