The world has seen dozens of economic recessions, ranging in degrees of severity. Each recession has historical context, such as the fact that before downturns, there is traditionally a period of economic growth. The Great Depression followed the roaring 1920's, the stagflation in the 1970's followed the post-World War II boom, and the 2008 Great Recession followed a period of previously unprecedented growth.
Further, history shows that the greater the growth, the worse the recession. For example, during the 1920's, U.S. Gross Domestic Product (GDP) grew by roughly 42%. During the Great Depression, GDP fell by nearly 26%. In contrast, Roosevelt's New Deal increased GDP by roughly 29%. This was followed by a less severe recession, known as the "Roosevelt Recession", when GDP decreased by 4%. The correlation between the extent of growth and severity of recession is undeniable.
Significant economic growth is typically created by deregulation of the economy, as was seen in the 1920's and as is happening now. Deregulation allows for buying securities on loan, low interest rates that enable high levels of borrowing, and other unhealthy economic trends. Thus, when the stock market has even the smallest downturn and people default on their loans, the economy destabilizes. Deregulation thus causes short-term monetary growth, but long-term economic depression. This is the cause of the aforementioned correlation, that greater growth is associated with greater recession.
World leaders of slow, steady growth. Some economists compare this to Japanification, a process that occurred in 1990s Japan featuring slow economic growth, a falling yield rate, and a large government debt. Many economists refer to this period as a "lost decade" for Japan.
Japanification differs from healthy economic growth. Deregulation has been proven to cause severe economic downturns, as has the fact that growth is proportionate to the recession that follows. Continued regulation and slow, steady economic growth is desirable to avoid recession.
International Youth Politics Forum, Est. 2019
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