Recession is a problem that is peculiar to the capitalist system. In this system, production is geared to maximise the profits of the capitalist class. The monopoly capitalists, who dominate the markets for commodities and credit in the present stage of capitalism, are satisfied with nothing less than the maximum rate of profit. The drive for maximum profits in the hands of a tiny minority leads to maximum exploitation of labour and impoverishment of the toiling majority. As a result, the capacity to produce keeps increasing while the capacity of the majority to purchase what is sold in the market remains restricted. This periodically leads to crises of overproduction. When such a crisis occurs, capitalists scale down production and jobs are destroyed.

Impoverishment of the working people leads to recession. And the typical response of the capitalist class to the problem of recession is to further impoverish the working people.

In the United States, impoverishment of the working class has been a constant trend for the past five years – as shown by the steady decline in the median income. This was accompanied by extension of consumer credit and initially cheap housing loans, which kept up demand growth for a period. The present financial crisis has brought about a turning point, when working people have become wary of spending on credit and becoming more indebted. This is leading to a huge shrinking of the market for consumer goods. It is leading to the loss of lakhs of jobs.