Is it time to start talking about a depression?

The Jarrow march that saw saw 200 unemployed men walk from Jarrow, Tyne and Wear, to London in 1936 There is no definition of what makes a depression

We now know that the UK economy contracted by 0.3% at the end of last year. This followed Olympics-flattered figures in the previous three months, when there was a bit of growth.

It continues the pattern of recent years, and every time there are two quarters of contraction in a row, we get excited about a recession, and then when there is growth again we get excited about the recovery.

Yet the UK economy is still considerably smaller than it was when the crisis started in 2008.

The influential National Institute for Economic and Social Research says we have been in a depression since then, and will not emerge until the economy reaches its 2008 level.

'Sideways slide'

And yet the word depression has rarely been mentioned and some economists have gone to great lengths to avoid using it.

"I've been trying to use a different word," says Randall Kroszener, professor of economics at University of Chicago, who used to sit on the committee that sets US interest rates.

"I came up with the term 'sideways slide', which characterises where lots of economies are - not boom and bust, just sliding along, surviving."

Randall Kroszener, professor of economics at University of Chicago Randall Kroszener prefers to use the phrase "sideways slide" rather than depression

Prof Kroszener says the key difference between a long recession and a depression is whether there are falling prices, or deflation.

The trouble is, while the definition of a recession as two consecutive quarters of negative growth is widely accepted, there is no popular definition of a depression, which means there is nowhere to go once recessions stop being relevant.

"The economy is either in high growth or in low growth, and we're on low growth," says Andrew Scott, professor of economics at London Business School.

"We're on a low trend so who cares about whether we're in recession or not?"

'Less pessimism'

David Sproul, chief executive of Deloitte UK, says he is seeing the mood improving among his client businesses.

"We're seeing much less pessimism around, but not yet optimism," he says.

"We're in an environment of uncertainty, which is very sentiment driven."

But he adds that many businesses are still concentrating on cost control to grow profits, which suggests a lack of confidence.

So although some may be talking about the possibility of the economy going into a triple-dip recession, that will ignore the fact that the economy has been basically flat for about two-and-a-half years.

The answer may not be to call it a depression, but something is needed to get the narrative beyond the obsession with tiny bits of growth or contraction every three months.

The experts quoted in this article were all attending the World Economic Forum in Davos, Switzerland.


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  • rate this

    Comment number 24.

    If every family in the country shifted £5 of spend a week from foriegn to UK mnufactured goods, we would not even have a recession.

  • rate this

    Comment number 23.

    "Randall Kroszener prefers to use the phrase "sideways slide" rather than depression"


    Ah. So we can expect to read "it is understood so-and-so was being treated for a sideways slide shortly before being found dead" can we?

  • Comment number 22.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 21.


    "...Index link wages to inflation by law..."


    Create a Legal Maximum Rent for private sector accommodation too. At the moment it screws every last brass farthing out of the tenants, so they've nothing left to spend in the rest of the economy.

    They can work out how much Council Tax we owe, for heaven's sake.

  • rate this

    Comment number 20.

    Man tells shepherd, "I will bet you one of your sheep that I can tell you the exact number in this flock."
    The shepherd thinks it over and takes the bet.
    "973," says the man.
    The shepherd is astonished, because that is exactly right

    "You are an economist !" says the shepherd
    "Amazing!" responds the man, "You are right! how did you deduce that?"

    "put down my dog and I will tell you."

  • rate this

    Comment number 19.

    Index link wages to inflation by law.

    We need the workers to be spared zero pay rises year after year , whilst companies hoard the cash and pay no tax.

    Workers spending will go up taking GDP with it.

  • rate this

    Comment number 18.

    The frightening thing about all this is if their was another bank crash we would all be in the same position as we were when certain banks needed rescuing (for all our good apparently). We have had two years of this government and seen very little action regarding the gun ho attitude of the banking sector. As for Austerity wait till it kicks in this year, its going to be a bad year all round.

  • rate this

    Comment number 17.

    12: Good one, definitely in need of Brains to get the economy moving again !
    In reality, you need Wealth creation. So, factories manufacture goods, profits from this pay wages, taxes and dividends.
    Natural Resources and middleman trading can contribute to an economy, but a modern economy needs a balance.
    Especially as natural resources are indeed finite.
    So, active industrial policy needed.

  • rate this

    Comment number 16.

    Not depressed we are chronically sick. We tolerate one idiot leader after another. Not one has a clue what to do. Reduce benefits, reform NhS again but still have money to play war games. England is a big business and needs a real business man at the elm. First do not buy what you cannot afford!

  • rate this

    Comment number 15.

    Doesn't matter what you call it - we won't see a "recovery" to 2007 levels any time soon because those figures were inflated by mountains of debt and there's still too much debt in the world economy. It has to get worse before it gets better.

  • rate this

    Comment number 14.

    Let's call it a correction. There is no depression. Some parts of the economy are suffering for sure but unemployment is falling and London is certainly not in decline.

  • rate this

    Comment number 13.

    'sideways slide' - not boom and bust, just sliding along, surviving.

    Exactly. Isnt that what banks and financial institutions should do?

    I've never understood this idea that there has to be perpetual growth.

    We live in a finite world with finite resources. There can't be growth forever.

  • rate this

    Comment number 12.

    Use "Zombie Economy". Dead but still moving..

  • rate this

    Comment number 11.

    Osbourne's austerity programme is not working. It's time to try something else and stimulate some growth.

  • rate this

    Comment number 10.

    If Osborne doesn't listen to the IMF then depression might be too light a term.

    'Our economy is going through a suicide' may be more apt.

  • rate this

    Comment number 9.

    If you're not moving forwards in business then you're going backwards... there's not standing still.

    'Sideways Slide' is board room speak 'for run out of ideas and in deep trouble'.

  • rate this

    Comment number 8.

    Not a depression but a sideways slide an economist says..
    Change the words and everything is alright then..
    Believing in economics is a form of mental illness.These people are idiots.

  • rate this

    Comment number 7.

    The trouble with comparing everything to the peak in 2008 is that that peak was mostly b*******. A huge chunk of it was funded by debts -- personal, corporate and governmental -- that we're paying off now.

  • rate this

    Comment number 6.

    There are alternatives to debt-financed enterprise.

    One's called capitalism.

    Companies, such as the Berkeley Group, are set up with a proprietor's money, then use revenues for further investment and expenditure.

    Oddly enough, they were unaffected by the credit shortage.

  • rate this

    Comment number 5.

    When the crash happened we were not in depression but we are being led their by DC / GO in their stubborn attitude to accept that they have got it totally wrong. An economy relies on people spending but they have no spare cash it has gone in tax and inflation which is grossly understated.


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