GE 319: The Contemporary World - Lesson 1: The Global Economy - PDF

GE 319 – THE CONTEMPORARY WORLD Lesson 1 The Global Economy Learning Outcomes  Define economic globalization;  Understand why nations trade with each other.  Summarize the different theories explaining trade flows between nations, and;  Identify the policy instruments used by govern...

GE 319 – THE CONTEMPORARY WORLD Lesson 1 The Global Economy Learning Outcomes  Define economic globalization;  Understand why nations trade with each other.  Summarize the different theories explaining trade flows between nations, and;  Identify the policy instruments used by governments to influence international trade flows. Time Frame: 1 Week Overview Globalization involves the "broadening and deepening of interdependence among peoples and states” (Cohn, 2011: 6). It leads to an extension of geographic linkages, encompassing societies and states and deepens interaction among them such that policies and events of one state also affect distant ones. Globalization is a multidimensional phenomenon comprised of political, economic and cultural features. To dismiss the multifaceted nature of the globalization would be inappropriate; the same goes as to how it would be incorrect to dismiss the essential and crucial role that economic dimension plays in as much as it as a driving force of globalization (Benczes, 2014). Szentes (2003) defines economic globalization as "a process making the world economy an "organic system" by extending transnational economic processes and economic relations to more and more countries and by deepening the economic interdependencies among them" (p. 69). Benczes (2014) follows this definition and emphasizes that interpretation of the current trends in the world economy must be understood in the global context of an integrated world economy. Moreover, while the state does not remain as the sole unit of analysis; non-state actors such as international organizations, non- governmental organizations, and multinational or transnational corporations play significant roles in the international economic processes. This chapter will primarily discuss the concept of economic globalization, the actors that facilitate it and the modern global economic system it has built today. 42 | P a g e  GE 319 – THE CONTEMPORARY WORLD Activity (Let’s Get Started!) In the COVID-19 crisis, governments have struggled to find the right national policies— and also to coordinate an effective global response. They’ll have to do better when it comes to confronting the biggest challenges of the age: fracturing world economy. This activity focuses on the workings of the global economy from a very macroeconomic viewpoint and looks at the impact of globalization on individual economies.  Discuss the impact of globalization and trade liberalization (removal of trade barriers) on the global economy.  Discuss the advantages and disadvantages of free trade and analyze how technology has increased the quantity of world trade.  Explain how globalization has led to variations in the standard of living and differences in the level of development between nations. Analysis (Let’s Think About it!) Now think about the questions below:  Can trade in services deliver for developing nations?  Is trade an opportunity or threat to workers? Does trade create or destroy jobs?  If an economy overall benefits from trade, why do governments often restrict trade?  In what sense is it a fallacy that exports are good and imports are bad? Abstraction (Let’s Explore!) In today’s borderless economy, the workings of the “invisible hand” have a reach and strength beyond anything Adam Smith ever could have imagined. In Smith’s day, economic activity took place on a landscape largely defined—and circumscribed—by the political borders of nation-states: Ireland with its wool, Portugal with its wines. Now, by contrast, economic activity is what defines the landscape on which all other institutions, including political institutions, must operate. Business and government are just beginning to live with the consequences. This inquiry begins by defining the term global economy. The global economy is the result of the development of an economy that rises above borders and is free moving between the different nation states of the world. A direct result of an economy that defies borders or governments is that it has openly called into question not only how much room governments have to maneuver but how much they can affect such an economy in the future. States are beginning to see themselves playing a diminished role when it comes to their own economies (Shively, 2012). Although this economic reallocation of power may be symbolic in nature it is representative of a loss of control not only in the economic arena 43 | P a g e  GE 319 – THE CONTEMPORARY WORLD but also potentially in the social arena as the concept of “globalization” takes a hold on the world. In this particular case, there are whole areas of economic policy in which states may wish to act on, but in the end is ultimately proven impossible for it to control. A state remains a state and its governments remain in power of said state however the range of things the state has the capacity to control is greatly diminished and part that diminishment can be seen as a diminishment of sovereignty. In this sense, while globalization has led to the convergence of more developed economies, many argue that the welfare gap between the more and less developed economies is growing. ‘Global economics’ looks at how trade has shaped the global economy and considers the costs and benefits of free trade – it also provides an analysis of the major problems facing the global economy in the 21st Century, and provides