What is the fundamental definition of an economic depression?

An economic depression is defined as a prolonged period of significant economic downturn, characterized by reduced economic activity across one or more major national economies. It is understood as a more severe and extended decline than a typical recession, which is a normal part of the business cycle.

How does an economic depression differ from a recession?

While both represent a slowdown in economic activity, an economic depression is distinguished by its severity and duration. A recession is a slowdown within the normal business cycle, whereas a depression signifies a more severe and long-term downturn.

What are some key characteristics that can signify an economic depression?

Economic depressions are often marked by sustained increases in unemployment, significant drops in business revenues, and signs of financial crisis. Other indicators include a decline in trade and commerce, volatile currency markets, price deflation, stock market crashes, and bank failures.

What role does the National Bureau of Economic Research (NBER) play in the United States regarding economic cycles?

In the United States, the National Bureau of Economic Research (NBER) is responsible for determining periods of contraction and expansion in the business cycle. However, the NBER does not officially declare or label economic periods as "depressions."

What is a proposed definition for an economic depression based on GDP and duration?

One proposed definition suggests that a depression involves a decline in real Gross Domestic Product (GDP) exceeding 10%, or a recession that lasts for two or more years. This definition highlights both the depth and length of the economic downturn.

How do different definitions of depression account for its duration?

Some economists define a depression solely by the period during which economic activity is actively declining. A more common interpretation, however, includes the entire duration until economic activity returns to near-normal levels, making the depression period longer.

According to the text, how does the Great Depression's chronology differ based on definition?

Using a definition that includes the recovery period, the Great Depression is often considered to have lasted from 1929 to 1941. However, if defined only by the period of decline, the depression that began in August 1929 ended in March 1933, with the NBER identifying two distinct recessions within that broader timeframe.

What term was historically used for financial crises before the widespread adoption of 'depression'?

In the 19th and early 20th centuries, financial crises were commonly referred to as "panics," such as the Panic of 1907. The term 'panic' has since fallen out of common usage for such events.

Who is credited with formalizing and popularizing the term 'The Great Depression'?

British economist Lionel Robbins is credited with formalizing the phrase "The Great Depression" in his 1934 book of the same name. U.S. President Herbert Hoover is widely recognized for popularizing the term, using it informally to describe the economic downturn of the 1930s.

Why is the characterization of economic downturns as 'depressions' contentious today?

The characterization of an economic downturn as a "depression" is often contentious due to the lack of a universally agreed-upon definition and the strong negative connotations associated with the term. Since 1945, most severe economic downturns have generally been referred to as "recessions."

Which two historical eras are most commonly referred to as 'depressions' in contemporary discussion?

The two eras most commonly referred to as "depressions" today are the period in the 1870s (often called the Long Depression) and the period in the 1930s (the Great Depression).

What was the 'General Crisis of 1640'?

The General Crisis of 1640 refers to a period of significant global turmoil, including the bankruptcy of China's Ming Empire and civil wars within the Stuart Monarchy in Britain. This era of widespread misery influenced Thomas Hobbes's philosophical work on the need for a Social Contract.

How is the Great Depression of 1837 compared to the Great Depression of the 1930s in the United States?

According to the provided text, the Great Depression of 1837 is acknowledged as having been a worse economic downturn in the United States than the Great Depression of the 1930s.

What event is cited as a major factor in ending the Great Depression of 1837 in the United States?

The California gold rush, which significantly increased the United States' gold reserves, is cited as a key factor in ending the Great Depression of 1837.

What was the Panic of 1837 primarily driven by?

The Panic of 1837 was an American financial crisis that was primarily built upon a speculative real estate market, indicating a bubble that eventually burst.

What happened in New York City banks on May 10, 1837?

On May 10, 1837, every bank in New York City stopped making payments in gold and silver coinage, marking a critical point in the Panic of 1837.

What characterized the Long Depression (1873-1896)?

The Long Depression, which began with the adoption of the gold standard in Britain and the United States, was a prolonged period of economic downturn. While longer than the Great Depression of the 1930s, it was shallower in some sectors, though many contemporaries considered it worse at times.

What was the Long Depression known as before the 1930s?

Before the 1930s crisis became widely known as 'The Great Depression,' the period from 1873 to 1896 (or more narrowly 1873-1879) was often referred to by that same name, 'The Great Depression'.

What event is considered the start of the Great Depression of the 1930s?

The Great Depression of the 1930s is generally considered to have begun with the Wall Street crash of 1929, which rapidly spread to other national economies.

What were the significant impacts on the US economy during the Great Depression (1929-1933)?

