Editing Economic depression

{{Short description|Sustained, long-term downturn in economic activity in one or more economies}}

An '''economic depression''' is a period of carried long-term economic downturn that is the result of lowered economic activity in one or more major national economies. It is often understood in economics that economic crisis and the following recession that may be named economic depression are part of economic cycles where the slowdown of the economy follows the economic growth and vice versa. It is a result of more severe economic problems or a ''downturn'' than the [[economic recession|recession]] itself, which is a slowdown in economic activity over the course of the normal [[business cycle]] of growing economy.

Economic depressions may also be characterized by their length or duration, showing increases in [[unemployment]], larger increases in unemployment or even abnormally large levels of unemployment (as with for example some problems in Japan in incorporating digital economy,<ref>{{cite journal | url=https://www.eastasiaforum.org/2022/09/21/supply-and-demand-issues-hinder-japanese-digital-transformation/ | title=Supply and demand issues hinder Japanese digital transformation | journal=East Asia Forum Quarterly | date=21 September 2022 | volume=14 | issue=3 | pages=31–33 }}</ref> that such technological difficulty resulting in very large unemployment rates or lack of good social balance in employment among population, lesser revenues for businesses, or other economic difficulties, with having signs of [[financial crisis]], that may also reflect on the work of banks, or may result in [[banking crisis]] (in various ways that may be for example unauthorized transformations of banks), and further the crisis in [[investment]] and credit; that further could reflect on innovation and new businesses investments lessening or even shrinking, or buyers dry up in recession and suppliers cut back on production and investment in technology, in financial crisis that may be more country [[sovereign default|defaults]] or [[sovereign debt|debt]] problems, and further in feared businesses [[bankruptcies]], and overall business slowdown. Other bad signs of economic depression could be significantly reduced amounts of [[trade]] and [[commerce]] (especially [[international trade]]), as well as in currency markets that maybe fluctuations or unexpected exchange rates with observed highly volatile currency value fluctuations (often due to relative currency [[devaluation]]s). Other signs of depression are prices [[deflation (economics)|deflation]], [[financial crisis|financial crises]], [[stock market crash]] or even [[bank failure]]s, or even specific behaviour of economic agents or population, that are also common or also non common elements of a depression that do not normally occur during a recession.

==Definitions==
In the United States the [[National Bureau of Economic Research]] determines contractions and expansions in the business cycle, but does not declare depressions.<ref name="nber.org">{{cite web |url=https://www.nber.org/cycles/recessions_faq.html |title=The NBER's Business Cycle Dating Procedure: Frequently Asked Questions |publisher=Nber.org |access-date=7 September 2012 |url-status=live |archive-url=https://web.archive.org/web/20121008141654/http://www.nber.org/cycles/recessions_faq.html |archive-date=8 October 2012 }}</ref> Generally, periods labeled depressions are marked by a substantial and sustained shortfall of the ability to purchase goods relative to the amount that could be produced using current resources and technology ([[potential output]]).<ref>{{cite web |url=http://www.infoplease.com/ce6/history/A0821657.html |title=Private Tutor |publisher=Infoplease.com |access-date=7 September 2012 |url-status=live |archive-url=https://web.archive.org/web/20120913025403/http://www.infoplease.com/ce6/history/A0821657.html |archive-date=13 September 2012 }}</ref> Another proposed definition of ''depression'' includes two general rules:<ref>{{cite news | url=http://www.economist.com/finance/displaystory.cfm?story_id=12852043 | newspaper=The Economist | title=Diagnosing depression | date=30 December 2008 | url-status=live | archive-url=https://web.archive.org/web/20090215002935/http://www.economist.com/finance/displaystory.cfm?story_id=12852043 | archive-date=15 February 2009 }}</ref><ref>{{cite web |url=http://businesscycles.info/recession-definition/ |title=Home Improvement Tips and Techniques &#124; Business Cycles |access-date=15 April 2009 |url-status=dead |archive-url=https://web.archive.org/web/20090202110823/http://businesscycles.info/recession-definition/ |archive-date=2 February 2009 }}</ref>
# a decline in real GDP exceeding 10%, or
# a recession lasting 2 or more years.