an analysis of the financial crisis and the rise of powerful trading blocs. But why do countries trade? Countries trade with each other when, on their own, they do not have the resources, or capacity to satisfy their own needs and wants. By developing and exploiting their domestic scarce resources, countries can produce a surplus, and trade this for the resources they need. Goods and services are likely to be imported from abroad for several reasons. Imports may be cheaper, or of better quality. They may also be more easily available or simply more appealing than locally produced goods. In many instances, no local alternatives exist, and importing is essential. This is highlighted today in the case of Japan, which has no oil reserves of its own, yet it is the world’s fourth largest consumer of oil, and must import all it requires. The production of goods and services in countries that need to trade is based on two fundamental principles, first analyzed by Adam Smith in the late 18th Century (in The Wealth of Nations, 1776), these being the division of labor and specialization. In its strictest sense, a division of labor means breaking down production into small, interconnected tasks, and then allocating these tasks to different workers based on their suitability to undertake the task efficiently. When applied internationally, a division of labor means that countries produce just a small range of goods or services, and may contribute only a small part to finished products sold in global markets. For example, a bar of chocolate is likely to contain many ingredients from numerous countries, with each country contributing, perhaps, just one ingredient to the final product. On the other hand, specialization is the second fundamental principle associated with trade, and results from the division of labor. Given that each worker, or each producer, is 44 | P a g e  GE 319 – THE CONTEMPORARY WORLD given a specialist role, they are likely to become efficient contributors to the overall process of production, and to the finished product. Hence, specialization can generate further benefits in terms of efficiency and productivity. Specialization can be applied to individuals, firms, machinery and technology, and to whole countries. International specialization is increased when countries use their scarce resources to produce just a small range of products in high volume. Mass production allows a surplus of goods to be produced, which can then be exported. This means that goods and resources must be imported from other countries that have also specialized, and produced surpluses of their own. Countries specialize in producing commodities where they have an advantage in production over other countries. How do we know which commodities countries will specialize on? a. Principle of absolute advantage – supposed there are two countries, A and B, producing only two commodities, potatoes and clothes. Let us assume that given the raw materials, the productivity of labor in producing potatoes and clothes determines the quantity of commodities actually produced. How will trade occur? In general, trade between the two countries will likely take place of country A can produce one good more efficiently than country B and country B can produce the other good more efficiently than country A. Consider table 2.1 Country Sack of Pieces potatoes of clothes A 6 4 B 3 12 Table 2.1 Output of potatoes and clothes by a worker per day Country A can produce six sacks of potatoes for every worker it employs in one day. On the other hand, it can produce four pieces of clothes per day if that worker was employed in the clothes industry. Looking at country B, we see that each of its workers can produce 3 sacks of potatoes or twelve pieces of clothes per day. It is obvious that country A is more efficient in producing potatoes that country B since it can produce more sacks of potatoes for every worker it employs than country B can. Country B is more efficient in the production of clothes than country A since it can produce more pieces of clothes for every worker it hires than country A can. We see from our example that country A has an absolute advantage over country B in the production of potatoes and country B has an absolute advantage over country A in the production of clothes. We can say that a country has absolute advantage in one commodity over another country if that country can produce the commodity more efficiently than the other country can. If the two countries are allowed to trade, countries A and B will specialize in producing commodities that each can produce more efficiently relative to the other country. Why? Suppose that each country is endowed with units of labor. Countries A and B have the option of either specializing in one commodity or dividing their labor resources for the production of both potatoes and clothes. Let us examine the case where the countries are not allowed to trade. This means that both commodities to satisfy domestic demand. To make things simple, let us assume that preferences are such that labor is divided equally between the two industries in each country. Table 2.2 shows the production schedules of countries A and B for potatoes and clothes. 