Economist Joseph Schumpeter has said that economic systems have the ability to repair themselves, and Nobel laureate in economics Paul Samuelson has said a situation similar to the Great Depression of the 1930s will not occur.
Many economists share the same views and firmly believe that particular period of economic collapse was the only case of its kind in history and that such a tragedy will never happen again.
However, experience tells us that the end of one economic storm is actually the start of another.
No matter how complete economic policies may be, problems such as unemployment, poverty and hunger can still strike us time and time again.
Based on experience gained from past economic crises, economist John Maynard Keynes suggested adopting an expansionary fiscal policy to stimulate the economy through increased demand.
This remedy has worked in the past and this is the major focus of Taiwan’s current economic policy.
PAST LESSONS
Because history repeats itself, past economic crises have shown us that economic problems can hardly be solved by economic means alone.
Even if we can survive the current economic crisis, economic strategy without social and cultural reform could very well lead to a repeat of the Great Depression.
Opinions vary greatly on the causes of economic recession. Economist Ravi Batra said economic recession was mainly the result of excessive centralization of wealth within a society. Many economic theories echo this view and blame recession on uneven income.
BANK TROUBLE
When wealth is excessively centralized, the number of people with little or no assets increases and more people demand loans from banks.
Because the demands for loans from the low and middle income brackets will always be higher than those of the rich, and as more people are unable to pay their loans, more banks run the risk of going bankrupt.
Another side effect of the uneven distribution of wealth is an increase in speculative expenditure.
When people’s fortunes increase, their willingness and opportunities to take risks with their money also increase. This shows us that when the rich, who are the minority in society, purchase assets and goods, including trading in the futures market, they do so with the goal to make profit through resale and not production.
Therefore, economic crises can hit us at any time if our economic policies simply duplicate the social dominance of the wealthy.
Although our government has proposed numerous plans to stimulate consumption, it has not thought about using the economic downturn as an opportunity to change our social culture and create new values for our citizens.
SELFISHNESS
Even if the economy does recover, people will still fight for their own interests when “desire” outweighs “need.”
In the process, making money often becomes their first priority.
When this happens, people will become subordinate to the wealthy as life becomes increasingly concerned with the accumulation of wealth and sensual pleasures.
This culture of greed, belligerence and exploitation may be able to create individual wealth. Such a culture, however, is incapable of bringing long-term happiness.
Chiou Tian-juh is a professor in the Department of Social Psychology at Shih Hsin University.
TRANSLATED BY EDDY CHANG
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