Wednesday, March 18, 2009

Preparation for Crisis (3) - Economic Impact

At the economic level the main impact of an economic crisis will be a reduction in the division of labour. Trade will become more difficult, which will reduce the level of specialisation. New Zealand may not be able to afford to import so many autos, computers and flat screen television. A decline in the volume of trade and in the degree of specialisation will make us all worse off, but it does not mean we have to return to self-sufficiency and subsistence.

Whatever happens, we should maintain as much division of labour as possible. When trade gets more difficult, we might need to shift to sharing to get the benefits of specialisation, but we should not return to subsistence unless that is the only alternative. Sharing can strengthen the division of labour when trade weakens it. A return to self-sufficiency should not be necessary, if people have learnt how to share.

2 comments:

brandbuster said...

is that "should be unnecessary"?

Blessed Economist said...

Thanks I have corrected it.