This in unemployment, decrease in consumer spending and Keynesians

This
essay seek to explain the great recession and great depression as both economic
crisis that erupted as a result of government failure to regulate borrowing of
more than you can pay and the stock market crash. The implication of both
events tends to be similar, for example, increase in unemployment, decrease in
consumer spending and Keynesians economic was required to restart the economy.
However, both events have different impacts on Canada , during the great
depression there was increase in unemployment levels, decrease in consumer
spending  while in recession period
Canada was doing much better than other countries. The global economic crisis
resulted due to the financial crisis and was a significant downturn in the US
economy in 2008. The economic turmoil spread over many foreign countries
leading to most serious recession since the Second World War. The great
recession started as a result of the failure of one of the largest investment
banks in the world (Richardson, 2010) on September 15, 2008. Over the following
months, US stock market plummeted, employees were laid off by successful
companies and liquidity dried up (Acharya, 2010). It is estimated that the
number of jobless people reached to 212 million which is an increase of 34
million in comparison to 2007 by the International Labour Organisation and
investors.

A
concern was raised by the World Health Organization over the crisis impact on
global health, and the Integrated Multi-sectorial Action was assigned the role
to monitor and protect the health of the most vulnerable and weak people in the
society. This aimed at enhancing equitability
among the people.

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There
is a worldwide concern that the significant impact of the global economic crisis
increased suicide rates in the world as a result of economic downturns and
increased level of unemployment. Economic downturns have been found to have an
impact on working men, causing a higher number of men committing suicidal acts
than women. In countries like United States, Italy, and England there was a
high rise in suicide crisis during the 2008 recession.

The
great recession erupted due to the global economic crisis of 2008; it cast its long shadow on the economic fortunes of
many foreign countries. The recession started as a result of the American
foreigners selling risky mortgages to questionable creditworthiness
borrowers.  This recession also started
as seemingly isolated turbulence in the sub-prime segment of the United State housing
market, it then mutated into a full-blown recession by the end of 2007(Andrew,
2009). Overall, since the second world war, 2009 was the first to face the
effects of the greet recession which is an unfortunate turnaround of the years
2002-2007.The wake of the global recession has led to considerable criticism of
economic profession by the leading scholars (Krugman 2009) criticises his
fellow economists for their blindness to the very possibility of the massive
failure in the market economy (Galbrith 2009) criticizes economic professions
by arguing that both explicit and implicit intellectual collusion made it
difficult for the business leading members (invariably associated with elite
American universities) to promote  and
enhance a genuine discourse based on alternative views(Andrews, 2010).

The
failure of the economic profession resulted in the collapse of Lehman brothers,
risk-loving banks and investors around the world which reversed the economic
perception. The complexity of the mortgage-backed securities made them unaware
of the true extent of the liabilities linked ultimately to a rapidly
deteriorating United States housing sector (Taylor, 2009) .This recession
happened despite the availability of warning signs like sizeable current budget
deficit signs in United States, United Kingdom and other advanced economists
that were financed by the excess saving of the emerging economist (the global
current account imbalance).

The
main impact of the recession was growth deceleration which was felt by mainly
the developing countries, but there were cases of outright recession too. It
was mostly felt in countries like Turkey, Mexico, Ukraine, Armenia and the
Baltic States. However, the successful globalizers of the recent times have
taken a significant downturn which has been crucial for kick-starting the
recovery in the year 2009 (Andrews, 2009). Nevertheless, some of the countries
like China maintained their high level of growth through the massive stimuli
and support offered to them by the Chinese authority. The Indian Economy has
been resilient to high domestic demand causing a drastic fail in their level of
growth. The reduction in the number of jobs during the recession resulted in an
increase in poverty level, loss of health insurance facilities by most affected
people as while as families and also falls in the level of income to employees
(Fallon, 2010). The explosion of the housing bubble and the fall in the stock
market ushered the decline of most families’ wealth; this resulted in a
significant change in the economy (Richardson, 2010). This effect highlights
the impact of the Great Recession on the labour market and working families.

During
the great recession, there was the emergence of retail. For instance, the
Muslim mall which was as a result of
Muslims taking over the massive vacant spaces during the recession period and
they developed the shopping malls hence
making use of the mostly deserted areas. During the third quarter of the
recession, real gross domestic product started contracting, however, in early
2009 it began falling at a drastic rate (Taylor, 2009). The level of
unemployment increased between the year 2007 and 2008, in December 2007, the
unemployment rate was at 4.9 per cent, but by the end of the year, unemployment
rate had increased to 10.1 per cent. The recession also led to pollution of the
environment due to humanmade emission whereas the International Energy Agency
had expected there would be a decrease in pollution levels after the occurrence
of recession. Capital investment also declined in the first quarter of 2009 by
nearly 4 per cent which is a great deal in the economy.

