How Honesty Relates to Economic Recession

Honestly, what could be further from the truth than the link between honesty and recession in economics? One would presume dishonesty is related to the economic recession but not honesty. The economy is comprised of 1) people 2) businesses and 3) regulatory laws among other things. Therefore dishonesty in any one of these economic components can have an affect on the economy since they are an inherent part of the economy. 

Determining why and how much dishonesty within these aspects of the economy affect economic performance is the task at hand. However, determining what actually is dishonest is another important factor as this is a term that means different things to different people and organizations. After all, who is to say what is dishonest to perspective A, is not naive to perspective B?

Proportional impact of business practice

Business is fueled by a lot of things, but honesty is not one of the dominant aspects of this economic arcanum. Think for a moment about what drives businesses forward; things like productivity, liquidity, demand, lean operations, brand equity etc. These are the nuts and bolts of business practice that strongly influence short-term and medium-term performance. Apart from business tactics however, is the element of business strategy; those actions and events that have a less immediate and obvious affect on business and the economy.

Dishonest business strategy is more likely to have a larger impact on economic performance than dishonest business tactics. This is so because business strategy guides the ultimate direction in which a business moves more so than any short term spins, jibing, tacking or what not. The more businesses that have dishonest strategies, and the larger those businesses the greater the potential influence on the economy IF that dishonesty leads to fiscal failure or corporate calamity.

Dishonesty in business practice may therefore, negatively influence economic performance, but only if that dishonesty is connected in such a way to the economy, that it might perform badly. For example, XYZ corporation has a trillion dollars in market capitalization and has found an opportunity that it knows can be beneficial to its long-term bottom line. This opportunity could be a loophole, a demand vacuum, an innovation etc.

Depending on the nature of the opportunity itself, capitalizing on that opportunity could either be 'honest' or 'dishonest' which ultimately are determined by the business itself whether it be moral or amoral. If that dishonesty leads to an exploitation of a resource be it financial, labor or legally related, the chance that resource will be depleted increases. This brings us to economic resource management which is within the scope of government regulation.

Regulatory decision making and its economic impact

The next clue in this puzzle is the link between economic resource regulation and business practice. Dishonest business practice alone may have minor impact on an economy if the regulation of business has already accounted for such dishonest in its economic forecasting, strategizing and oversight. However, when this is not the case, or when actions are known to be deceptive per se, then the results can have a larger impact that's results may be foreseeable at least in part.

To illustrate, If object A moves north at 90 degrees and object B rests in its path, an interaction is likely to occur if both objects continue their course. Similarly, in economic regulation, lack of accounting oversight, weak derivative forecasting, and overly liquid mortgage financing also have their interactions. Even if an economist or regulators' goal of keeping mortgage rates low is honest in the sense that it is intended to promote economic growth, the result could be the opposite.

Thus in some cases, economic intent may not always be dishonest, but rather the opportunities made possible when tied to lax regulation and greater economic access to wealth can lead to greater dishonest exploitation of those opportunities hence the link between economic regulation, dishonesty and economic recession. Of course this is not to say, that still others may not see the chain reactions taking place and find either honest or dishonest opportunity within such, but that is another story.

An economy is only as good as the people within it

Regulators, businesses and economies alike are composed of people who are the essential ingredient in many human endeavors. Recessions are never really the Government's fault, Businesses' fault, or the economy's fault, rather it is the people who comprise and are responsible for such entities that are ultimately the cause for events. Institutions are empty shells without the people inside them, and their actions have affects whether they be intentional, unintentional, or contrived.

Mathematically, modeling the range and effect of human interactions in any given day, discipline, business, interaction etc. is a considerable undertaking not easily done at the spur of the moment. Thus, making a genuine, honest and accurate forecast of the result of dishonesty in the complete sense of the phrase difficult if not impossible for most except those with access to extensive processing capacity. Thus to say, dishonesty is linked to the recession is somewhat fallacious because actions taken are not always known as dishonest at the time, and consequently may be more naive than dishonest.

Honesty is an aspect of operational integrity whether it be within a financial system, governmental system or business practice. If honesty is not used within these practices effects occur. The extent of those effects is somewhat proportional to, and dependent upon the allowable and possible range of the affects of dishonest practice within business, regulation and the people that run them. In other words, if the economy is based on lies, and the economy is believed to be good, at some point the reality may be revealed along with its affects.