There are also differences in the duration of depression across definitions. Some economists refer only to the period when economic activity is declining. The more common use, however, also encompasses the time until the economic activity has returned close to normal levels.<ref name="nber.org"/>

A recession is briefly defined as a period of declining economic activity spread across the economy (according to NBER). Under the first definition, each depression will always coincide with a recession, since the difference between a depression and a recession is the severity of the fall in economic activity. In other words, each depression is always a recession, sharing the same starting and ending dates and having the same duration.

Under the second definition, depressions and recessions will always be distinct events however, having the same starting dates. This definition of depression implies that a recession and a depression will have different ending dates and thus distinct durations. Under this definition, the length of depression will always be longer than that of the recession starting the same date.

A useful example is a difference in the chronology of the Great Depression in the U.S. under the view of alternative definitions. Using the second definition of depression, most economists refer to the Great Depression, as the period between 1929 and 1941. On the other hand, using the first definition, the depression that started in August 1929 lasted until March 1933. Note that NBER, which publishes the recession (instead of depression) dates for the U.S. economy, has identified two recessions during that period. The first between August 1929 and March 1933 and the second starting in May 1937 and ending in June 1938.<ref>{{cite web |url=https://www.nber.org/cycles/ |title=US Business Cycle Expansions and Contractions |publisher=National Bureau of Economic Research |access-date=1 October 2008 |url-status=live |archive-url=https://web.archive.org/web/20090219215409/https://www.nber.org/cycles/ |archive-date=19 February 2009}}</ref>

==Terminology==
Today the term "depression" is most often associated with the [[Great Depression]] of the 1930s, but the term had been in use long before then. Indeed, an early major American economic crisis, the [[Panic of 1819]], was described by then-president [[James Monroe]] as "a depression",<ref name="hnn">{{cite web|url=http://hnn.us/articles/61931.html|title=When Did the Great Depression Receive Its Name? (And Who Named It?)|website=hnn.us |access-date=9 May 2018|url-status=live|archive-url=https://web.archive.org/web/20130901125648/http://hnn.us/articles/61931.html|archive-date=1 September 2013}}</ref> and the economic crisis immediately preceding the 1930s depression, the [[Depression of 1920–21]], was referred to as a "depression" by president [[Calvin Coolidge]].

However, in the 19th and early 20th centuries, ''financial'' crises were traditionally referred to as "panics", e.g., the 'major' [[Panic of 1907]], and the 'minor' [[Panic of 1910–1911]], though the 1929 crisis was more commonly called "The Crash", and the term "panic" has since fallen out of use. At the time of the Great Depression (of the 1930s), the phrase "The Great Depression" had already been used to refer to the period 1873–96 (in the United Kingdom), or more narrowly 1873–79 (in the United States), which has since been renamed the [[Long Depression]].

Common use of the phrase "The Great Depression" for the 1930s crisis is most frequently attributed to British economist [[Lionel Robbins]], whose 1934 book ''The Great Depression'' is credited with 'formalizing' the phrase,<ref name="hnn"/> though US president [[Herbert Hoover]] is widely credited with having 'popularized' the term/phrase,<ref name="hnn" /><ref>''The Glory and the Dream: A Narrative History of America, 1932–1972'', William Manchester</ref> informally referring to the downturn as a "depression", with such uses as "Economic depression cannot be cured by legislative action or executive pronouncement", (December 1930, Message to Congress) and "I need not recount to you that the world is passing through a great depression" (1931).

