Problem

National economic recession

Other Names:
Domestic recession
Economic slump
Nature:
Generally defined by economists as two quarters of negative growth in the gross national product, although because of delays in collecting data it is usually difficult to determine when a recession actually begins. An alternative definition is a decline in growth that is so serious that it begins to feed on itself. A recession is characterized by rising unemployment, sharply contracting imports, and falling real wages and living standards. Lower living standards are then unavoidable when the previous level has been artificially raised by unsustainable policies. Such a recession can be damaging to future growth if it is too deep or to prolonged. The blow to the confidence of domestic investors may inhibit necessary new investment. The decline in the economy can also strain financial system and impair its ability to finance new growth. Excessive cuts in spending risk a downward spiral of continually falling output.
Incidence:
During the recession of the beginning of 1980s the rate of unemployment in the USA and western Europe escalated from under 6% in 1979 to over 10% in the last quarter of 1982. Output fell for two consecutive years in Italy, UK and the former Germany FR. Capacity utilization in manufacturing, where most of the rise in unemployment took place, fell drastically. Interest rates rose sharply with the tightening of monetary policy.
Claim:
In the 1990s, Japan's economic catastrophe has harmed all of Asia and arose largely from political incompetence, endemic corruption, webs of relationships that misallocate resources and a parliamentary system that hugely overrepresents the most backward parts of the country.
Problem Type:
D: Detailed problems
Date of last update
25.02.2000 – 00:00 CET