oil price and recession, is it all that bad?

A recession may be caused by a sudden dramatic decrease in consumption by the society at large at the same time as businesses and governments make high investments and accumulate debt. This causes an excess of production and commodity prices to plunge. And to adjust to such low commodity demand and decline in profits corporations would lay off lots of people. Unemployment and social unrest would peak. There would be protests on the streets demanding work. Foreigners would be blamed for lack of work and xenophobic movements would rise. State tax revenues would drop, but social assistance for unemployed would rise. State finances could collapse. On the other hand the excess offer of labour in the workforce market will lower wages for those that do work (there will always be someone willing to do the job for less) and this will lead to more social unrest. A feeling of mistrust towards the economy would affect society and markets, and fear of investment would prevent money being available to initiate revivals and creation of jobs. Migration movements would be attempted and blocked by closed border policies. A negative spiral could be induced making matters ever worse eventually degenerating into sparks of war or revolutions, eventually creating tendencies to accept authoritarian and totalitarian regimes. This is a scenario similar to what occurred in the Great Depression in 1928. This is the worst we fear about a serious recession. And could a recession be induced by the oil price rising so much and the present food crisis? Can these problems slow down consumption and cause a  recession? The crisis in American credit markets is already a sign of such a recession. Real state prices plunged and people with credits could not pay them back and were forced to cut consumption.

But could a recession also be beneficial? 

I have a feeling that the notion that things tend to evolve slowly and that we should expect social habits to become more sustainable with time as awareness to environment problems increases is not entirely true. Real evolutions or important jumps occur out of dramatic changes or occurrences. Maybe a serious recession is what the western world needs to finally adjust its life-style to one that is more sustainable. One that accounts for the fact that resources are finite, the world population cannot grow indefinitely, and indefinite economic growth is not attainable. Maybe I'm a hypocrite because I think I'm not among those that are likely to loose their jobs with a recession and therefore are not so afraid, although I could just as well loose it (after all who would need spacecraft in times of crisis?).

But after discussion at lunch today with friends, we came up with a number of potentials benefits of a recession:

• Transportation costs would rise, making local production viable instead of importing, thus creating jobs specially for commodities that are basic (food and clothing).
• People would be forced to use energy more efficiently and new energy sources would finally be better developed and explored. This would benefit the environment.
• Less willingness to consume would mean that people would prefer long lasting products over perishable ones, thus forcing producers to adjust. This could potentially reduce the present consuming fever in the long term and change the consumption paradigm, which in turn benefits again the environment by depleting less resources.
• Major structural chances (social, economical, industrial) could occur which actually are for the better. If people see this as an opportunity to worked together out of it. For example transportation systems and in particular public ones could be totally re-designed and improved in quality and efficiency (we could get rid of oil).
• People might finally be convinced that consuming cannot be the ultimate goal in life and that other economic paradigms are possible. Economists would be forced to find them.
• With lack of jobs, possibly with predominant impact on low payed jobs, people might get the incentive to study more to apply for jobs at the other end of the wage scale.
• Consuming less or having less choice when consuming could potentially simplify a lot our excessively sophisticated life-styles thus reducing stress, and liberating more quality time to be with those you like.
• Family planning would increase as educated people would figure that they cannot afford larger families and we might get a grip on world demographic explosion

Maybe it's just wishful naïve thinking and things may turn for the worst. But it seems we're getting ever closer to it, and if we get there, it's best to think on the positive aspects than to allow us to enter the negative spiral!