The
Great Depression took ten years that is from 1929-1939 and was a significant
downturn in the economy of the industrialized world. This depression also
crippled the presidency of Herbert Hoover leading to the election of
Frankling.D.Roosevelt in 1939 who promised a new deal; Roosevelt would be
longest-serving president of the United States. 
In 1929, as the expansion of the stock market reached to maximum, the level
of unemployment had increased and production level declined which lead to
increase in prices (Ernst, 2008). Additionally, wages at that time were low;
consumer debt was growing, the agricultural sector of the economy was
struggling due to drought and decline in food levels, banks had an excess of
significant loans that could not be in liquid form. Most economist point to the
stock market crash of September 24, 1929, as the essential start point for the
depression, however, there are other events which contributed to the high
depression. The significant factors are;

First,
the stock market crash of 1929. On October 24, there was a wave of panic as
investors feared the occurrence of the stock market crash which steered selling
of shares at high prices. Millions of shares were traded in October causing
millions of shares to become worthless, and investors who had bought on margin
were wiped out entirely. The tension and inadequate knowledge of their deed led
to more loss of shares in the next two months.

Second,
there was a reduction of purchasing power across the board. With the investment
becoming worthless, spending by customers and companies come to a standstill,
the rate of saving declined which led to a decline in the rate at which banks
were offering credit to people. This effect resulted to workers being led off
en mass and most employees become jobless. The unemployment rate rose above 25
per cent, which meant less spending to help alleviate the economic situation (Ernst,
2008).

Third,
the great depression affected the economic policy between America and Europe.
As great depression become intense, the government took the responsibility
vowing to protect the United States economy from their competitors and restore
their economic level. The government fulfilled their responsibility by imposing
high taxes on the imported goods hence making them expensive. American traders
retaliated by imposing tariffs on the United States goods causing trade to fall
by two-thirds.

Fourth,
natural disasters like drought emerged in the country. Environmental
destruction profoundly contributed to great depression. That involved a one-year
drought characterized by massive dust storms which choked towns, killing crops
and livestock, sickening of people and causing millions in damage (Andrew ,
2009). Lastly, there was a failure of banks which was created by the collapse
of the stock markets. People panicked, and they started withdrawing their
money, causing bank deficit as people desperately withdrew their money which
forced more banks to shut down. Over the decade more than 9000 banks had
failed, which worsened the situation leading to less and less spending.

The
great depression also resulted in social change and panic to most of the citizens.
The citizens become cautious about the stock market, apt to hoard food, wary of
banks and opt to remain self-employed to avoid being jobless in case of such
happenings again. Increased mass migration where people shifted from the rural
areas to the urban areas in search of food, security,
and employment (Ernst, 2008). The role
of government expanded to an unprecedented level which continued even
after the recovery of the great depression. Roosevelt deal aimed at pulling
America from the great depression by addressing high rates of unemployment and
poverty. An array of services, applications, subsidies, and regulations were
introduced to promote the deal. Introduction of the stock market and bank
regulation which involved, strict trading and banking regulations were
presented, as well as financial protections, enforced by the newly formed
Securities and Exchange Commission (SEC) and the Federal Deposit Insurance
Corporation (FDIC) (World Bank ,2009).

There
is an excellent relationship between the great depression of 1930’s and the
great recession of 2008 which includes the similarities and differences between
them. The central analogy is the primary cause of both which lies under the
federal government. In the case of great depression, the federal reserve kept
the interest rates in the 1920’s low and increased in 1929 to halt the
resulting boom which was a great deal of investment. The sky-high Smooth-Hawley
was signed into law by President Hoover, which stifled trade and damaged
American exports throughout the 1930s resulting to decline in prices of exports.
In both events there is discrimination in employment where African American was
highly subjected to being fired from work than the whites (Weber, 2009).
Finally, the President signed a massive tax increase into law in 1932, which
halted entrepreneurship.

In
the case of great recession, the government was involved where it started
pushing the rule of home ownership with great ease even to creditworthy people.
This endangered mortgage-backed security built on dubious mortgage loans when housing
markets took a downturn which made most American banks to deteriorate.

 However, there were some differences between
the great depression and the great recession which include; the great recession
was caused by perverse incentives created by the government and they resolved
their problem more skilfully through an intelligent government response while
great depression was caused by inadequate legislation and inadequate
interventions by the government. The state response in both events deferred,
during the depression the state responded by raising taxes and cutting spending’s
while during regression they used federal stimulus plan which gives fiscal
relief to states to reduce the impact of tax increases. The rate of
unemployment in depression period was 25 per cent while that of the recession
was 8.5 per cent. The decline of the economy during the great depression was
26.5 per cent (1929-1933) while economic downturn experienced during recession
period was 3.3 (second quarter 2008-first quarter 2009). There was also a
difference in price changes where during depression prices increased by 25 per
cent while in recession period prices increased by 0.5 per cent.