==Occurrence== 
Due to the lack of an agreed definition and the strong negative associations, the characterization of any period as a "depression" is contentious. The term was frequently used for regional crises from the early 19th century until the 1930s, and for the more widespread crises of the 1870s and 1930s, but economic crises since 1945 have generally been referred to as "recessions", with the 1970s global crisis referred to as "[[stagflation]]", but not a depression. The only two eras commonly referred to at the current time as "depressions" are the 1870s and 1930s.<ref name="krug2010">{{citation | url = https://www.nytimes.com/2010/06/28/opinion/28krugman.html | first = Paul | last = Krugman | author-link = Paul Krugman | title = The Third Depression | date = 27 June 2010 | journal = The New York Times | url-status = live | archive-url = https://web.archive.org/web/20120411051630/http://www.nytimes.com/2010/06/28/opinion/28krugman.html | archive-date = 11 April 2012}}</ref>

To some degree, this is simply a stylistic change, similar to the decline in the use of "panic" to refer to financial crises, but it does also reflect that the [[economic cycle]] – both in the United States and in most [[OECD]] countries – though not in all – has been more moderate since 1945.

There ''have'' been many periods of prolonged economic underperformance in particular countries/regions since 1945, detailed below, but terming these as "depressions" is controversial. The 2008–2009 economic cycle, which has comprised the most significant global crisis since the Great Depression, has at times been termed a depression,<ref name="krug2010" /> but this terminology is not widely used, with the episode instead being referred to by other terms, such as the "[[Great Recession]]".

== Notable depressions ==

===The General Crisis of 1640===
{{main|The General Crisis}}
The largest depression of all time occurred during [[the General Crisis]].{{cn|date=November 2022}} The [[Ming Empire]] of China went bankrupt and the [[Stuart Monarchy]] fought a [[Wars of the Three Kingdoms|civil war on three fronts in Ireland, Scotland, and England]]. [[Thomas Hobbes]], an English philosopher, created the first recorded explanation of the need for a universal [[Social Contract]] in his 1651 book ''[[Leviathan (Hobbes book)|Leviathan]]'' based on the general misery within society during this period.

===Great depression of 1837===
This depression is acknowledged to be a worse depression in the United States than the later Great Depression of the 1930s.<ref>{{cite journal|title=The Social History of an American Depression, 1837–1843|journal=The American Historical Review|volume=40|issue=4|pages=662–687|date=1 July 1935|jstor = 1842418|last1 = Rezneck|first1 = Samuel|doi=10.2307/1842418}}</ref>{{better source needed|date=November 2022|reason=This citation dates to the middle of the Great Depression, so it's an apples to oranges comparison since it was written before the Great Depression ended.}} This depression ended in the United States due to the [[California gold rush]] and its tenfold addition to the United States' gold reserves. As with most depressions, it was followed by a thirty-year period of a booming economy in the United States, which is now called the [[Second Industrial Revolution]] (of the 1850s).{{cn|date=November 2022}}

====Panic of 1837====
{{main|Panic of 1837}}

The Panic of 1837 was an American [[financial crisis]], built on a [[Speculation|speculative]] real estate market.<ref name="politonomist.com">{{cite web|url=http://www.politonomist.com/history-of-economic-recessions-00273/3/|title=Panic of 1837 (1837–1842) – History of Economic Recessions|date=2 January 2009|publisher=Politonomist.com|archive-url=https://web.archive.org/web/20090406205415/http://www.politonomist.com/history-of-economic-recessions-00273/3/|archive-date=6 April 2009|url-status=dead|access-date=7 September 2012}}</ref> The bubble burst on 10 May 1837 in [[New York City]], when every [[bank]] stopped payment in [[gold]] and [[silver]] [[coin]]age. The Panic was followed by a five-year depression,<ref name="politonomist.com" /> with the failure of [[bank]]s and record high unemployment levels.<ref name="Glasner">{{Cite book|title=Business cycles and depressions: an encyclopedia|author=Timberlake, Richard H. Jr.|publisher=Garland Publishing|year=1997|isbn=978-0-8240-0944-1|editor1=Glasner, David|location=New York|pages=514–516|chapter=Panic of 1837|editor2=Cooley, Thomas F.|chapter-url-access=registration|chapter-url=https://archive.org/details/businesscyclesde00glas}}</ref>

