Why recessions can be good for the economy

Story from The Takeaway. Listen to audio for full report.

Unemployment remains perniciously high in the United States, and the economy is still struggling to find its footing. Some experts, though, think that a recession is the perfect time for entrepreneurs to start a new business and help the economy rebound.

“When you go back and look at the S&P 500, the largest 500 companies in America, I think that well over half, maybe two thirds, were started in times of depression or recession,” billionaire hedge fund manager Ron Barron told the BBC. And the reason for it is relatively simple that there’s a lot of people unemployed, so you can get great, talented people and costs of business starting up are lower, and people don’t have the opportunity to get high-paying jobs as much as they did in the past.”

The recession, according to Barron, is “setting the stage for tremendous wealth creation in the future.”

One person who embodies this positive take on the recession is Henry Balanon, co-founder of Detroit Labs. Balanon was laid off of his job in 2008, and he decided to start a company on his own.

“When everything’s going good, people tend to cruise,” Balanon told PRI’s The Takeaway. “When everything is up in the air, people start to make choices.” Often those choices can have big economic payoffs.

Balanon admits that startups like his may not solve the employment problems in the United States right away. He does emphasize, though, “it’s a good start, and I think that it’s a seed that needs to be cultivated.” He adds, “it may not seem like a lot, but all the initiatives happening now are going to add up to more opportunities in the future.”

With the help of a venture capital firm, Balanon now has a company with 12 employees, and he continues to hire. Though it didn’t seem like it at the time, Balanon says that getting laid off was actually a good thing, in the end. “If I wasn’t laid off,” he says, “I could very well be cruising still.”

———————————————————

“The Takeaway” is a national morning news program, delivering the news and analysis you need to catch up, start your day, and prepare for what’s ahead. The show is a co-production of WNYC and PRI, in editorial collaboration with the BBC, The New York Times Radio, and WGBH.