A global recession is a period of global economic slowdown. The
International Monetary Fund (IMF) takes many factors into
account when defining a global recession, but it states that global
economic growth of 3 percent or less is "equivalent to a global
Informally, a national recession is a period of declining
productivity. Some rules of thumb to identify a recession include
two successive quarterly declines in gross domestic product
(GDP), a measure of the nation's output. This two-quarter metric is
now a commonly held definition of a recession. In the United States, the
National Bureau of Economic Research (NBER) is regarded as the
authority which identifies a recession and which takes into account
several measures in addition to GDP growth before making an
assessment. In many developed nations other than USA, the two-quarter
rule is also used for identifying a recession.
Whereas a national recession is identified by two quarters of decline,
defining a global recession is more difficult, because developing nations
are expected to have a higher GDP growth than developed nations.
The IMF estimates that global recessions seem to occur over a cycle
lasting between 8 and 10 years. During what the IMF terms the past three
global recessions of the last three decades, global per capita output
growth was zero or negative.
Since 1980 there have been only eight periods of negative economic
growth over one fiscal quarter or more, and four periods considered
recessions. Major recessions that occurred in the world from 1980's are
(3) of (8)
Early 1980s recession
The early 1980s recession was a severe recession in the United States
which began in December of 1980 and ended in November 1982. It has
been thought that the primary cause of the recession was a
contractionary monetary policy established by the Federal Reserve
System to control high inflation.
In the wake of the 1973 oil crisis and the 1979 energy crisis, stagflation
began to afflict the economy of the United States. Unemployment had
risen from 5.1% in January 1974 to a high of 9.0% in May 1975. Although
it had gradually declined to 5.6% by May 1979, unemployment began
rising again thereafter. It jumped sharply to 6.9% in April 1980 and to
7.5% in May 1980. A mild recession from January to July 1980 kept
unemployment high, but despite economic recovery unemployment
remained at historically high levels (about 7.5%) through the end of
Inflation, which had averaged 3.2% annually in the post-war period, had
more than doubled after the 1973 oil shock to a 7.7% annual rate.
Inflation reached 9.1% in 1975, the highest rate since 1947. Inflation
declined to 5.8% the following year, but then edged higher. By 1979,
inflation reached a startling 11.3% and in 1980 soared to 13.5%.
Several key industries—including housing, steel manufacturing and
automobile production—experienced a downturn from which they did not
recover through the end of the next recession.
This recession marked the early years of Reagan's presidency in U.S.,
hitting almost all sections of the country. Real gross national product
(GNP) fell by 2.5 percent in 1982, as the unemployment rate rose above
10 percent and almost one-third of America's industrial plants lay idle.
Throughout the Midwest, major firms like General Electric and
International Harvester released workers.
The oil crisis contributed to the decline. As gains in U.S. productivity
slowed, economic rivals such as Germany and Japan won a greater share
of world trade. American consumption of goods produced by other
countries rose sharply.
Farmers also suffered hard times. The number of farmers declined, as
(4) of (8)
production became concentrated in the hands of a smaller number.
During the 1970s, American farmers had helped India, China, the Soviet
Union and other countries suffering from crop shortages, and had
borrowed heavily to buy land and increase production. Then the rise in oil
prices raised farm costs and a worldwide economic slump in 1980 reduced
the demand for farm products. Farmers had major difficulties making
But the deep recession throughout 1982 -- combined with falling oil prices
-- had one important benefit: it curbed the runaway inflation that had
started during the Carter years. Conditions improved for some segments
of the economy in late 1983; by early 1984, the economy rebounded and
the United States entered one of the longest periods of sustained
economic growth since World War II.
Early 1990s recession
The recession of the early nineteen-nineties was an economic recession
that hit much of the world in 1990-91.
On Black Monday of October 1987 a stock collapse of
unprecedented size lopped 22.6 percent off the Dow Jones
Industrial Average. The collapse, larger than that of 1929, was handled
well by the economy, and the stock market began to quickly recover.
However, in North America, the lumbering savings and loans industry was
beginning to collapse, leading to a savings and loan crisis which put the
financial wellbeing of millions of Americans in jeopardy.
The panic that followed led to a sharp recession that hit hardest those
countries most closely linked to the United States, including Canada,
Australia, and the United Kingdom. The economies of much of Europe and
Japan were hurt, but not as badly. The US economy continued to grow as
a whole, although certain sectors of the market such as energy and real
The first burst of the recession was short-lived, as fervent preelection
activity by the governments of the United States and
Canada created what many economists at the time saw as an
economic miracle: a growing consumer confidence and increased
(5) of (8)
consumer spending almost single-handedly lifted the North American
economy out of recession.
