Another recession could be about to arrive, or even be here already. Some people fear it will be as bad as the last one, which reduced output in the U.S., euro zone and Japan by 5.1, 5.5 and 8.9 percent respectively. Those GDP declines are often described in cataclysmic terms: staggering, disastrous or traumatic. Such words are vast – and dangerous – exaggerations.
Even at the trough of the last recession in 2009, real GDP in most rich countries was as high as it had been five or six years earlier – when economic conditions were not considered particularly bad. And that comparison is too harsh on the 2009 consumer experience, which included iPhones and the Airbus A380 super jumbo jets, both better than the comparably valued goods available in 2003.
Americans and Europeans have little enough reason to moan about their recessions; citizens of the world have much less. For mankind as a whole, the small travails of the wealthy are much less important than the entry of the truly poor into the modern economy. Industrial production in emerging economies, a good measure of that development, has increased at a heartening 6 percent annual rate over the last decade, according to the most recent data from Dutch consultants CPB. The recession reversed two years’ progress, but only briefly.
Of course, production is only one part of the economy. The recession has been harder on other parts. It led to both increased unemployment and a decline in the relative position of the poor, especially in the U.S. Neither of those bad trends has been fully reversed. But the former was caused mostly by the end of an unsustainable excess of construction activity while the latter only amplified a decades’ old pattern.
The last decline is often compared to the Great Depression, but was nothing like the economic pains experienced during the two decades after the First World War. Then a series of crises, including a 25 percent reduction in U.S. GDP, helped lead the world into the most destructive war in history. The desire not to repeat the inter-War experience spurred on the potent official response to the 2008 financial crisis.