SHIP IN STORM

Invisible hand, prisoner’s dilemma, unemployment, growth, inflation rate, recession, stagflation, interest rate, fiscal policy, monetary policy, and many more are used to explain what is going on around us. Every day, we drive our cars or take public transportation vehicles to go our work or school. Usually everybody has breakfast before leaving their home, sometimes people go to their favorite team match or theater to enjoy. They pay their bill, they buy something cheap or expensive or they apply to bank to buy a house by utilizing mortgage. Then they watch economy news on tv or they read newspapers to know how economy is going on. All these things are in macro economics issues. On the other hand, companies run for making their profit maximize. They compete each other in competitive or oligopolistic market and sometimes they determine either quantity or price of their products. They follow developments in economy and decide their strategy based on these economic data. All these things are in micro economics.

World economy fluctuates periodically; sometimes time lags between global crises might be long and sometimes short. The last one started in 2008 and we still don’t know when it starts to recover. After 1 year, for the first time national economy grew in the last quarter. Economic growth was seen in some countries such as South Korea and this can be thought as a positive indicator for recovery. While we are seeing recovery in national economy, in Massachusetts unlike the past, economic performance is worse than nation’s. People’s wages, incomes have reduced and their purchasing powers have reduced as well. This seems a deteriorating spiral because companies cannot sell as much as they did before and due to reduction in sales they try to reduce costs by starting from wages. Then people’s wages reduce and they cannot afford to buy as much as they did. In end of 1920’s the similar situation lived in USA and the cure for this crises came from John Maynard KEYNES. Last stimulus program was an example of Keynes’ theory. Government expenditure increased and market’s cash needs were met. Now it is time to reverse spiral but authorities in economy should be careful about inflation rate especially after that kind of recovery.

Global crisis are the good examples for “butterfly effect theory”. If it happens in one of the biggest economy in the world, it spreads out immediately to all countries. Free movement of capital has pros and cons and nowadays we live the disadvantages of it. However, last week we got the good news concerning growth in USA national economy and this firstly will affect all states in North America then other countries gradually. Unfortunately, even if economy recovers after each depression, people lose their jobs, wages, and dreams in those times and the most suffered class in society affected from the crises is lower waged people.

Countries and people face with rain, storm, and thunders for a while but at the end sun always shines…

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