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Bacolod City, Philippines Friday, August 21, 2020
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with Ben S. Malayang III
OPINIONS

Recession, pandemic, faith

Ben Malayang

Simply put, a recession is a contraction of the economy resulting from a general decline of productivity. It’s when production of goods and services begins a pattern of slowing down (of “negative growth”). It’s a continuing decline and not just temporary dips like when there are severe typhoons that down the power grid and factories close temporarily, or farms lose harvests for a season and agricultural production goes down for the year. Recession is a systemic contraction of production of goods and services in an economy in a place and time.

Recession implies three serious things: First, it means that investments are slowing down and there’s less spending for inputs, on manufacturing, and on hiring so that the production of goods and services contracts.

Second, because of slowing investments, jobs are lost; employment shrinks, and many people lose incomes or experience reductions of earnings. More workers could be laid off; salespeople and professionals could be furloughed or lose clients; and service contractors could lose accounts. And third, because of the first two, food and nutrition intakes, quality of life, health care, basic services, and security of life and properties could decline.

In short, a recession has a brutal logic to it. Lower production leads to higher unemployment. Higher unemployment leads to lower household incomes. Lower incomes lead to lower household spending. And lower household spending would eventually result to lower quality of life among most in the population.

What does recession mean to you and me? Many things. The things we routinely use and consume may not be as available anymore as before (certain brands, spare parts, some foods). Or because they are not produced as much as before, they become more expensive (like medicines, clothing, housing materials). It could also mean that we simply don’t have that much income to keep to a pattern of life and lifestyle that we’ve been used to before. We may have been used to going to restaurants and salons every week or so before, now, in a recession, it would not be as much (if even at all). Salary increases could be put on hold, there’d be more defaults on rentals, amortizations, and other regular obligations.

The pains of a recession may not be stark or apparent at first. They build up, slowly, imperceptibly, then, if it persists and continues for long, they become stinging and searing.

If recession persists, intensifies, and widens to beyond local economies, when, like a pandemic, it goes beyond borders and affects other economies, the condition is referred to as a depression. In a depression, production dips to very low levels (to almost none). Unemployment soars. Food shortages and hunger intensify and get widespread. Eventually, the deterioration of quality of life dives to very disturbing lows. We don’t want this. Recession is already painful. Depression would be horrible.

Add the CoViD-19 pandemic … and “Houston, we’ve got a problem.” A recession during a pandemic is a double whammy. It’s like bearing two crosses in our shoulders as we struggle in a health and economic Via Dolorosa. They’re both hard to control in our individual levels because they’re systemic – created beyond our individual capabilities to prevent and control. And with a pandemic that seems to have a low prospect of being controlled soon, recovering from a recession would be difficult indeed.

But somehow, we have some bits of saving grace (a few Simons of Cyrene, so to speak). In fact, three.

One, inflation has been benign so far, keeping to within the Bangko Sentral projection of 2 percent to 2.7 percent. It could even be lower next year, says Dr. Bruce Tolentino of the Monetary Board. A low inflation means lower prices and so mitigates the recessionary pressures on the demand side of the economy.

Two, our natural capital. We have a vast life support system and natural wealth in our lands, oceans, and biodiversity. For example, while fisheries are valued only 1.3 percent of GDP, almost 85 percent of our people actually subsist on our substantial fisheries assets for protein.

And three, we have much social capital that we could engage creatively so that even if both CoViD-19 and a recession are systemic, we could do something at our individual levels to dampen their hurtful effects on us and on others. Washing hands, wearing masks, and distancing could be done by each of us to control CoViD-19, and conservational spending, helping others as much as we could, focusing on basic needs, and prioritizing spending on where they make the most long-term difference like on nutritional foods, could dampen the effects of recession on us, our families, and on our neighbors. If you have a bit more to spare, buy from vendors around the corner and from local shops in order to keep money circulating and benefit many more in the community.

What must be done? Some say control the pandemic first because unless it is controlled, we can’t decelerate economic constriction, nor even recover. Others say open up the economy fast, open up businesses, manufacturing, and the service sector, so that the economy gets agitated, would produce more, and we acquire more capabilities to combat the pandemic.

 

I’m afraid we’ve gone beyond these two choices. The situation is becoming two big storms fusing together into a single big super typhoon. I’d say we need to do both, together: control the pandemic and step on the brakes on recession.

How to do this? Perhaps put more money and efforts to control the pandemic and make the control of the pandemic a safe industry in itself. Be more precise and specific in pandemic controls and adopt more safeguards in our production and supply chains.

I don’t have details, only this framework. But this I know: We could hope and trust in the creativity and faith of our people – their faith on God and on themselves – to overcome the pandemic-recession conundrum and challenge, especially if government is willing to support (rather than curtail and hamper) their creativity and the harnessing of their faith.*

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