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Politics : View from the Center and Left

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To: Katelew who wrote (129311)	1/26/2010 8:25:16 PM
From: Cogito	Read Replies (2) of 541936

>>As you say, the most important consideration is how a recession should be handled. I'm firmly in the group that is basically non-interventionist, that believes the economy should be left to readjust and correct the excesses on its own. Let the weak go under and the strong companies will pick up the slack and rehire laid off workers. This is better than keeping all of them limping along not working at full capacity, imo.<< The problem in economic contractions is that when companies start laying off workers, demand for products and services weakens, leading to further layoffs. When whole companies give up the ghost, this disruption is intensified, as more and more people find themselves without jobs. It becomes a vicious cycle. So there are no strong companies around rehiring the laid off workers. The companies that are left standing go into a defensive posture and freeze or reduce hiring, since they are seeing reduced demand. That puts a big hole in the "let the chips fall where they may" argument. I'm not suggesting that no company should ever be allowed to go under. I'm only saying that under some circumstances, we can mitigate the consequences of a minor recession before it becomes a major one.

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