What does recession mean?

What does recession mean? Economic recession may lead to the simultaneous decline of many economic indicators. Economic recession is characterized by a general decline in economic vitality, and a more serious sustained economic downturn is called depression. What does it mean to share the recession?

What does recession mean? 1 To a certain extent, people are highly worried about the recession precisely because the United States is in the longest period of economic expansion in history. But looking back, what exactly is a recession? In the complicated macroeconomic data, there is still room for discussion on the definition of economic recession.

The current economic expansion of the United States has become the longest expansion period in history. At least, the staff of the Business Cycle Measurement Committee of the National Bureau of Economic Research thinks so.

However, many other countries have experienced a longer period of expansion-at least under several standard definitions. This article will discuss these different definitions in more detail. Traditional definitions may mask the real recession.

There is no universally agreed definition of recession. The most common definition is that gross domestic product (GDP) has shrunk for at least two consecutive quarters. According to this definition, the honor of not having a recession for the longest time was won by Japan, and its GDP did not decline for two consecutive quarters from1late 1940s to 1993.

Australia and the Netherlands also entered the top three. Australia has never experienced two consecutive quarters of GDP contraction since 199 1, while the Netherlands avoided two consecutive quarters of GDP contraction from 198 1 to 2008. According to this definition, from 1950s to 1975, many western European countries avoided economic recession. Some of these countries, such as Austria, have sustained economic growth until 198 1. (South Korea also avoided the recession defined as 1979 in the mid-1950s. )

Unfortunately, this general definition is arbitrary and will cover up the real recession.

The decline of gross domestic product from the peak.

For example, the United States did not experience two consecutive quarters of GDP decline from 199 1 to 2008. This means that there is still a long way to go to break any domestic record in this round of economic expansion since 2009. However, the United States did experience a recession from 200 1 to 2003, because GDP contracted for several consecutive quarters and then slowly increased. For a long time, employment and investment have fallen sharply.

A better example is Japan. From 1974 to 1975, Japan's economy went down seriously because of the soaring oil price, although Japan's GDP did not contract for two consecutive quarters at that time. One way to solve this problem is to observe the level of GDP relative to the previous peak. From this perspective, Japan's recession in the mid-1970s is obvious:

This way of looking at things also makes it easier for us to distinguish whether the economy is recovering from recession or in real expansion that can improve living standards. Unfortunately, this method is also flawed, because GDP itself cannot measure economic performance well. For the whole society, what is important is the growth rate of GDP relative to a certain reference standard.

Per capita GDP of working-age population

There is no way to accurately define this reference standard, but the most important factor is the working-age adult population. For example, if the potential labor force in a society grows at a rate of 2% per year, then the continuous GDP growth 1% can only be considered as a recession. In contrast, even if GDP is shrinking, a society with a decreasing adult population of working age can perform well.

One of the most important places of this problem is Mexico. After experiencing economic prosperity in the 1970s, Mexico fell into a serious depression in the 1980s. According to official data, Mexico's economy had fully recovered before 1990, and then experienced nearly 30 years of growth, with only a few intermittent short-term downturns. However, with the rapid population growth in Mexico as the adjustment factor, economic growth presents a completely different picture. From 198 1 to 1989, the per capita GDP of the population aged 20 to 64 in Mexico decreased by 25%. Since then, Mexico's economic growth has been weak and cannot make up for these losses:

Even this picture is a little misleading. Since 198 1, the average living standard of Mexicans has improved slightly (by about 0.7% every year), because the main population has changed from children who are too young to work to adults who produce more than they consume. In other words, the decline in the proportion of people who depend on others for survival offset the huge blow to productivity.

Generally speaking, the length of economic expansion period is usually not as interesting as its "amplitude". Australia may have the best record of avoiding economic recession. But as far as the overall growth rate is concerned, there are not many impressive records in the country, especially considering the rapid growth of the working-age population in the country.

This is especially obvious when comparing the per capita GDP growth rate of the population aged 20-64 in Australia, Japan and Spain. Since 2007, Japan and Spain have experienced several serious recessions, and their economies (deflation, bursting of real estate bubble and banking crisis) are often regarded as counterexamples that need warning. However, in the past few decades, the per capita GDP growth of Japan's population aged 20-64 is 4% higher than that of Australia, while Spain is almost the same as Australia.

population migration

Population migration adds another problem to this analysis. The average living standard of the working-age population in Australia may be comparable to that of the working-age population in Spain, but this does not fully represent the economic situation of the two countries.

Based on the population-adjusted indicators, Australia seems to be underperforming, because it attracts a large number of people from other parts of the world, which is partly due to its strong job market. In contrast, Spain looks relatively good, because since 2008, Spain has experienced a large number of potential labor outflows. 200 1 By 2008, millions of people (mainly from Latin America) moved to Spain to participate in the then prosperous economy. Many of these workers left after the economic depression, and thousands of Spaniards also left. They went to other places to find a better future.

Compared with Australia, the number of net immigrants in the United States is much less, but much more than that in Spain. During the same period, the performance of American economy was no less than that of Spain. )

No single statistical data can explain the performance of an economy. But I hope to clarify some important issues with the most commonly used indicators here.

What does recession mean? 2. Economic recession is a kind of view of bourgeois economists on economic crisis, which generally refers to economic recession. People think that the temporary "recession" phenomenon in economic development is the economic crisis. Economic recession is characterized by a general decline in economic vitality, followed by a large number of workers unemployed. A severe recession will be defined as economic depression.

Economic recession may lead to the simultaneous decline of economic indicators such as employment, investment and corporate profits, and other accompanying phenomena include falling prices (deflation). Of course, when the economy is stagflation, prices may also rise rapidly.

A devastating economic recession is called economic collapse. Economic recession is related to the decline in consumption (probably loss of confidence in the future), excessive commodity inventory, insufficient technological innovation and new capital accumulation, and randomness of the stock market.

One of the characteristics of market economy is the existence of economic cycle, but economic recession does not always exist. In the field of economics, there are many arguments about whether government intervention can straighten out the economic cycle (Keynesianism), expand the influence of the consequences of the economic cycle (real business cycle theory), or create the economic cycle (monetarism).

Economic retrogression, namely economic recession, has both negative and positive effects on today's society.

The negative effects of economic recession

1, mass unemployment

2, rising prices, inflation or deflation and falling prices.

3. People's life loses vitality and their consumption decreases.

4. Affecting industrial production may make enterprises lose confidence in the future.

5. Enterprises will no longer venture into new fields, which will affect enterprise innovation.

The positive effects of economic recession

1, which may cause social change.

2. Eliminate some backward social productive forces.

3. Change people's work and work habits.

4, increase people's sense of urgency.

5. Respond to the society and promote the change of social productive forces.