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Four ways economic crises can change things for the better

Creative destruction

Economic crises often purge inefficient or out-of-date structures. New entities emerge in their place.

In early 2000, the Nasdaq stock exchange crashed after years of the share prices of online companies rising. Underperforming firms that based their growth on the hype around the internet closed. But the crash accelerated the rise of eBay, Google, Amazon, and other tech companies.

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Four ways economic crises can change things for the better

Four ways economic crises can change things for the better

https://theconversation.com/four-ways-economic-crises-can-change-things-for-the-better-138751

theconversation.com

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Key Ideas

WWI and women working

Over a century ago, women in the UK weren't allowed to own property, open a bank account, or work in a legal or civil service job.

When WW1 broke out in 1914, over a million women joined the workforce over the next four years to keep the economy going, even in jobs that were not previously open to them.

WWII and the NHS

The National Health Service (NHS) was established in 1948 and is funded from general taxation. Before the NHS, people were expected to pay the hospital or a private doctor if they needed to use medical services.

WWII necessitated government-supported medical services to become freely available for everyone.

More people go to university

Recessions and the lack of jobs that ensues can lead more people to pursue education. This progress also affects subsequent generations.

A more educated workforce tends to make an economy more productive and profitable. The knock-on effects include society's health, lower crime rates, voting, and volunteering.

Creative destruction

Economic crises often purge inefficient or out-of-date structures. New entities emerge in their place.

In early 2000, the Nasdaq stock exchange crashed after years of the share prices of online companies rising. Underperforming firms that based their growth on the hype around the internet closed. But the crash accelerated the rise of eBay, Google, Amazon, and other tech companies.

SIMILAR ARTICLES & IDEAS:

Two of the biggest innovations
Two of the biggest innovations

Two of the biggest innovations of modern times are cars and airplanes. At first, every new invention looks like a toy. It takes decades for people to realise the potential of it.

Innovation is driven by incentives

There are three types of incentives:

  1. "If I don't figure this out, I might get fired." It will get you moving.
  2. "If I figure this out, I might help people and make a lot of money." It will produce creativity.
  3. "If we don't figure this out now, our very existence is threatened." Militaries deal with this, and it will fuel the most incredible problem-solving and innovation in a short time.

During World War II, there was a burst of scientific progress that took place. The government was in effect saying that if a discovery had any possible war value, then it had to be developed and put in use, regardless of the expense.

The conditions for big innovations to happen

The biggest innovations seldom happen when everyone's happy or safe. They happen when people are a little panicked and worried, and when they have to act quickly.

In 1932, the stock market fell by 89%. It was an economic disaster where almost a quarter of Americans were out of work. However, the 1930s was also the most productive and technologically progressive decade in history. Economist Alex Field writes that in 1941, the U.S. economy produced almost 40 percent more output than it had in 1929, with little increase in labor hours or private-sector capital input.

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Our culture of work

Our culture claims that work is unavoidable and natural. The idea that the world can be freed from work, wholly or in part, has been suppressed for as long as capitalism has existed.

Exploring the abolition of work
  • In 1885, socialist William Morris proposed that in the factories of the future, employees should work only four hours a day.
  • In 1930, John Maynard Keynes predicted that advances in technology would lead to an age of leisure where people might work 15 hours a week.
  • Since the early 2010s, these ideas have been developed further, creating a growing critique of work as an ideology, and exploring alternatives to work.
  • Post-work offers enormous promises: In a life of much less work, life would be calmer, more equal, more communal, more pleasurable, more thoughtful, more politically engaged, more fulfilled.
Work ideology

The work ideology is not natural nor very old.

  • Before the modern era, all cultures thought of work as a means to an end, not an end in itself.
  • Once the modern work ethic was established, working patterns started to shift. Between 1800 and 1900, the average working week shrank from 80 hours to 60 hours, and in the 1970s to roughly 40 hours.
  • In 1979, Bernard Lefkowitz related in his book that people who had given up their jobs reported feelings of "wholeness." During the same period, because wages were high enough, it became possible for most people to work less.
  • During the 80s, work ideology was reimposed by aggressively pro-business governments who were motivated by a desire for social control.
  • By the early 21st century, the work culture seems inescapable.

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    State Of Emergency
    The ongoing pandemic is more than just a gigantic health crisis. The global economic order, for the first time in several decades, is on the path to an imminent restructuring.
    Th...
    Resolve

    The measures to stop the spread of the virus are well-known by now: staying home in lockdown, working from home as a default option, schools switching from physical classrooms to e-learning models.

    Not every country has been able to make these choices fast, due to a combination of hesitation, inaction, and paralysis. Before any decision is made, the first thing to do is determine what needs to be done and at what pace and scale.

    Resilience

    As the current health crisis steamrolls into an economic crisis unparalleled for the last 100 years, the decline in economic activity is already at par with the great depression.