=== Long Depression ===
{{Further|Long Depression}}
[[File: Tompkins square riot 1874.jpg|thumb|New York police using force to remove rioting protesters in [[Tompkins Square Riot (1874)|Tompkins Square Park]], 1874]]

Starting with the adoption of the [[gold standard]] in Britain and the United States, the [[Long Depression]] (1873–1896) was indeed longer than what is now referred to as the Great Depression, but shallower in some sectors. Many who lived through it regarded it to have been worse than the 1930s depression at times. It was known as "the Great Depression" until the 1930s.{{Citation needed|date=November 2018}}

===Great Depression===
{{main|Great Depression}}

The [[Great Depression]] of the 1930s affected most national economies in the world. This depression is generally considered to have begun with the [[Wall Street crash of 1929]], and the crisis quickly spread to other national economies.<ref>{{cite web |url=http://www.english.uiuc.edu/maps/depression/about.htm |title=About the Great Depression |publisher=English.uiuc.edu |access-date=7 September 2012 |url-status=live |archive-url=https://web.archive.org/web/20081220090243/http://www.english.uiuc.edu/maps/depression/about.htm |archive-date=20 December 2008 }}</ref> Between 1929 and 1933, the [[gross national product]] of the United States decreased by 33% while the rate of [[unemployment]] increased to 25% (with industrial unemployment alone rising to approximately 35% – U.S. employment was still over 25% agricultural).{{citation needed|date=November 2012}}

A long-term effect of the Great Depression was the departure of every major currency from the [[gold standard]], although the initial impetus for this was [[World War II]] (see [[Bretton Woods Accord]]).

===Greek depression===
{{main|European sovereign-debt crisis}}

Beginning in 2009, Greece sank into a recession that, after two years, [[Greek government-debt crisis|became a depression]]. The country saw an almost 20% drop in economic output, and unemployment soared to near 25%.<ref>{{cite news |url=https://www.reuters.com/article/greece-gdp-idUSL5E8ME4WM20121114 |title=Greece sinks deeper into depression in third quarter |agency=Reuters|date= 14 November 2012|access-date=14 November 2012 |url-status=live |archive-url=https://web.archive.org/web/20121114221922/http://www.reuters.com/article/2012/11/14/greece-gdp-idUSL5E8ME4WM20121114 |archive-date=14 November 2012 }}</ref> Greece's high amounts of [[sovereign debt]] precipitated the crisis, and the poor performance of its economy after the introduction of severe [[austerity]] measures slowed the entire eurozone's recovery.{{cn|date=November 2022}} Greece's troubles led to discussions about [[Greek withdrawal from the eurozone|its departure from the eurozone]].

