The intensity of a crisis can be measured either by the extent of the fall from peak to through, or by the number of years required to recover pre-crisis levels. The current crisis, for instance, is very often analysed as a Great Recession, in view of the breath-taking collapse of real GDP during the 2008-2009 biennia in many advanced economies (indeed, some southern European countries have not returned yet the real GDP per capita they enjoyed in 2007). In fact, applying the duration criterion, one might consider that a crisis which entailed nearly a decade of under-utilization of productive capacity can be better characterized as a great depression rather than a great recession.
Prolonged under-utilization of productive capacity has been recorded in other large-scale crisis in several regions of the globe. Japan’s rate of growth has been suffering long-term decline since the early 1990s. Latin America experienced a “lost decade” for economic growth during the 1980s, and the US and Western Europe recorded stagnation throughout the 1970s. The advanced and developing world suffered the worst contemporary collapse in banking, agriculture and manufacturing production during the Great Depression of the 1930s. The collapse of activity during First World War and its aftermath led to dramatic agrarian crises, industrial slumps, bank bankruptcies and political turmoil in Latin America, southern Europe and southern Asia. Mediterranean economies suffered financial instability and long-lasting stagnation during the wave of globalization of the late 19th century, and southern and far-east Asia experienced dramatic deflation and sustained de-industrialization during the first half of the 19th century. Mediterranean Europe faced a large-scale crisis when the Ancient Regime collapsed and the Napoleonic wars badly disturbed the previous patterns of trade.
The above cases suggest that large-scale crises defined as prolonged periods of under-utilization of productive capacity, have been relatively frequent over the course of economic history. In this session we encourage shcolars working in the field to present their recent research results, focusing on the following objectives.
First, further discussion is needed on the concepts of large-scale crisis or great depression, which might be considered as synonymous. The organizers suggest prioritizing the number of years required for the recovery of pre-crisis levels as the key criteria for detecting these events, but they are open to consider alternative measures.
Second, the session is intended to highlight the debate on the best indicators to identify full recovery after a great depression. For recent large-scale crises, a substantial range of indicators can be used: GDP, human developement index, height, agrarian production, industrial production, real financial assets, market shares and businesses’ rates of profit. Perhaps alternative measures such as demographic indicators, urbanization rates or real wages might also be considered.
Third, large-scale crises usually derive from a combination of shocks which merit further analysis. In most depresions a key role is played by previous periods of financial speculation and mass borrowing by firms, households and governments. But other crises have also been triggered by ecological catastrophes, the outburst of war, or the new forms of globalization in world market caused by the diffusion of innovation in transport and communication.
Fourth, the impact of great depressions is not even across all productive sectors. According to some interpretations, primary commodities deflation or banking bankruptcies might be the critical stage in converting a crisis into a prolonged depression. Similarly, during the recovery phase different industries may have different roles in helping to overcome the depression.
Last but not least, governments and firms had to select sustainable strategies to cope with depressions. This session aims to discuss the types of policies adopted by governments to deal with prolonged crises and their outcomes. We also consider the degree of success of strategies implemented at the firm level. Finally, the macroeconomic mechanisms of adjustment which contribute to achieve full recovery will also be analysed.