    This crisis of global proportions requires resilience, both for near-term issues like liquidity and cash flow, as well as long-term issues like uncertainty, personal financial stress and recovering from multiple challenges that were already present and are now further complicated due to the pandemic.

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    A new playbook

    Growth evangelists are right when they state that severe lockdowns produce a parallel human misery of unemployment, looming bankruptcies, and extreme financial anguish. Yet, opening the economy too...

    The false choice

    “Save the economy or save lives” is a false choice.
    A group of economists published a paper on the 1918 flu outbreak. Their findings revealed:

    • Early and aggressive interventions saved lives and triggered a faster rebound, such as job growth and banking assets.
    • Without a healthy population, there can be no healthy economy.

    The hope is for a deep, short recession, to show that people have shut the economy down to limit the spread of disease.

    A living wage

    Asking millions of able-bodied workers to stop working creates a crisis of unemployment.

    During this time, the U.S. is expanding unemployment benefits and are also delaying tax filing. In northern-European countries, the government is directly paying businesses to maintain their payrolls to avoid mass layoffs and furloughs.

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    The Automation Myth

    For decades, we have believed that automation and huge leaps in technology will take away most of our jobs and there will be widespread unemployment.

    A new study shows that this belief is inc...

    Hours worked vs Income

    The average working hours have declined only 6 percent, while income has increased at a decent rate per year.

    The economy has actually grown even after automation, due to the addition of workers.

    The Solow Paradox

    The Solow Paradox suggests that automation and computerization aren't taking our jobs, but are adding to our overall workload, taking away our leisure time.

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    Understanding recessions are vital
    Understanding recessions are vital

    Recessions are part of the fabric of a dynamic economy. The average investor fears recessions because they mean lower home prices, lower stock prices, and less or no work.

    Several things ca...

    Naming a recession

    Recessions are really "depressions," but the term "depression" seems too terrifying. After the Great Depression, economists began to use the word "recession" instead.

    The 2007-09 recession involved a financial crisis, high unemployment, and falling prices, and was named the Great Recession. Our current recession is still without a name.

    An official recession

    A standard measurement for a recession is two-quarters of consecutive GDP contraction. But the official arbiter of recessions and recoveries, the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), prefers domestic production and employment indicators instead. Other signs of the recession include:

    • Declines in real (inflation adjusted) manufacturing, wholesale-retail trade sales, and industrial production.
    • Extended declines in production, employment, real income, and other indicators.

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    Getting the economy back on track

    While fighting the new virus economy worldwide has seen a huge growth in unemployment. Therefore, measures are to be taken and this as soon as possible. Maybe the most significant factor into getti...

    Immunity vs. privacy

    Getting the worldwide economy back on track requires workforce. Providing this workforce requires healthy individuals able to work hard enough to help things get better. Governments are now trying out ways to officially have people's health checked: by providing different types of certificates, for instance. The major concern, however, is in regards to everybody's privacy: while these certificates do prove our immunity, research institutions are working on developing tools that can also protect our data.

    Certifying immunity and its advantages

    It might be that only by certifying workers' immunity, states can help their economy know growth again. However, in order to make the people who get certified take up positions that require direct contact with customers, there will be a need for encouragement from employers' side, such as pay raises. As this is maybe the only real option, countries worldwide are going to have to apply the method.

    Social-emotional learning
    Social-emotional learning

    Schools are supposed to be able to adjust to their students' needs and requirements throughout the year.

    Especially in times of crisis, the technique called social-emotional learning is a m...

    Support teachers' needs

    While going through a crisis of any kind can be challenging for most of us, one category that for sure feels the change is represented by the teaching staff worldwide.

    When asked to teach their subject via Zoom or applications alike, teachers have to change their way of presenting the topic, make them seem more interesting and, what is even more important, to make the class more interactive; this can eventually lead to sadness, anxiety and fear even for the most experienced teachers.

    Mentoring relationships within schools

    If there is one thing that teachers should be particularly good at, this has to be mentoring their students.

    By doing so, not only do they guide an individual's self-development throughout his or her school years, but they also emphasize the idea of human interaction, which should actually be the basis for most of our successful actions.

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    Reality Reloaded
    Reality Reloaded

    Pandemics, wars, and major social crisis create new kinds of attitudes, needs, and behaviors, which require mastering new skills and adjusting to the new realities.

    One of the key factors...

    Crisis Chronology

    During a crisis, the chronological way to handle things is usually:

    • Defensiveness and rapid reaction.
    • Endurance plans for a potential recession.
    • Making adjustments for a quick rebound.
    • Reinventing and applying creative strategies for new opportunities.
    Developing Capacity For Imagination

    Imagination is a challenging task under extreme circumstances and world-changing events like the current pandemic. It helps us go from adapting to the new environment to shaping it. A leader has to develop the capacity for imagination using the following imperatives:

    • Carving out time for Reflection
    • Asking active, open questions
    • Being Playful
    • Sharing, collecting and scaling of ideas
    • Seeking the Unexpected
    • Experimenting
    • Not losing Hope.

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