Between 1929 and 1933, the United States experienced a 33% decrease in its Gross National Product (GNP), and the national unemployment rate surged to 25%. Industrial unemployment alone reached approximately 35%.

What was a major long-term consequence of the Great Depression on global currencies?

A significant long-term effect of the Great Depression was the eventual departure of every major currency from the gold standard. While World War II provided the initial impetus, the groundwork was laid by the economic conditions of the depression.

When did Greece experience a depression, and what were its key economic indicators?

Beginning in 2009, Greece entered a depression characterized by an almost 20% drop in economic output and unemployment soaring to nearly 25%. This crisis was precipitated by high sovereign debt and the impact of austerity measures.

What was the nature of the economic crisis in former Soviet Union countries in the 1990s?

The economic crisis in former Soviet Union countries during the 1990s was exceptionally severe, described as nearly twice as intense as the Great Depression in Western Europe and the United States. It led to catastrophic falls in living standards, particularly in post-Soviet states.

What was the approximate GDP decline in former Soviet Union countries from 1990 to 1996?

From 1990 to 1996, former Soviet Union countries experienced a significant decline in GDP, estimated at around 45%, due to the collapse of the planned economy and the transition to market economies.

What do Finnish economists call the economic decline experienced from 1989 to 1994?

Finnish economists refer to the significant economic decline experienced in Finland between 1989 and 1994, following the breakup of the Soviet Union, as a "great depression" (suuri lama).

What factors contributed to the severity of the Finnish economic decline in the early 1990s?

The severity of the Finnish economic decline was compounded by multiple sudden external shocks, including the loss of Soviet trade and the savings and loan crisis and recession in the West. These coincided with internal economic overheating that had been developing throughout the 1980s.

What economic period occurred in the late 1910s and early 1920s globally?

The late 1910s and early 1920s were marked by an economic depression that followed World War I. This period saw a global nosedive in commodities, high unemployment for returning servicemen, and business failures as economies struggled to transition to peacetime.

What caused Germany's economy to be crippled until 1923-24 after World War I?

Germany's economy was crippled until 1923-24 due to a severe hyperinflation crisis that occurred in the aftermath of World War I.

What economic events led to a recession between 1973 and 1975?

The 1973 oil crisis, combined with the rising costs of maintaining welfare states in many countries, led to a recession between 1973 and 1975.

What characterized the economic period following the 1973-1975 recession?

Following the 1973-1975 recession, economies experienced a period of almost minimal growth, coupled with rising inflation and unemployment, a phenomenon often referred to as stagflation.

What crises led to a severe depression in the mid-to-late 1980s, impacting the early 1990s?

The savings and loans crisis and the leveraged buyout crises led to a severe depression in the mid-to-late 1980s, which contributed to a recession in 1990-91, further fueled by an oil price shock.

What were some notable political effects of the 1990-1991 recession?

The recession of 1990-1991 had significant political repercussions, including the resignation of British Prime Minister Margaret Thatcher and the loss of the 1992 U.S. presidential election by incumbent President George H. W. Bush, partly due to domestic economic issues.

What triggered the US recession that began in 2007?

The US recession that began in 2007 was triggered by the bursting of the housing bubble in 2007, following persistent oil price rises and economic overheating caused by deregulation in the preceding years.

Which Latin American countries experienced 'great depressions' in the 1980s according to the Kehoe and Prescott definition?

According to the Kehoe and Prescott definition of a great depression (at least one year with output 20% below trend), Argentina, Brazil, Chile, Mexico, and Peru experienced great depressions in the 1980s.

What is the ongoing crisis in Turkey since 2018 referred to as?

Since 2018, Turkey has been experiencing an ongoing crisis known as the Great Turkish Depression.

What is the difference between a depression and a recession according to the NBER's approach?

The NBER, which dates recessions, does not officially define depressions. However, the text implies that a depression is a more severe downturn than a recession. Under one definition, a depression is a recession with a GDP decline over 10% or a duration over two years, suggesting depressions and recessions can overlap but depressions are more severe.

What was the 'Great Slump' of the 15th century?

The Great Slump of the 15th century, occurring roughly between 1430 and 1490, is mentioned as a period of economic downturn within the broader context of the Commercial Revolution.

What was the 'Financial Revolution' in the context of economic history?

The Financial Revolution, spanning approximately from 1690 to 1800, is noted as a period of significant development in financial systems, occurring during the era of the Commercial Revolution.

What was the 'British credit crisis of 1772-1773'?