45 | P a g e  GE 319 – THE CONTEMPORARY WORLD Country Labor Potatoes Labor Clothes Allocated produced Allocated produced (Potatoes) (Clothes) A 5 30 5 20 B 5 15 5 60 Total 10 10 Table 2.2 Production schedule for potatoes and clothes without trade Country Labor Potatoes Labor Clothes Allocated produced Allocated produced (Potatoes) (Clothes) A 10 60 0 0 B 0 0 10 120 Total 10 10 Table 2.3 Production schedule for potatoes and clothes with trade In a situation without trade, the amount of potatoes available for country A is 30 while the amount of clothes available is 20. For country B, available potatoes is 15 sacks and clothes produced is 60 pieces. Now suppose that the countries are allowed to trade and each country specializes in the commodity where it is relatively more efficient in production. Country A, therefore, will specialize in the production of potatoes and country B will specialize in production of clothes. Table 2.3 shows the resulting production schedule with specialization and trade. Notice from table 2.3 that potato production for country A doubles from 30 to 60 sacks with the reallocation of labor from clothes to potato production. For country B, the production of clothes also doubles from 60 to 120 pieces. Suppose that the countries trade with each other with the assumption that one piece of cloth exchanges for one sack of potatoes. Will both countries be better off? If country A exports the additional sacks of potatoes it produces (30 sacks) and exchanges them for clothes, then more clothes would be available for the domestic market of country A. The same thing will be true for country B. More potatoes are now available for domestic market of country B. Clothes available in country A increase from 120 pieces to 30 pieces while potatoes available in country B expand from 15 sacks to 30 sacks. Specialization and trade expand production and consumer choices because more commodities become available. b. Principle of comparative advantage - David Ricardo took Adam Smith’s theory one step further by exploring what might happen when one country has an absolute advantage in the production of all goods. Smith’s theory of absolute advantage suggests that such a country might derive no benefits from international trade. In his 1817 book Principles of Political Economy, Ricardo showed that this was not the case. According to Ricardo’s theory of comparative advantage, it makes sense for a country to specialize in the production of those goods that it produces most efficiently and to buy the goods that it produces less efficiently from other countries, even if this means buying goods from other countries that it could produce more efficiently itself. We have structured the above situation in such a way that one country would have absolute advantage in one commodity and the other country will have absolute advantage on the other commodity. What if one country has absolute advantage in both commodities? Would trade and specialization still occur? Obviously a country like the United States has absolute advantage over the Philippines in almost all commodities. But why is it that 46 | P a g e  GE 319 – THE CONTEMPORARY WORLD trading still occurs? Let us take the case of two countries C and D with rice and shoes as the commodities. Table 2.4 shows the productivity of one unit of labor per day. Country Rice Shoes produced produced C 12 6 D 2 4 Table 2.4 Output of rice and shoes by a worker per day According to table 2.4, in country C, a worker can produce 12 sacks of rice or 6 pairs of shoes for a day’s work. In country D, one worker can produce two sacks of rice or four pairs of shoes. Thus, country C can produce both commodities more efficiently relative to country D. Clearly, we can see that country C has absolute advantage in producing rice and shoes because it can produce more of both commodities per unit of labor than country D. Would there be benefits accruing to both countries if they were to trade? What would be their bases for trading? Note that a worker in country C can produce six times as many sacks of rice as a worker in country D. However, country C can only produce one and a half times more pairs of shoes. Country C is more efficient in producing rice than shoes while country D is more efficient in the production of shoes relative to the production of rice. Country C has comparative advantage in the production of rice while country D has comparative advantage in the production of shoes. To further illustrate the concept of comparative advantage, let us look at the opportunity costs for each country in producing the two commodities. To produce 6 more pairs of shoes, country C has to give up producing 12 sacks of rice. Thus, the opportunity cost of producing one pair of shoes, country C is two sacks of rice. In country D, to be able to produce 4 additional pairs of shoes, it must sacrifice producing 2 sacks of rice. In other words, the opportunity cost in producing one more pair of shoes is only ½ sack of rice. Country D has lower opportunity cost in producing shoes than country C. Hence, country D has comparative advantage over country C in the production of shoes. We say that a country has comparative advantage in the production of a commodity if that country can produce that commodity more efficiently (or at a lower opportunity costs) than another commodity relative to another country. Each country will specialize in the production of a commodity where it has comparative (not absolute) advantage. Country C will specialize in the production of shoes. The basis, therefore, for specialization and trade, in general, is comparative advantage and not absolute advantage. Absolute advantage could only be used as a basis in special cases like one we ha earlier. Thus, countries specialize in and export those goods and services where they have comparative advantage and import those commodities where they do not have comparative advantage. This is the law of comparative advantage. What would the countries gain from trading? Using the same example, let us again assume that each country is endowed with ten units of labor. Suppose initially, that there is no trade. Table 2.5 shows each country’s production without trade and specialization. Country Labor used Rice Labor