Ali’s blog

Mostly quant stuff with occasional digressions

When does the “recession” become a “depression?”

Posted by alifinmath on February 6, 2009

My initial intention was to examine the semantics of “recession” and “depression,” and to demonstrate that the dividing line is blurred and unclear and that there’s no clear consensus, in any case, of what constitutes a “depression.” But I can see that this has already been done.

I’ve been meaning to say something about this for some months but the catalyst for this post came from some recent comments from the GE boss:

The US economy is suffering its steepest downturn since at least the 1970s and could descend into a depression, Jeff Immelt, General Electric’s chief executive, warned on Thursday.

“Unlike the other downturns that I’ve been a part of, this one is faced with limited liquidity,” Mr Immelt, GE’s chief since 2001 told a conference. “Once you break through ’74-’75, you don’t stop ’til you get to 1929.”

When asked whether he would call the current slowdown a recession or a depression, Mr Immelt joked that he would need to refer to his college economics text book for a precise answer but said “it is one of those”.

Perhaps it’s not really germane how we classify what’s happening today — leave that to pedants. What is important is that there is no way out. Even if the downward spiral is arrested, it will only be a respite. The downward spiral into chaos and disorder is inexorable and its roots lie beyond economics. We are not going back to some golden era. Our crowded world, our diminishing resources, and and our changing climate guarantee that this century is going to be unusually testing, unusually violent, and unusually anarchic. The economic turmoil is in some sense a corollary of this but I can’t be bothered to sketch the causal connections in detail. Suffice it to say that a world of ever more brutal domination and ever-increasing divides between a minority of haves and a majority of have-nots generates its own systemic economic crises.

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2 Responses to “When does the “recession” become a “depression?””

  1. Quagmire said

    I see 2 possibilities:
    (1) A retreat of American empire in favor of international consensus.
    (2) An escalation in the current Oil War by one side, followed by a natural response by the other, leading almost inevitably back to (1).

    The first possibility would, in a best case American scenario, require the shared burden of recent American excess, and almost certainly still result in a severe global recession. American retrenchment could, alternatively, come with harsher conditions for the U.S. (e.g. a new Bretton Woods.) The second possibility would bring heretofore hidden actors Russia and China into more active (if still proxy) conflict with the U.S. in the oil producing regions of Earth. Americans should hope their government chooses (1) intelligently.

  2. alifinmath said

    There are different ways of looking at this and they all offer some insight. I don’t want to say that any one encompasses all the truth and is canonically correct. The first is the contradictions inherent in global finance capitalism — some of which were foreseen by Marx himself well over a century ago. The second is the dynamic of an American imperium losing its financial and military hegemony, along with concomitant chaos at home. A third is the rivalry between East and West, with a resurgent China — and possibly India — competing for spheres of influence (e.g., in Africa and South America) and markets. Readers of this humble blog can doubtless come up with other equally pertinent perspectives. But I don’t think that in any of them, a plausible outcome is international consensus. I’m too tired at the moment to write anything further but I may come back with some interpretations of the work of the German theorist, Carl Schmitt, which seem pertinent to what I want to say.

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