There
is much difference in the rate at which the manufacturing sector of the United
States declined. During the depression era industrial production dropped only
by 12 per cent that is within the first three quarters while the decline in
industrial production was higher all the three quarters during the great recession.
There was a difference in the rate of bank foreclosure. During the great
depression, 50 per cent of banks failed while during the recession period only
0.6 per cent of the banks failed. When banks are not in good position to lead
there is stagnation in the developing of the business. There was a decline in
the real gross domestic product by 30 per cent during the great depression
period which was much higher than that of the recession period. The industrial
production had a three-year-long decline during the great depression while
during recession period it was a small decline whereby growth continued later
slowly. However, the major reason why the great recession differs from depression
is the presence of the housing markets that sustained the financial and labour
market crisis. The housing market had a high increase in the year 2004 0f 49
per cent but it dropped drastically by 15 per cent after the bubble burst in
2008.  

In
Canada great recession had more impact on the labour force; the 2008 recession
was much less severe for Canada’s labour market than the recessions that began
in 1981 to 1990. In those two events, the unemployment rate rose above11.0 per cent,
compared with 8.3 percent for all of 2009 (using annual averages, which are
more revealing of the structural changes). As well, employers increased working
hours to reduce their labour input during the recession. This differed from the
previous two recessions when jobs and hours worked fell by the same amount.
Some of the labour hoardings were encouraged by work-sharing programs under the
employment insurance system. By hoarding labour, employees were not required to
be hired by the employer. During recovery 2009; there was the lengthening of
the labour force and work week to cater for increased demands that dampened the
initial upturn of employment during the recovery. It was attributed by the
council of advisors that half of the decline of the economy had impact to the
aging during the Great Recession. This also had negative impact to the economy
since the aging involved the working group.

 The great depression in Canada had impacts on
different groups which includes; the industries, individuals, students and the
employed. The employed lost their jobs and received minimal income that could
not cater for all their needs while for the unemployed there were no jobs
available for them. The students were affected in that most of them were forced
to leave their studies as their parents were unable to withstand their school
expenses and necessities (Fallon, 2009). For the industries, it becomes much
difficult to cater for their daily expense as there was no capital left in
their banks. In addition to that; Canadians depended on government for relief
food and other basic needs like clothing and shelter.

 The difference between the great depression
and recession in Canada was experienced in the unemployment rates and the real
gross domestic rates. The rate of unemployment during the great depression was
less intense compared to that experienced during the recession era. The gross
domestic product declined by over 5 per cent during the national recession which
was much higher compared to great depression rate (Bivens, 2009).

The
great depression in Canada had severe impacts on the following; unemployment, Prairie
Provinces, teachers, women and the labour force. By 1930, most of the people
had lost their jobs during the event leading to high dependency on government
assistance. Under the labour force, the case study of two cotton and hosiery
and knitting conducted by four Canadian textiles explain the business response
towards the economic crisis. The women took the role of homemakers; this is
because of unsteady flow of income hence they were forced to cater for food,
clothing and medical care for their family. Birth rates regulations were
introduced to reduce the rate of birth until there was enough finance to take
care of their needs. There was high discrimination of gender where the women
lost their jobs if their husbands were employed causing a high decline in the
rate at which they were represented in the white collar jobs (Heuer, 2009). The
working class militancy increased during the depression period who conducted
strikes and protests many of which resulted in violence with the police
therefore increasing mortality rate.

In
conclusion, the economic crisis did not only affect the levels of unemployment
in the countries but also had impact on various groups like the industries, students,
and more so the investment sector. The industrial production declined due to
decline in agricultural production and inadequate finances’ to fund its
operation which was as a result of failure of the banks. The banks were also
affected where they become bankrupt and the people didn’t save their money any
more leading to bank closure. The students were affected due to inadequate
income hence their parents could not afford to cater for their school
necessities. The essay also indicates that if the government and the economist
had performed their duties well, both events couldn’t have massive effects to
the economy.it can also be concluded that the great recession of 2008 had more
and heavy impacts on the economy than other economic crisis experienced before.

Lastly,
there is a range of complex and interrelated factors behind the emergence of
global financial crisis, which includes the unstable monetary policy, global
deficit, misperceptions of risk and inadequate financial regulation. This essay
indicates how economies around the world have been affected resulting to
increase in unemployment level. Hoarding of money was due to the stock market
crash in New York which was accompanied by fall in consumption levels. According
to the essay, it can also be concluded that, the recovery process may be tough
due to premature withdraw of package stimuli and the challenge of controlling
the financial sector so as to regulate the rate of borrowing.