used Shoes for rice produced for shoe produced production production C 8 96 2 12 D 4 8 6 24 Table 2.5 Production schedule for rice and shoes without trade 47 | P a g e  GE 319 – THE CONTEMPORARY WORLD Country Rice Shoes produced produced C 120 0 D 0 40 Table 2.6 Production schedule for rice and shoes with trade Without trade, country C produces 96 sacks of rice and 12 pairs of shoes. Country D produces 8 sacks of rice and 24 pairs of shoes. If the countries were to trade and specialize, will they be better off? Table 2.6 gives the situation where trading and specialization occurs. With specialization, country C produces 120 sacks of rice as compared to 96 sacks without specialization. Country D, on the other hand, is able to produce 40 pairs of shoes as compared to only 24 pairs before. Assuming again that all the increase in the production of each commodity brought about by specialization is exported at the rate of one sack of rice for one pair of shoes. We see that shoes available in country C increases by 4 (16- 12) while rice for country D increases by 8 (16-8) sacks compared to pre- trade/specialization levels. Again, production and consumption possibilities are expanded. After all the adjustments in international trade have taken place, assuming that there are no barriers to trade like tariffs and that there are no transportation costs, we will see that prices of rice and shoes equalize across countries. Rice will cost the same in country C and D and so will shoes. Our example does not permit us to calculate the exact prices of the commodities. However, we are sure that the trading prices of the goods will be between the pre-trade prices. The advantages of trade International trade brings a number of valuable benefits to a country, including:  The exploitation of a country’s comparative advantage, which means that trade encourages a country to specialize in producing only those goods and services which it can produce more effectively and efficiently, and at the lowest opportunity cost.  Producing a narrow range of goods and services for the domestic and export market means that a country can produce in at higher volumes, which provides further cost benefits in terms of economies of scale.  Trade increases competition and lowers world prices, which provides benefits to consumers by raising the purchasing power of their own income, and leads a rise in consumer surplus.  Trade also breaks down domestic monopolies, which face competition from more efficient foreign firms.  The quality of goods and services is likely to increases as competition encourages innovation, design and the application of new technologies. Trade will also encourage the transfer of technology between countries.  Trade is also likely to increase employment, given that employment is closely related to production. Trade means that more will be employed in the export sector and, through the multiplier process, more jobs will be created across the whole economy. The disadvantages of trade Despite the benefits, trade can also bring some disadvantages, including:  Trade can lead to over-specialization, with workers at risk of losing their jobs should world demand fall or when goods for domestic consumption can be produced more 48 | P a g e  GE 319 – THE CONTEMPORARY WORLD cheaply abroad. Jobs lost through such changes cause severe structural unemployment.  Certain industries do not get a chance to grow because they face competition from more established foreign firms, such as new infant industries which may find it difficult to establish themselves.  Local producers, who may supply a unique product tailored to meet the needs of the domestic market, may suffer because cheaper imports may destroy their market. Over time, the diversity of output in an economy may diminish as local producers leave the market. The Pattern of International Trade The theories of Smith, Ricardo, and Heckscher–Ohlin help explain the pattern of international trade that we observe in the world economy. Some aspects of the pattern are easy to understand. Climate and natural resource endowments explain why Ghana exports cocoa, Brazil exports coffee, Saudi Arabia exports oil, and China exports crawfish. However, much of the observed pattern of international trade is more difficult to explain. For example, why does Japan export automobiles, consumer electronics, and machine tools? Why does Switzerland export chemicals, pharmaceuticals, watches, and jewelry? Why does Bangladesh export garments? David Ricardo’s theory of comparative advantage offers an explanation in terms of international differences in labor productivity. The more sophisticated Heckscher–Ohlin theory emphasizes the interplay between the proportions in which the factors of production (such as land, labor, and capital) are available in different countries and the proportions in which they are needed for producing particular goods. This explanation rests on the assumption that countries have varying endowments of the various factors of production. Tests of this theory, however, suggest that it is a less powerful explanation of real-world trade patterns than once thought. One early response to the failure of the Heckscher–Ohlin theory to explain the observed pattern of international trade was the product life-cycle theory. Proposed by Raymond Vernon, this theory suggests that early in their life cycle, most new products are produced in and exported from the country in which they were developed. As a new product becomes widely accepted internationally, however, production starts in other countries. As a result, the theory suggests, the product may ultimately be exported back to the country of its original innovation. In a similar vein, during the 1980s, economists