The British credit crisis of 1772-1773 was an economic downturn that affected England, Scotland, and the American Colonies, marking an early financial crisis during the period of the First Industrial Revolution and Market Revolution.

What is the 'Post-Napoleonic Depression'?

The Post-Napoleonic Depression refers to an economic downturn that occurred in the years following the Napoleonic Wars, specifically from 1815 to 1821, during the era of the First Industrial Revolution.

What was the 'Baring crisis' of 1890-1891?

The Baring crisis was a financial crisis that occurred between 1890 and 1891, during the Gilded Age and the Second Industrial Revolution, impacting economies during that period.

What is the significance of the 'Recession of 1937-1938'?

The Recession of 1937-1938 occurred during the Great Depression era and is noted as a significant downturn within that broader period of economic hardship.

What was the '1973-1975 recession' characterized by?

The 1973-1975 recession was largely driven by the 1973 oil crisis and the increasing costs associated with maintaining welfare states, leading to a period of economic contraction.

What is the 'Great Moderation'?

The Great Moderation was a period of relative economic stability and low volatility, generally considered to have lasted from 1982 to 2007, during the Information Age and the Second Gilded Age.

What was the 'COVID-19 recession'?

The COVID-19 recession refers to the global economic downturn that occurred between 2020 and 2022, triggered by the widespread impact of the COVID-19 pandemic and associated public health measures.

What does the term 'stagflation' refer to?

Stagflation describes an economic condition characterized by a combination of stagnant economic growth, high inflation, and high unemployment, as seen in the 1970s.

What is the 'Great Recession'?

The Great Recession is the term used for the significant global economic crisis that occurred from 2007 to 2009, triggered by the bursting of the US housing bubble and the failure of major financial institutions.

What is the 'Great Turkish Depression'?

The Great Turkish Depression is the name given to the ongoing economic crisis that Turkey has been experiencing since 2018.

What is the relationship between 'potential output' and economic depressions?

A depression is often characterized by a substantial and sustained shortfall between the economy's ability to purchase goods and the amount that could be produced using available resources and technology, known as potential output.

How did the economic crisis in post-Soviet states affect standards of living?

In many parts of the former Eastern Bloc, particularly in post-Soviet states, average standards of living experienced a catastrophic fall in the early 1990s following the collapse of the Soviet planned economy.

What was the 'Depression of 1920-21' referred to by President Calvin Coolidge?

The Depression of 1920-21 was an economic downturn that occurred in the United States, which President Calvin Coolidge referred to as a 'depression' at the time.

Economic Depression Wiki: Economic Downturns: A Deep Dive into Depressions

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Definitions

Sustained Economic Contraction

An economic depression signifies a prolonged and severe downturn in economic activity, impacting one or more major national economies. It represents a more profound economic challenge than a typical recession, which is a standard phase within the broader business cycle of growth and contraction.

Key Characteristics

Depressions are often marked by significant increases in unemployment, substantial revenue declines for businesses, and potential financial crises. These can manifest as banking instability, reduced investment and innovation, decreased trade (especially international), price deflation, stock market crashes, and widespread business bankruptcies.

Defining Criteria

While no single definition is universally agreed upon, some economists propose criteria such as a real GDP decline exceeding 10% or a recession lasting two or more years. The National Bureau of Economic Research (NBER) in the U.S. identifies business cycle contractions but does not formally declare depressions.

Terminology

Historical Usage

Historically, severe economic downturns were often termed "depressions" (e.g., the Depression of 1920–21). Financial crises were frequently called "panics" (e.g., Panic of 1907). The term "Great Depression" became widely associated with the 1930s crisis, popularized by figures like Herbert Hoover and formalized by economists like Lionel Robbins.

Evolution of Terms

The usage of "depression" has become less common post-1945, with "recession" often preferred for downturns. Events like the 2008 crisis, while severe, were typically termed the "Great Recession" rather than a depression, reflecting a stylistic shift and potentially more moderate economic cycles in developed nations.

Occurrence

Global Impact

Depressions, by their nature, tend to have widespread international effects. The Great Depression of the 1930s, for instance, impacted most global economies, leading to significant GDP drops and unprecedented unemployment rates. The departure from the gold standard was a notable long-term consequence.

Post-War Trends

Since World War II, while many countries have experienced prolonged periods of economic underperformance, these are generally labeled as recessions. The term "depression" is often reserved for the historical periods of the 1870s (Long Depression) and the 1930s (Great Depression), though some argue specific national or regional crises meet depression criteria.

