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
    +1

    Comment number 184.

    Well it looks like none of us have the answer. Better hope for some benevolent aliens to come and save us from our whiny selves.
    We aren't exactly hard done to compared to a lot of poor folk out there in the world. Arguing over why people own computers and whether people are scientists or engineers, for God's sake get a grip!

  • rate this
    +1

    Comment number 183.

    A recession is when your neighbour loses their job. A depression is when you lose yours. Seeing as I found out today I am losing my job, this is definitely now a depression!!

  • rate this
    0

    Comment number 182.

    @178

    Aha - the old internet post gambit. If two people disagree with you then try to make out they are sock puppets of each other. Fail !!!

    I am British but I work at Arizona State University - in, as I said before, research - at SESE if you must know, the School of Earth and Space Exploration.

    But I am still appalled at your analogy of a chemical plant to a national economy.

  • rate this
    0

    Comment number 181.

    We are bumping along the bottom. There is no democracy left in Britain. The vote has become progressively more meaningless as each of the 3 main parties morphs into the others. Pledges are now routinely broken and cannot be taken seriously. The party whip is yet another block on party members. Parties are private companies and ministers are in the pockets of business.

    What hope have the public?

  • rate this
    0

    Comment number 180.

    I rest my case.

  • Comment number 179.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +1

    Comment number 178.

    We have a "scientific researcher" and a "engineer-neil" who seem to get on quite well. Are they a scientific experiment gone wrong? Are they "scientific neil"?

  • rate this
    +1

    Comment number 177.

    What's this about going into a triple dip recession? When I look at the graph I see 4 dips already!

  • rate this
    +2

    Comment number 176.

    169.engineer-neil
    More selfrighteous and sanctimonious garbage. You have absolutely no idea what I use a computer for, but the clue is in the name.
    //////
    One thing you don't use it for is to educate yourself. So you use it to "neil"? What is that? And you use it for "invoicing"? What are the invoices for? The damage you did trying to engineer an inebriation in a distillation column?

  • rate this
    +1

    Comment number 175.

    168.kc_chiefs
    I think you'll find that, unofficially, UK population is somewhat higher than 65 million. And as Norman Lamont said in his extraordinary outburst of honesty, unemployment (and underemployment) is a price well worth paying for conditions amenable to tax dodging venture capitalists. The answer to your question is renewal of British sovereignty, nationalization and closure of borders.

  • rate this
    0

    Comment number 174.

    @169 Exactly - Yet the people whining aren't really badly off. Despite saying otherwise - they will have surplus income and they will buy luxuries. They just want even more and are jealous of those who do. One of the reasons I left the UK - no get up and go - no work hard mentality by far too many. We became a lazy nation of hand out takers.

  • rate this
    +1

    Comment number 173.

    It’s a form of madness that we try to keep an economic system going that should have been binned in the 1920s. Communism was thrown out when it didn’t work for the majority, and we should be doing the same for Capitalism. The debate we should be having, is not how to keep a failing system going, but what to replace it with, for the benefit of the maximum number of people.

  • rate this
    0

    Comment number 172.

    @ 169. engineer-neil: ...and so the vulgarity begins. I always get a tad smug when I get to react like that.

  • rate this
    +2

    Comment number 171.

    A couple of years ago I posted that 'no disposable income' would be the downfall of this 'coalition' and, seeing how businesses are struggling and/or going under it appears to be worsening.
    So, Osbornes crackpot scheme of even more 'austerity measures' creating even less disposable income seems like a recipe for even more disaster. Add the loss of confidence due to the Euro exit talk, suicide!

  • rate this
    +1

    Comment number 170.

    168.kc_chiefs
    Funny you sat that - scientific research is what I do for a living.
    //////
    No you don't. You obviously lack one, fundamental asset, and you blatantly give that fact away in your post.

  • rate this
    +2

    Comment number 169.

    @166

    More selfrighteous and sanctimonious garbage. You have absolutely no idea what I use a computer for, but the clue is in the name. In between passing a bit of time goading the lefties on here, I'm hard at work doing some invoicing - which could take a while because I'm stacked with work. Shame others can't go find some.

  • rate this
    0

    Comment number 168.

    @165

    Funny you sat that - scientific research is what I do for a living. And if you think a testbed for an industrial project can be an analogy to a national economy I am appalled.

    You cannot have a 65 million population and relatively poorly educated workforce survive on making saunas, a few mobile phones and cutting down timber to survive.

    Economies do not scale like distillation columns.

  • rate this
    0

    Comment number 167.

    @161
    It beggars me how you expected someone without a computer to post on this website.
    1. I do not have a surplus income.
    2. All the major parties are as bad as each other.
    3. I will be expected to do the work of three people tomorrow due to staff cuts.

    Thank you government, thank you bankers.
    And thank you engineer-neil for thinking of others before yourself.

  • rate this
    +1

    Comment number 166.

    154.engineer-neil
    they are clearly wealthy enough to own a computer and pay for internet subscription. Hardly essential items for someone in real poverty.
    ////////
    Computers are today's bike in terms of finding work. You literally have access to 1000's of jobs around the world. So, quite essential really. You use yours to spout inessential rubbish on a forum. Far more pointless.

  • rate this
    +2

    Comment number 165.

    @ 164.kc_chiefs:
    I said they can be a template. If you ever worked in research, you'd know that large projects are usually tested in miniature versions of the end products. Years ago I worked on an experimental chemical plant for Ciba Geigy in Switzerland (ironically). The test plant would fit into my garage, the end product was the size of Wapping. So yes, it could work.

 

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