===Post-communism depression===
The economic crisis in the 1990s that struck former members of the [[Soviet Union]] was almost twice as intense as the Great Depression in the countries of [[Western Europe]] and the United States in the 1930s.<ref>{{cite web |title=What Can Transition Economies Learn from the First Ten Years? A New World Bank Report in Transition Newsletter |url=http://worldbank.org/transitionnewsletter/janfeb2002 |archive-url=http://webarchive.loc.gov/all/20130609102438/http://worldbank.org/transitionnewsletter/janfeb2002 |url-status=dead |archive-date=9 June 2013 |publisher=World Bank }}</ref><ref>{{cite web |url=http://www.k-a.kg/?nid=5&value=6 |title=Kalikova & Associates – Law Firm |language=ru |publisher=K-a.kg |access-date=7 September 2012 |url-status=live |archive-url=http://archive.wikiwix.com/cache/20120907055134/http://www.k-a.kg/?nid=5&value=6 |archive-date=7 September 2012 }}</ref><ref name=Russia>[https://www.nytimes.com/2000/10/08/books/who-lost-russia.html Who Lost Russia?], ''The New York Times'', 8 October 2000</ref> Average [[Standard of living|standards of living]] registered a catastrophic fall in the early 1990s in many parts of the former [[Eastern Bloc]], most notably in [[post-Soviet states]].<ref>{{cite web |url=http://news.bbc.co.uk/1/hi/business/966616.stm |title=Child poverty soars in eastern Europe |archive-url=https://web.archive.org/web/20040718232818/http://news.bbc.co.uk/1/hi/business/966616.stm |archive-date=18 July 2004 |url-status=live|publisher=BBC News |date=11 October 2000}}</ref> Even before [[1998 Russian financial crisis|Russia's financial crisis of 1998]], Russia's GDP was half of what it had been in the early 1990s.<ref name=Russia/> Some populations are still poorer today than they were in 1989 (e.g. [[Ukraine]], [[Moldova]], [[Serbia]], [[Soviet Central Asia|Central Asia]], [[Caucasus]]).{{citation needed|date=August 2012}} The collapse of the Soviet planned economy and the [[Shock therapy (economics)|transition to a market economy]] resulted in catastrophic declines in GDP of about 45% from 1990 to 1996<ref>{{cite web |url=http://www.citymayors.com/society/easteurope_cities.html |title=Poverty, crime and migration are acute issues as Eastern European cities continue to grow |url-status=live |archive-url=https://web.archive.org/web/20100102083735/http://citymayors.com/society/easteurope_cities.html |archive-date=2 January 2010 |type=A report by UN-Habitat |date=11 January 2005}}</ref> and poverty in the region had increased more than tenfold.<ref>{{Citation |url=https://www.nytimes.com/2000/10/12/world/study-finds-poverty-deepening-in-former-communist-countries.html |title=Study Finds Poverty Deepening in Former Communist Countries |newspaper=The New York Times |date=12 October 2000 |url-status=live |archive-url=https://web.archive.org/web/20170205184219/http://www.nytimes.com/2000/10/12/world/study-finds-poverty-deepening-in-former-communist-countries.html |archive-date=5 February 2017 }}</ref>

Finnish economists refer to the [[Early 1990s depression in Finland|Finnish economic decline]] during and after the [[breakup of the Soviet Union]] (1989–1994) as a great depression (''suuri lama''). However, the depression was multicausal, with its severity compounded by a coincidence of multiple sudden external shocks, including loss of Soviet trade, the [[savings and loan crisis]] and [[early 1990s recession]] in the West, with the internal overheating that had been brewing throughout the 1980s. Liberalization had resulted in the so-called "casino economy". Persistent structural and monetary policy problems had not been solved, leaving the economy vulnerable to even mild external shocks. The depression had lasting effects: the Finnish markka was floated and was eventually replaced by the euro in 1999, ending decades of government control of the economy, but also high, persistent unemployment. Employment has never returned even close to the pre-crisis level.{{cn|date=November 2022}}

==Other depressions==
===Global===
The late 1910s and early 1920s were marked by an economic depression that unraveled in particularly catastrophic circumstances: [[World War I]] and its aftermath led to a global nosedive in commodities that ruined many developing nations, while servicemen returning from the trenches found themselves with high unemployment as businesses failed, unable to transition into a peacetime economy. Also, the [[Spanish flu pandemic]] of 1918–20 [[Depression of 1920–1921|brought economic activity to a standstill]] as even more people became incapacitated. Most developed countries had mostly recovered by 1921–22, however [[Weimar Republic|Germany]] saw its economy crippled until 1923–24 because of [[German hyperinflation|the hyperinflation crisis]].

The [[1973 oil crisis]], coupled with the rising costs of maintenance of [[welfare state]] in most countries led to a [[1973–75 recession|recession between 1973 and 1975]], followed by a period of [[stagflation|almost minimal growth and rising inflation and unemployment]]. The [[Early 1980s recession|1980–82 recession]] marked the end of the period.

