Global recession – definition and meaning
A global recession is a recession that stretches across the world. It is a period of global economic decline. According to the IMF, the macroeconomic indicators that point to a global recession include declining oil consumption, capital flows, trade, industrial production, and rising unemployment. In other words, a drop in global output should coincide with a weakening in those indicators for there to be a global recession.
If we use the IMF’s definition, there have been four global recessions since the Second World War. They started in 1975, 1982, 1991, and 2008. IMF stands for the International Monetary Fund.
The 2007/8 global recession was the widest, deepest, and longest-lasting of all. It lasted until 2011/12. We call it ‘The Great Recession.’ The world economy has since been recovering. However, the recovery has been a slow and fragile one.
A recession affects just one country or region. We define a recession is a period of economic contraction that lasts at least two consecutive quarters. Depressions last at least three years and reduce GDP by at least 10%.
Regarding a global recession, however, the IMF does not specify two quarters of GDP per capita contraction. In fact, it does not specify any period.
According to BusinessDictionary.com, a global recession is:
“A period of general economic decline that has reached global proportions. The financial crisis in the US in 2008 sparked a global recession that lasted into 2009.”
The 2007-2012 global recession
Most people refer to it as The Great Recession. It lasted from 2007 to 2012. It was a period of general economic decline in world markets.
Not all countries agree on the Great Recession’s length. The US National Bureau of Economic Research says it lasted from December 2007 to June 2009.
Although it affected many countries across the world, some suffered more than others.
According to the IMF, it was the worst global recession since The Great Depression. The Great Depression, which originated in the United States, spread internationally during the 1930s.
The causes of the Great Recession mainly originated in America, particularly in the real estate market. However, economists say that choices that other countries made also contributed. It was related to the 2007/8 financial crisis and the 2007-2009 subprime mortgage crisis.
There was a collapse of banks in the world economy and scarcity of valuable assets in the market economy.
There were many bailouts of banks in the United States and Europe during the Great Recession. In other words, the taxpayer had to save failing banks with funds.
According to the IMF, a global recession typically occurs over a cycle that lasts from eight to ten years. During three global recession that occurred after WWII, global GDP per capita was either zero or negative.
Video – Causes of the Great Recession
The Great Recession, the most severe and longest-lasting global recession since the Great Depression of the 1930s, happened because banks had become too greedy. This One Minute Video explains why it occurred.