Defining Controversy

The characterization of any period as a "depression" remains contentious due to the lack of a universally accepted definition and the strong negative connotations. This ambiguity often leads to debate among economists and historians regarding specific historical events.

Notable Depressions

General Crisis (1640s)

Considered perhaps the largest depression of all time, this period saw widespread societal upheaval, including the bankruptcy of the Ming Empire in China and civil wars across the Stuart Monarchy's territories. It profoundly influenced philosophical thought, notably Thomas Hobbes's concept of the social contract.

Great Depression of 1837

This U.S. financial crisis, triggered by a speculative real estate bubble, led to widespread bank failures and record unemployment. Some analyses suggest its severity surpassed the later Great Depression in the U.S. Its end was notably linked to the California gold rush, which bolstered national reserves.

Long Depression (1873–1896)

This extended period, initially known as "the Great Depression," was characterized by deflation and economic stagnation, particularly impacting the UK and US. It was longer than the 1930s depression but generally shallower, though many contemporaries perceived it as worse.

Great Depression (1930s)

Beginning with the Wall Street crash of 1929, this global downturn saw drastic reductions in GDP (e.g., 33% in the U.S.) and unemployment reaching 25%. It led to fundamental shifts in economic policy and the abandonment of the gold standard by major currencies.

Greek Depression (2009–Present)

Originating from sovereign debt issues, Greece experienced a severe depression with nearly 20% economic output reduction and unemployment near 25%. Its prolonged struggles significantly impacted the Eurozone's recovery and raised questions about Greece's membership.

Post-Communism Depression (1990s)

The transition from planned to market economies in former Soviet bloc nations resulted in catastrophic GDP declines (up to 45% in some regions) and a dramatic rise in poverty. Many populations remain economically poorer today than before this period.

Other Significant Downturns

Other notable periods include the post-WWI recession (1918-21), the stagflationary period of the 1970s, the early 1980s recessions, the Great Recession (2007-09), and the COVID-19 recession (2020-22). Regional depressions have also occurred, notably in Latin America, Sub-Saharan Africa, and Turkey.

Related Concepts

Business Cycle

Economic depressions are extreme phases within the natural business cycle, characterized by fluctuations between periods of economic expansion and contraction.

Financial Crisis

Often intertwined with depressions, financial crises involve severe disruptions in financial markets, such as bank failures, credit crunches, and asset price collapses.

Recession

A less severe and shorter-term downturn than a depression, typically defined as a significant decline in economic activity spread across the economy, lasting more than a few months.

Deflation

A sustained decrease in the general price level, often associated with depressions, which can increase the real burden of debt and discourage spending.

Unemployment

A hallmark of depressions, characterized by a substantial and sustained rise in joblessness, often reaching levels far exceeding those seen in typical recessions.

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References

Who Lost Russia?, The New York Times, 8 October 2000

A full list of references for this article are available at the Economic depression Wikipedia page

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Economic Downturns

💡 Dive in with Flashcard Learning! 💡

Definitions ℹ️

📉 Sustained Economic Contraction

📊 Key Characteristics

⚖️ Defining Criteria

Terminology 🗣️

📜 Historical Usage

➡️ Evolution of Terms

Occurrence ⏳

🌍 Global Impact

📉 Post-War Trends

🤔 Defining Controversy

Notable Depressions 🏛️

⚔️ General Crisis (1640s)

🇺🇸 Great Depression of 1837

🇬🇧 Long Depression (1873–1896)

📈 Great Depression (1930s)

🇬🇷 Greek Depression (2009–Present)

🇷🇺 Post-Communism Depression (1990s)

🌐 Other Significant Downturns

Related Concepts 🔗

🔄 Business Cycle

💸 Financial Crisis

📉 Recession

⬇️ Deflation

🧑‍💼 Unemployment

Sources 📚

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📜 References

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Disclaimer ⚠️

📜 Important Notice

Dive in with Flashcard Learning!

Definitions

Sustained Economic Contraction

Key Characteristics

Defining Criteria

Terminology

Historical Usage

Evolution of Terms

Occurrence

Global Impact

Post-War Trends

Defining Controversy

Notable Depressions

General Crisis (1640s)

Great Depression of 1837

Long Depression (1873–1896)

Great Depression (1930s)

Greek Depression (2009–Present)

Post-Communism Depression (1990s)

Other Significant Downturns

Related Concepts

Business Cycle

Financial Crisis

Recession

Deflation

Unemployment

Sources

Teacher's Corner

True or False?

Test Your Knowledge!

Gamer's Corner

Discover other topics to study!

References

Feedback & Support

Disclaimer

Important Notice