The Great Recession of 2008-2010/11 is going to be a very tough time economically.  As I wrote in my Forecast for 2009, this economic collapse brings four words to mind.

The first word is contraction, which is the standard way to view a recession.  Economic activity contracts and we are in a recession, economic expansion represents the end to the contraction.  The contraction was severe in the fourth quarter and will be so in the first quarter and second quarter. Output and consumption are in a deep fall right now and will remain so.

The second word is cleansing which in this context means that old ways of doing business, of looking at only the upside, of embracing debt and extreme leverage must and will be cleansed from both the economy and the way that people think. The casino capitalism of the past 20 years will soon be viewed as an unsustainable exercise in individual and corporate greed.

The third word is reorganization.  To quote from the linked column above:

“Reorganization of almost everything that is part of society and how humanity operates within society.  This reorganization will happen to economic institutions, political and philosophical allegiances, geopolitical alliances, communications; all to a new global order that is getting ever more electronically connected.”

Finally, the fourth word is transformation.  “Transformation of almost everything into new ways of seeing, doing, understanding and living. All of this will ultimately move us into new transformative realms of consciousness and understanding.  That will take a decade, but the process is underway and the transition to it is what 2009 will be about.”

Now, there have been a number of stories in the media about how the credit lock down has imperiled green companies seeking additional lines of credit.  There have also been stories about the perception that since ‘green energy technology’ is more expensive than conventional energy technology the recession will slow the development of these new technologies because people are looking for cheap things across the board.  Well, there may be examples of this in the micro sense, but in the macro sense this is a completely incorrect viewpoint.

First, the contraction part of the Great Recession has greatly reduced energy consumption as people are driving and buying less, which means less greenhouse gases and less goods destined for landfills.  If the great economic machine that is contributing to the heating of the planet and the pollution of our environment has slowed, the damage it inflicts is lessened.  The idea of reuse, reduce and recycle now has taken on real economic meaning across the country and around the world.

Second the stimulus bill that was just passed dramatically, and immediately increases the amount of government funding on green energy technologies and the development of a 21^st century grid in the U.S.  Because of the dire economic situation a stimulus bill including this much needed and much delayed investment was passed.  The Obama administration, and before that, the campaign was consistent and clear that a significant part of our economic future and well-being is dependent on the development of alternative and renewable sources of energy.  The urgent need for a stimulus package allowed investments in this area to occur faster than might otherwise be possible.

This leads to the reorganization and ultimately transformation parts of the Great Recession.  Yes this will be a couple of years of economic hardship, pain and suffering.  Whenever there is a transition from one age to another there is creative destruction as the old order gives way to the new.  Unfortunately this process cannot occur without pain.

The view here is that when the U.S. does emerge from this recession in 2010-11 it will be a greener country with a new vision actually taking root in the realm of alternative and renewable energy.  It will prove to be true that this recession will change habits, stop rampant consumerism, increase conservation and provoke investment in renewable and alternative forms of energy.   It is ironic that this Great Recession will actually accelerate the country into a greener future faster than if it had not happened.