such as Paul Krugman developed what has come to be known as the new trade theory. New trade theory (for which Krugman won the Nobel Prize in economics in 2008) stresses that in some cases, countries specialize in the production and export of particular products not because of underlying differences in factor endowments but because in certain industries the world market can support only a limited number of firms. (This is argued to be the case for the commercial aircraft industry.) In such industries, firms that enter the market first are able to build a competitive advantage that is subsequently difficult to challenge. Thus, the observed pattern of trade between nations may be due in part to the ability of firms within a given nation to capture first-mover advantages. The United States is a major exporter of commercial jet aircraft because American firms such as Boeing were first movers in the world market. Boeing built a competitive advantage that has subsequently been difficult for firms from countries with equally favorable factor endowments to challenge (although Europe’s Airbus has succeeded in doing that). In a work related to the new trade theory, Michael Porter developed a theory referred to as the theory of national competitive advantage. This attempts to explain why particular nations achieve international success in particular industries. In addition to factor endowments, Porter points out the importance of country factors such as domestic demand and domestic rivalry in explaining a nation’s dominance in the production and export of particular products. 49 | P a g e  GE 319 – THE CONTEMPORARY WORLD Trade Theory and Government Policy Although all these theories agree that international trade is beneficial to a country, they lack agreement in their recommendations for government policy. Mercantilism makes a case for government involvement in promoting exports and limiting imports (and Donald Trump seems to advocate such policies). The theories of Smith, Ricardo, and Heckscher– Ohlin form part of the case for unrestricted free trade. The argument for unrestricted free trade is that both import controls and export incentives (such as subsidies) are self- defeating and result in wasted resources. Both the new trade theory and Porter’s theory of national competitive advantage can be interpreted as justifying some limited government intervention to support the development of certain export oriented industries. Evidence for the Link between Trade and Growth Many economic studies have looked at the relationship between trade and economic growth. In general, these studies suggest that as predicted by the standard theory of comparative advantage, countries that adopt a more open stance toward international trade enjoy higher growth rates than those that close their economies to trade. Jeffrey Sachs and Andrew Warner created a measure of how “open” to international trade an economy was and then looked at the relationship between “openness” and economic growth for a sample of more than 100 countries from 1970 to 1990. Among other findings, they reported: We find a strong association between openness and growth, both within the group of developing and the group of developed countries. Within the group of developing countries, the open economies grew at 4.49 percent per year, and the closed economies grew at 0.69 percent per year. Within the group of developed economies, the open economies grew at 2.29 percent per year, and the closed economies grew at 0.74 percent per year. A study by Wacziarg and Welch updated the Sachs and Warner data through the late 1990s. They found that over the period 1950–1998, countries that liberalized their trade regimes experienced, on average, increases in their annual growth rates of 1.5–2.0 percent compared to pre-liberalization times. An exhaustive survey of 61 studies published between 1967 and 2009 concluded: “The macroeconomic evidence provides dominant support for the positive and significant effects of trade on output and growth.” The message seems clear: Adopt an open economy and embrace free trade, and your nation will be rewarded with higher economic growth rates. Higher growth will raise income levels and living standards. This last point has been confirmed by a study that looked at the relationship between trade and growth in incomes. The study, undertaken by Jeffrey Frankel and David Romer, found that on average, a 1 percentage point increase in the ratio of a country’s trade to its gross domestic product increases income per person by at least 0.5 percent. For every 10 percent increase in the importance of international trade in an economy, average income levels will rise by at least 5 percent. Despite the short-term adjustment costs associated with adopting a free trade regime, which can be significant, trade would seem to produce greater economic growth and higher living standards in the long run, just as the theory of Ricardo would lead us to expect. Trading with Many Commodities among Many Countries To simplify things, we have confined ourselves to a two-country, two-commodity case in discussing international trade. This, obviously, is not the situation in the real world. The Philippines has more than one trading partner and our exports are not just confined to one good like handicrafts. Also, trading nowadays, is usually done between regions. Will our principles still be applicable to reality? The many goods-many countries case is, in general, no different from our previous example. Countries simply have to rank commodities according to which good the country has the most comparative advantage down to the good with which it has the least comparative advantage. The law of comparative advantage still