Less than a week after Elon Musk cut half of Twitter’s workforce, Facebook’s parent company Meta laid off 11,000 employees. Meta’s market value has fallen by 75% in the past year after the corporation spent billions of dollars on a “metaverse” with little popular buy-in. Tech corporations buoyed with easy access to venture capital are facing a “dizzying reality check” from an economic downturn (CNN). With consumer prices still “rising quickly by historic standards” (CNBC), just 17% of U.S. registered voters believe the economy is in “excellent” or “good” shape (Pew). A recent survey found 72% of U.S. residents expect children to be in worse financial shape than their parents when they grow up (Pew). Despite compounding economic troubles, there’s debate as to whether or not the United States is in an economic recession. So what is a recession? Today, we’re looking into what they are, why they occur, and what we can do about them.
• If you have the capacity, redistribute your resources to support those more marginalized. Donate to local food banks, mutual aid initiatives, and land trusts.
• Give money and resources directly to oppressed people in your community.
• Support the Undocumented Worker Fund, POOR Magazine, Los Angeles Black Worker Center, or local efforts by and for low and no-income BIPOC.
So what is a recession?
A recession is commonly defined as two or more quarters of shrinking gross domestic product (GDP): the total value of all goods and services produced in a country. To put it another way, a recession is when the total monetary value of a national economy declines for half a year or more. By this definition, the U.S. has been in a recession since the summer.
But recessions are commonly associated with decreases in manufacturing, rising unemployment, and decreased consumer spending. None of these things are happening, so some economists say that we aren’t in a true recession yet (Forbes, Forbes).
Why do recessions happen?
Recessions are a recurrent feature of the business cycle, the “boom and bust” periodic expansion and contraction of capitalist economies. The period between the 2008 financial crisis, or Great Recession, and 2020 is the longest recession-free period of economic expansion on record (Investopedia).
Recessions are understood to be an “unavoidable feature of a modern capitalist economy” (Investopedia) which allocates resources to maximize profits for individual business owners and investors (Britannica). During a “boom” period of economic growth, capitalists over-invest in profitable industries. But when these industries hire more workers, a tighter labor market causes wages to rise, cutting into the share of profits going to the owning class (and defeating the whole purpose of their investment). During the “bust” period, investments dry up, workers get laid off, and mass unemployment pushes workers’ wages back down, allowing the owning class to make more profits when the whole cycle restarts. “In a market economy, therefore, periodic recessions are indispensable for profits,” wrote economist Dr. David M. Gordon (NYTimes). That’s why the Federal Reserve is raising interest rates to create what it considers a “necessary” recession (Yahoo!) with “plans to sharply boost unemployment” (CBS News).
What are the results of a recession?
That depends on who you are. The results can be devastating for people living paycheck-to-paycheck, precariously housed, and/or working for low wages. For the well-off, recessions can be opportunities to buy up assets at rock-bottom prices. During the first two years of the Great Recession, the net worth of the richest 7% of U.S. households increased by over 25% (Britannica). Black household wealth was cut in half (EPI). In this context, the answer to “What is a recession?” must factor in what a recession entails, which depends on your positionality.
What can we do?
We’re taught to respond to economic anxiety by turning inwards and focusing only on ourselves. This mentality leads some people to misunderstand their socioeconomic status. Learning about our objective class positionality and class privilege is a good first step.
In the event of a deeper economic crisis, we can choose to reject selfishness and choose solidarity and social support. That’s the choice that led to the creation of the Arab Spring and Occupy Wall Street movements during the Great Recession. If the most powerful institutions on the planet are willing to sacrifice human well-being for private profit, it’s up to us to support each other. Otherwise, it will be communities dealing with the weight of historical oppression and present-day inequities who will suffer.
• Recessions are prolonged periods of national economic decline.
• While catastrophic for the poor, recessions can be a financial opportunity for the rich.
• In fact, recessions are necessary for the very rich to continue increasing their wealth.