Depression or recession: how bad?

It is commonly said that we are facing “the worst” recession or depression for decades or even a century or so. If this is true, how much does it matter?

Recessions and depressions are rated (if that is quite the word) by a percentage fall in growth or in gross domestic product. So when we compare such events, it seems sensible to think that, say, a five percent, or a 25 percent, fall in economic activity will be as disastrous in 2009 or 1929.

But is this so? For one thing, even very bad recessions and depressions have not yet had the power to do much more than dent temporarily the quite constant rise in national economic prosperity. This one may be different: it may trigger some much more hideous situation.

But if it doesn’t and if this economic hiatus is no worse than we have experienced before, what would we make of it? Surely it matters that we are much richer now than we were in 1929? So we may not enjoy (and plenty of us have reason to fear) a decline in our living standards. But with any luck many people who suffer a decline in living standards will go – temporarily – from affluence to getting-by in a degree of comfort not known to many people 80 years ago.

One problem comparison is with unemployment. In the 1920’s three million unemployed people equated to 25 percent unemployment. In 1982, three million unemployed equated to 20 percent in Northern Ireland, 15-16 percent in some parts of the north of England and about 10 percent in the South East.

I haven’t yet checked, but such an absolute number would probably represent a still lower percenatge of employment than is now the case. I have looked elsewhere at other unemployment comparisons and found some comfort there.

I am more loath than most to accept the argument of the likes of Oliver James that affluence is a bad thing and that part of its being bad flows from its being the product of neo-liberal economics. I confidently expect what many think of as “bad” economic policies will nontheless return us to prosperity, and that prosperity will be pleasanter than depression or recession.

All in all I doubt it makes sense to compare the late 1920’s with the late “Noughties”.