Economic recession assignment paper sample 

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The economic recession of 2008 Overview

An economic recession occurs in the short-term, leading to scarring to economies as a long-term effect. Economic downturns are characterized by high unemployment, low income, reduced economic activities, and reduced spending from companies. These traits leave long-term effects on individuals, long-term, and the world experiencing education problems, increased poverty levels, diminished production abilities, and slow technological advancement. The 2008 recession came as a surprise for several investors and economic professionals. The U.S. mortgage market was doing poorly in 2007 which turned into a global financial problem up to 2008. The crisis took the longest time of economic downturn in history since the 1930s Great Depression. The paper will evaluate the economic recession results caused by the 2008 financial depression.

The economic recession of 2008 results

The advanced economics faced large deficits that called out to their financing from savings and oil exporters. These markets, such as the U.S. and U.K., experienced weak monetary policies characterized by lax fiscal laws and risk misperception. The major corporation went down, and significant investors in the world withheld their capital. Financial liquidity was minimal in the markets affecting substantial businesses. These issues affected the global economic system broadly and almost bringing it to collapse. The trade activities collapsed, leading to increased unemployment in developed countries (Verick & Islam 2010). The developing countries without social security schemes were pushing many individuals into poverty.

The United States was the center of the recession, and its economy was affected in a significant way. The financial crisis that occurred in the real estate market affected the United States directly, that caused a credit crunch. The economy went down in 2007 where it fell up to 2.7 % in the USA. The shrinking of national economies affected almost all countries falling with a higher percentage compared to the USA. The domestic financial problems went down to corporates, small businesses, and individual levels. However, some nations such as China and India managed to escape the significant contraction despite their inclusion in the global economy (Verick & Islam 2010). Also, developing countries such as Ethiopia and Uganda continue to multiply despite the worldwide recession.

The unemployment rate increased due to the economic crisis in 2008. In developed countries, the unemployment rate grew from 5.7 % to 8.6% up to 20009. The global unemployment rate went up with some countries experiencing the hit compared to others (Naudé, 2009). Estonia, Spain, United States, Ireland, and Turkey were some of the most affected nations that experienced an increased unemployment rate. Other countries did not absorb the unemployment problem that was changing the world. Australia, Germany, Poland, experienced a decrease in unemployment during this period (Verick & Islam, 2010). A reduction in the GDP growth rate in a country leads to an increase in the trends of unemployment, a problem that touched most nations.

According to Verick & Islam (2010), unemployment had a massive impact on vulnerable groups of people in society. Young men and women became jobless as they were competing with older and highly experienced people. Young people tend to work in the manufacturing and construction industry that experienced a more significant impact on the global crisis. The increased unemployment rate hit individuals with lower education levels. Employers were reluctant to firing skilled workers during the economic crisis because of the hiring cost. Employees under temporary contracts were the first options for employers to cut back because its easy and cheap than firing permanent or unionized employees. Immigrants experienced a high rate of unemployment compared to the original citizens.

The rise of poverty is an indication of a massive financial crisis in developing countries. In most developing countries, the labor system data are absent, leading to a few conclusions. Real wage tends to decline in developing countries due to the shock in economic activities. However, the rise in the poverty level tends to increase, indicating the significant impact that the economic recession has on developing nations (Kose, Sugawara & Terrones, 2020). Also, the migration of urban to rural areas tend to increase for the laid-off employees. People losing their jobs are likely to take up employment in the informal sector or move to rural economies such as farming or mining (Naudé, 2009). Individual financial status is affecting due to the economic crisis in such nations.

Mitigating the effects of the crisis

Verick & Islam (2010) claims that governments across the world sought for means to mitigate the financial crisis by intervening to avoid a total collapse of the economy. The response consisted of giving money to the financial institutions to allow liquidity, cutting interest rates to improve borrowing, and extra fiscal spending to enhance demand. These actions prevented the worst from happening in most economies. It allowed new employment opportunities for workers to regain their jobs. Also, countries can avoid a significant downturn by injecting money into the financial systems. Small businesses were able to borrow loans at a reduced rate to improve their business operations.

Fiscal stimulus packages account for a high percentage in the world and national GDP. Verick & Islam (2010) illustrates that the packages were used in social protection policies and interventions. Some governments spent money supporting job seekers, ensuring food security, and expanding social protection. Group-specific initiatives is another intervention that targeted youths, migrant workers, and informal workers. Cash transfer programs and support for the export sector brought significant changes in absorbing the financial crisis shock and rising in the economy.

Economic recession results disagree.

The impact of the financial crisis of 2008 on health inequalities has gained a great controversy. Some studies illustrate a direct link between the economic problems with increased social disparities in health sectors. However, the conflicting conclusion has been achieved, showing how the financial crisis has no connection with health provision. As a controversy, some studies show that macroeconomic downturns are directly related to a positive mass health outcome. During a financial crisis, people tend to change their behaviors and lifestyle that reduce chronic disease rates and mortality. People tend to be active, reduce drug abuse, minimize fast-food intake, and connect with family. These disagreements lead to further investigation to analyze other variables that may indicate the differences in results (Bacigalupe, Shahidi, Muntaner, Martin & Borrell, 2016). The controversial debate on this topic should focus individually on poor, middle, and high-income families that may experience the economic crisis at different angles.

Disagreements on the results of the economic recession of 2008 occur as some countries experience different effects. Irons (2009) stipulates that the financial crisis was a global problem, but not all nations integrated into the universal market experienced high levels of unemployment, poverty, or trade issues. Some countries such as India did not experience the economic effect of the problem leaving significant debates on the impact of the recession. Some developing countries, such as Ethiopia, recorded an increase in economic growth. These differences in results caused by the economic downturn leave a big debate among scholars, and controversial articles giving varying information. Unemployment which was the primary indicator of the recession, did not occur to all nations in the global market that raises the question on the generalization of the economic recession effects of 2008.

References

Bacigalupe, A., Shahidi, F. V., Muntaner, C., Martin, U., & Borrell, C. (2016). Why is there so much controversy regarding the population health impact of the great recession? Reflections on three case studies. International Journal of Health Services, 46(1), 5-35.

Irons, J. (2009). Economic scarring: The long-term impacts of the recession. Washington, DC: Economic Policy Institute.

Kose, M. A., Sugawara, N., & Terrones, M. E. (2020). Global recessions.

Naudé, W. (2009). The financial crisis of 2008 and the developing countries (No. 2009/01). WIDER Discussion Paper.

Verick, S., & Islam, I. (2010). The great recession of 2008-2009: causes, consequences, and policy responses.

 

 

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