holds. Countries will export commodities where they have comparative advantage in production over its trading partner. The question of which commodity to 50 | P a g e  GE 319 – THE CONTEMPORARY WORLD export given a ranking of comparative advantage, however, is another area of concern. Generally, the choice would depend on the demand conditions prevailing in the international market. If demand is high for a commodity and if the country has comparative advantage in that commodity, it will export that good. What about the case of many countries? This could still be treated like a two-country case. Trade occurs between the exporting country on one side and the rest of the world on the other. It is just like trading with a very big country. Another fact that we have to contend with in reality is the truth that countries do not only trade bilaterally (i.e., between two countries). In fact, most of the trading that occurs in the international market is multilateral trade (i.e., among many countries). How does this affect our principle of comparative advantage? Countries will still export commodities where they do not have comparative advantage regardless of the origin of those imports. We must be careful, though, in making generalizations about the impact of trade. While it is true that countries will gain from trade, matters of policy like what to do with labor that is displaced as industries shut down because specialization cannot be answered by our theory. But as we have seen, trade is better than no trade at all. Policymakers only need to put up a system of safety nets so that the gains from trade will be maximized. Trade: Free Trade Vs Protectionism Overview One view says that we should make it as easy as possible for goods and services to move between countries. This approach is based on the argument that more trade makes us wealthier and is therefore a good thing. It is known as free trade. Another approach says that we should restrict trade. We might do this to protect certain jobs. We might think that we need certain industries – such as food production or steel- making – just in case things go wrong in the wider world. We might want to restrict imports from countries with lower labor or environmental standards so they can’t undercut our industries. This approach is known as protectionism. Many economists agree that some restrictions on trade are desirable, but that we should be careful, as such restrictions can make us poorer overall. For example, limits on agricultural imports may be good for British farmers, but they also increase food prices. The following sections set out some of the arguments in more detail. Arguments for Free Trade There are several key arguments in favor of free trade:  Free trade increases the size of the economy as a whole. It allows goods and services to be produced more efficiently. That’s because it encourages goods or services to be produced where natural resources, infrastructure, or skills and expertise are best suited to them. It increases productivity, which can lead to higher wages in the long term. There is widespread agreement that rising global trade in recent decades has increased economic growth.  Free trade is good for consumers. It reduces prices by eliminating tariffs and increasing competition. Greater competition is also likely to improve quality and choice. Some things, such as tropical fruit, would not be available in the UK without trade.  Reducing non-tariff barriers can remove red tape, thus reducing the cost of trading. If companies that trade in several countries have to work with only one set of regulations, their costs of ‘compliance’ come down. In principle, this will make goods and services cheaper.  In contrast, protectionism can result in destructive trade wars that increase costs and uncertainty as each side attempts to protect its own economy. Protectionist rules can tend to favor big business and vested interests, as they have the resources to lobby most effectively. 51 | P a g e  GE 319 – THE CONTEMPORARY WORLD Arguments for Protectionism While free trade increases the size of the economy as a whole, it isn’t always good for everyone:  As more countries experience industrial development, traditional domestic industries can decline. In the UK, for example, the shipbuilding industry has declined in the face of international competition since the 1950s and currently steel production faces increasing competition. Protectionism can help preserve jobs in these sectors, or at least slow the process of change.  Protectionism can also help build up new industries. In sectors with high start-up costs, new firms might find it difficult to compete if there is not support from government in the form of tariffs or subsidies. Once they have become competitive, such barriers can be removed.  Protectionism can be used to safeguard ‘strategic’ industries such as energy, water, steel, armaments and food. For example, ‘food security’ may be seen as important so that we can feed ourselves if something terrible happens to disrupt the system of world trade.  Some people worry that free trade deals can lead to a lowering of standards. Such deals might require us to let in goods and services even though they don’t meet our standards, which might then be cheaper than those made by domestic industries. For example, some people have been worried recently that a free trade deal with the US might let in imports of chlorine-washed chicken. There might also be pressure to reduce our standards for workers’ rights or environmental protection so that our companies can compete with companies in countries that have lower standards. NOTE: Please read the attached file in the UVE. re: Global Outlook–Pandemic–Recession.pdf 52 | P a g e