The current economic difficulties have led to many heart-wrenching scenes: a large number of companies have laid off employees, many have had to turn to temporary jobs such as food delivery and Didi, and many others are struggling to find jobs. At the same time, brick-and-mortar stores have closed down, and the streets and alleys are filled with slogans such as "clearance" and "prosperous shop transfer".
All of these scenes tell us about the plight of the economy. In this context, we have to think deeply, what happened to the economy this year, why is it so difficult?
To understand the current situation, we need to understand what isBusiness cycles
The so-called economic cycle, in simple terms, is the cycle of fluctuations in economic activity. For example, in the automotive industry, from the procurement of raw materials to the sale of final products, every link involves the generation and distribution of profits. At this time, you may ask, how exactly will the profits be distributed?Well, the use of profits can be divided into three scenarios: reinvestment, consumption, and saving. But in reality, not all profits are reinvested in production or consumption, and many times, people are more inclined to save, especially the rich.
This leads to a problem: socially produced goods cannot be completely consumed, and there will always be unsalable. As a result, businesses may lay off workers, workers will earn less, and their spending power will decrease, further exacerbating the contraction of the economy. This is the nature of the business cycle: people always want to accumulate more purchasing power, but excessive accumulation leads to economic instability.
Let's talk more specifically about why this year's economy has been particularly difficult.
The pandemic has hit the economy a global scale. Many industries have stopped work and production due to the impact of the epidemic, which has led to the disruption of the relationship between supply and demand. The shrinking consumer market and the difficulties in the operation of enterprises have put the economy in a predicament.
The intensification of international friction has also had a certain impact on the economy. Tensions between countries and frequent tariff measures have restricted the exports of many enterprises, resulting in uncertainty in production and operation, and also leading to a slowdown in economic growth.
The instability of financial markets has also been a reason for the economic difficulties this year. **The fluctuation of the real estate market, the rise in interest rates, etc., have made investors suspicious and afraid to invest easily, which has also had a negative impact on the development of the economy.
So, how do you break this cycle?
First, we need to strengthen international cooperation to address the economic impact of the pandemic. The global pandemic has had a huge impact on the economies of all countries, so the international community needs to strengthen cooperation to jointly address the challenges brought about by the epidemic. This includes strengthening vaccine R&D and production, and promoting the sharing and exchange of medical resources, which can only be effectively controlled and economic vitality restored through global cooperation.
Second, it is necessary to promote the smooth flow of international cooperation through measures such as reducing tariffs and expanding opening up. Friction not only harms the economic interests of various countries, but also disrupts the global chain and industrial chain. Therefore, all countries need to reduce tariffs, reduce barriers, expand opening-up, enhance cooperation and achieve mutual benefit and win-win results through dialogue and consultation. Only by strengthening the international community can we create more opportunities for the recovery of the global economy.
At the same time, financial supervision should be strengthened, the stability of the financial market should be maintained, and investors should be given more confidence. Since the beginning of this year, the market has hit too many people's confidence, although there are a lot of major positive information released, but the actual feedback lacks "endless ups and downs"!
The most important thing is that it is necessary to strengthen domestic demand, increase residents' income, and increase their spending power, so that the economy can get back on track. Promoting domestic demand is the key to achieving stable economic growth. This needs to increase residents' income and improve their spending power by increasing social welfare expenditures, raising minimum wage standards, and reducing taxes and fees.