Economists are warning the globe against an imminent economic downturn exacerbated by a combination of different factors in recent times. Besides the covid-19 pandemic that left the global economy feeble, the unprecedented rise in the global fuel prices arguably due to climate change, and the Russian invasion of Ukraine, has further increased inflation as prices for food and other essential goods and services increase(Griffiths). Although the greatest impact has been suffered disproportionately by the poor and developing countries, majorly in Africa and Asia, the effects on the US economy have been significant. Despite the country scoring relatively better in terms of the rate of unemployment that remains historically low at 3.6 percent, strong economic revival, job creation, and significantly constant growth in consumer spending, there are warnings of a possible recession.
Although an economy can progress without peaks and troughs, classical and neo-classical economists argued that booms and busts are inevitable for capitalistic economies. Most countries, even those that recorded exceptional economic growth without recessions such as Australia succumbed to the global crisis caused by the covid-19 pandemic that distorted the global supply chain. As different countries struggle to get back on their feet, there is increased tension regarding the increasing economic volatility. A consensus has been developed around the possible causes of the current economic distortions with the most significant being supply shocks. According to Rosalsky, economic distortions emerge from a wide range of factors relating to production and business such as the “lock-downs that had a detrimental effect on manufacturing and shipment of goods across borders” (Rosalsky). Consequently, the covid-19 aftermath has exacerbated serious repercussions with the most evident being the risk of global food shortage.
Estimates by the United Nations suggest an increase in the global food prices by close to one third in 2021, fertilizer by half, and oil by approximately two-thirds and continues to rise. It is estimated that inflation is far more serious in countries prone to natural disasters. This calls for a comprehensive evaluation and international intervention to salvage the global economy. This would be through effective policies to stimulate and boost production. Producers could be incentivized through a working combination of fiscal and monetary policies to increase production as well as promote sustainability.
Griffiths, Robert. “With Food Prices Climbing, The U.N. Is Warning of Crippling Global Shortages”. Npr.Org, 2022, https://www.npr.org/2022/05/23/1100592132/united-nations-food-shortages.
Rosalsky, Greg. “Fear The Vibe Shift: Are We Entering A Recession?”. Npr.Org, 2022, https://www.npr.org/sections/money/2022/05/31/1101774189/fear-the-vibe-shift-are-we-entering-a-recession.