What makes an economy objectively “good”? People seem to complain about the economy being “bad” all the time but who/what determines if it’s truly “good” or “bad”?
In: Economics
Economic growth phase is generally considered good, life is easy, life in nice, everyone has money up to eyebrows, there are jobs enough for everyone, companies grow like mushrooms after rain etc.
However… there is a quote that applies here, “Hard times create strong men, strong men create good times, good times create weak men, and weak men create hard times”
When times are good, any sensible company focuses of growth above all else. Most relevantly, growth above efficiency. Why bother with difficult penny pinching when easy expansion can bring in way more money than you could ever save? But those small inefficiencies pile up, on level of individual companies and on level of the entire economy because everyone behaves the same.
And sooner or later, those inefficiencies start costing so much that the economic growth stalls and contraction starts. That is generally considered as bad economy. There is not enough money to go around, life is hard, many companies go bankrupt, people lose jobs etc.
But, who is thrown under the bus first? Where ever the money runs out fastest, the most inefficient companies go under first, the least necessary employees lose their jobs first. There is no growth to be had, so companies focus on improving efficiency. Which sets conditions up for another round of growth and the cycle repeats. That is why economy is cyclic.
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