How can a recession see a drop in profits and a rise in poverty? Where does all the money go, if not to the businesses or people?
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I’ve struggled with this concept also. My stumbling block is that I don’t truly, deep down, understand that the economy isn’t a zero-sum system.
The explanation or answer that most resonated with me was told to me by an old college Econ professor of mine, who suggested I imagine that all of a sudden all of the gasoline on the planet simply ceased to exist.
That would be real, material wealth that no longer existed. The entire world economy would have suffered a loss, and nobody would have gained the equivalent wealth to offset it.
Similar things can and do occur in the real world. If behaviors change – suppose we learn that eating beef WILL cause you to die sooner and everybody confidently believes that, and suddenly stops eating beef, for example – then suddenly a lot of wealth related to the beef industry just diminished.
(REALLY, believe me, it was just a hypothetical. I’m not giving up my cheeseburgers or steaks!)
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