The [[Savings and loan crisis|savings & loans]] and the [[leveraged buyout]] crises led to a severe depression in mid-to-late 1989, causing a [[Early 1990s recession|recession in 1990–91]] (also fueled by [[1990 oil price shock|the oil price crisis]]), whose effects lasted as late as 1994. This downturn is more remembered for its political effects: [[British Prime Minister]] [[Margaret Thatcher]] had to resign in November 1990; and while his approval ratings were above 60%, [[U.S. President]] [[George H. W. Bush]] lost the [[1992 United States presidential election|1992 election]] to [[Bill Clinton]] because of the domestic malady marked by the depression and increasing [[urban decay]].

In 2005, the [[2000s energy crisis|persistent oil price rises]] and [[economic overheating]] caused by deregulation led to a gradual deterioration of the world economy with inflation and unemployment rising as growth slowed: The [[housing bubble]] in the U.S. burst in 2007, and the American economy slipped into [[Great Recession|a recession]]. This, in turn, provoked the failure of many prominent financial institutions throughout 2008, most notably [[Lehman Brothers]], leading to the loss of millions of jobs.

===Regional===
Several Latin American countries had severe downturns in the 1980s: by the Kehoe and Prescott definition of a great depression as at least one year with output 20% below trend, [[Economy of Argentina|Argentina]], [[Economic history of Brazil#Stagnation, inflation, and crisis, 1981-94|Brazil]], [[Economy of Chile|Chile]], [[Economic history of Mexico#1982 crisis and recovery|Mexico]], and [[Lost Decade (Peru)|Peru]] experienced great depressions in the 1980s, and Argentina experienced [[Argentine economic crisis (1999-2002)|another]] between 1998 and 2002. South American countries fell once again into this in the early-to-mid 2010s.

This definition also includes the economic performance of [[Economy of New Zealand|New Zealand]] from 1974 to 1992 and [[Economy of Switzerland|Switzerland]] from 1973 to the present, although this designation for Switzerland has been controversial.<ref>{{cite journal |author1=Abrahamsen, Y. |author2=Aeppli, R. |author3=Atukeren, E. |author4=Graff, M. |author5=Müller, C. |author6=Schips, B. |title=The Swiss disease: Facts and artifacts. A reply to Kehoe and Prescott|journal=[[Review of Economic Dynamics]] |volume=8 |year=2005 |issue=3 |pages=749–758 |doi=10.1016/j.red.2004.06.003|hdl=10419/50866 |hdl-access=free }}</ref><ref>{{cite journal|author1=Kehoe, T. J. |author2=Ruhl, K. J. |year=2005|title=Is Switzerland in a Great Depression?|journal=[[Review of Economic Dynamics]]|volume=8|issue=3 |pages=759–775|doi=10.1016/j.red.2005.03.003 }}</ref>

From 1980 to 2000, [[Sub-Saharan Africa]] broadly suffered a fall in absolute income levels.<ref name="kick">{{cite magazine |author-link=Ha Joon Chang |last=Chang |first=Ha-Joon |url=http://www.paecon.net/PAEtexts/Chang1.htm |title=Kicking Away the Ladder |url-status=live |archive-url=https://web.archive.org/web/20151217161243/http://www.paecon.net/PAEtexts/Chang1.htm |archive-date=17 December 2015 |journal=[[Post-Autistic Economics Review]] |date=4 September 2002 |number=15 |at=article 3 |access-date=8 October 2008}}</ref>

==See also==
* [[Economic collapse]]
* [[Great Recession]]
* [[L-shaped recession]]
* [[List of recessions]]
* [[List of recessions in the United States]]
* [[Recession]]
* [[Stagflation]]

==References==
{{Reflist}}

== External links==
{{Wikiquote}}

{{United States – Commonwealth of Nations recessions}}
{{Authority control}}

[[Category:Economic crises]]
[[Category:Recessions|*]]