Is it possible that we need recessions for the economy to stay healthy?

That’s the message from this article by Drake Bennett for The Boston Globe’s blog (“The good recession”). While most people focus on the harm recessions do to earnings, employment and consumer spending, Bennett takes a look at some potential long-term gains.

Amongst the benefits he finds: a slowing economy, some economists suggest, can help you live longer. During recessions people drink and smoke less, get sick less, and even die less than during boom times. People who worry about losing their jobs do things to keep them from getting laid off — they drink less, they fight less, they become less risk-taking. If they have less disposable income, perhaps they will spend less on drugs, alcohol, and cigarettes. Cut-backs in driving and car ownership should mean less traffic and fewer accidents.

That’s all fairly speculative, of course, and you could well argue that other factors — depression, fear, job-related stress — must surely increase during recessionary times, pulling people’s state of health in the opposite direction.

The purely economic impact of recessions over the long-term seems less controversial. To quote Bennet’sarticle:

The great Austrian economist Joseph Schumpeter thought of recessions the way a naturalist might think of forest fires: periodic purges that burn off dead wood and make room for new growth. It was in recessions that what Schumpeter famously termed capitalism’s ‘creative destruction’ was at its most ferocious: lean times sped up the process by which more adaptable companies and new industries pushed aside the less fit. [. . .] Economists do agree, however, that recessions help to right economies that have lost touch with reality. Recessions not only cull unhealthy companies, they expose financial gimmickry. They punish groundless optimism and the rampant speculation it feeds - in fanciful Internet ventures in the 1990s, for example, or in housing over the past few years.

We might all prefer less violent and painful ways of correcting excesses and mistakes in the economy, but as long as we want to enjoy the boom times, the busts that follow them seem fated to stay with us also.

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