Euphemism in Economics, 06 10 2025
Euphemism is a polite way for saying something harsh, a wolf in sheep’s clothing. Calling older people, senior citizens, or a fat person well fed, or sacking employees letting them go, are some examples. But economists have mastered the art of euphemism: to sell bitter medicine in sweet tablets for more than a century. Just think will people vote for economics panics, turning regulatory bodies into businesses, lending to people with poor credit history, or promoting individual interest over national interest. But this is what economists, and policy makers have successfully done.
Calling borrowers with poor credit records as sub-prime credit fueled the US housing boom. Smart investment bankers sold inferior mortgages bundled together as sub-prime financial instruments to pension funds and mutual funds leading to the credit crisis in 2008 resulting in Lehman Brothers collapse. Driven by profits, the rich bankers fueled the bubble bigger and bigger till it burst and pushed the global economy into a major recession.
Rich investment bankers benefited from selling poor credit instruments and when the bubble burst, the cost of economic recovery of hundreds of billions of dollars was borne by the US government, i.e. the masses bailed out large financial institutions that profited from the bubble. A huge cost, but for the euphemism of calling poor credit as sub-prime, it may not have happened.
Stock exchanges, the quasi-regulators for stock trading were commercialized across the globe in the last few decades. It did not get the deserved attention as it was euphemistically called de-mutualization, to prevent public outcry. Until the 1980’s, stock-exchanges were primarily run as a stockbrokers’ co-operatives for mutual benefit. They had the limited financial goal of recovering their operational costs. With de-mutualization, or to be more explicit commercialization, stock exchanges today are commercial enterprises owned by shareholders and run to maximise profits. Is the unfettered growth of derivatives that we see in India a result of this?
While Sub-prime crisis cost the masses billions of dollars, only time will tell how commercialization of stock exchanges will affect the masses. Today only the ill-equipped derivative trader is losing money, but tomorrow? I hope I am proved wrong, but human history unfortunately has shown otherwise.
Until the 20th century reduction in economic activity in a country was called panics as it resulted in unemployment and heightened people’s distress. 1907 was a famous panic in the USA. Following the 1929 stock market crash and the resulting panic, the incumbent President Herbet Hoover use the euphemism of depression to reduce negative sentiment in the runup to re-elections. Despite the sugar coating, he lost the elections as the poor were hard hit.
When the 1930’s depression depended, it earned the title of the Great Depression. We saw a repeat of this sentiment playout following the 2008 Lehman Brothers crash, when each time the term ‘great depression’ was used, it was subtly countered by great recession, a much milder term.
The much-touted globalization was eagerly embraced in 1980s across the world by the unsuspecting public. Little did they know they were promoting individual businesses to maximize their profits at the cost of national interest. This euphemism wore out when the interest of the richest, the US economy, was adversely affected; result the recent tariff wars initiated by Donald Trump. National interest now replaces globalization across the world as each country tries to protect itself.
My take away, whenever euphemism is used by the policy makers or the rich businesses, always check their latent motive, as we will pay the price, if not now, surely later.
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