It soon turned out that the quick recovery was illusory, and by 1990,
economic malaise had returned with the beginning of the Gulf War
and the resulting 1990 spike in the price of oil, which increased
inflation but to less of a degree as the oil crisis ten years earlier.
Nevertheless, for the next several years' high unemployment, massive
government budgetary deficits, and slow Gross Domestic Product (GDP)
growth affected the United States until late 1992 and Canada until 1995.
The rest of the world was less affected by the downturn; Germany and
Japan both grew rapidly.
Like all recessions, the one of the late 1980s and early 1990s had a
profound impact on society. Rates of alcoholism and drug abuse
increased, as did rates of depression.
Early 2000s recession
The early 2000s recession was a decline in economic activity
which occurred mainly in Western countries. It affected the
European Union mostly during 2000 and 2001 and the United
States mostly in 2002 and 2003
The early 2000s recession had been predicted by economists for years,
because the boom of the 1990s, which was accompanied by both low
inflation and low unemployment, had already ceased in East Asia during
the 1997 Asian financial crisis. The 1990s were also a period of recession
between 1995 and 1998 inclusive. The early 2000s recession was not as
bad as many predicted it would be, nor was it as bad as either of the two
previous worldwide recessions.
In the U.S. the recession was characterized by large layoffs,
outsourcing, and a jobless recovery, with many formerly high-paid
manufacturing and professional employees being forced into much
lower paid service positions.
The NBER's Business Cycle Dating Committee has determined that a peak
in business activity occurred in the U.S. economy in March 2001. A peak
(6) of (8)
marks the end of an expansion and the beginning of a recession. The
determination of a peak date in March is thus a determination that the
expansion that began in March 1991 ended in March 2001 and a recession
began. The expansion lasted exactly 10 years, the longest in the NBER's
According to the National Bureau of Economic Research (NBER), which is
the private, nonprofit, nonpartisan organization charged with determining
economic recessions, the U.S. economy was in recession from March 2001
to November 2001, a period of eight months at the beginning of President
George W. Bush's term of office. However, economic conditions did not
satisfy the common shorthand definition of recession, which is "a fall of a
country's real gross domestic product in two or more successive
quarters," and has led to some confusion about the procedure for
determining the starting and ending dates of a recession.
The NBER's Business Cycle Dating Committee (BCDC) uses monthly,
rather than quarterly, indicators to determine peaks and troughs in
business activity, as can be seen by noting that starting and ending dates
are given by month and year, not quarters.
From 2000 to 2001, the Federal Reserve in a move to quell the stock
market, made successive interest rate increases, credited in part for
"plunging the country into a recession." Using the stock market as an
unofficial benchmark, a recession would have begun in March 2000 when
the NASDAQ crashed following the collapse of the Dot-com bubble.
The Dow Jones Industrial Average was relatively unscathed by the
NASDAQ's crash until the September 11, 2001 attacks, after which the
DJIA suffered its worst one-day point loss and biggest one-week losses in
history up to that point. The market rebounded, only to crash once more
in the final two quarters of 2002. In the final three quarters of 2003, the
market finally rebounded permanently, agreeing with the unemployment
statistics that a recession defined in this way would have lasted from
2001 through 2003. Effect of this recession on other countries is
Canada's economy is closely linked to that of the United States, and
economic conditions south of the border tend to quickly make their way
north. Canada's stock markets were especially hard hit by the collapse in
high-tech stocks. The events of September 11 also hurt the Canadian
(7) of (8)
stock markets and were especially devastating to the already troubled
However in the wider economy Canada was surprisingly unhurt by these
events. While growth slowed, the economy never actually entered a
recession. This was the first time that Canada had avoided following the
United States into an economic downturn. The rate of job creation in
Canada continued at the rapid pace of the 1990s. A number of
explanations have been advanced to explain this. Canada was not as
directly affected by 9/11 and the subsequent wars, and the downward
pressure of these events was more muted. Canada's fiscal management
during the period has been praised as the federal government continued
to bring in large surpluses throughout this period, in sharp contrast to the
United States. Unlike the United States no major tax cuts or major new
expenditures were introduced. However, during this time, Canada did
pursue an expansionary monetary policy in an effort to reduce the effects
of a possible recession. Many provincial governments suffered greater
problems with a number of them returning to deficits, which was blamed
on the fiscal imbalance. 2003 saw elections in six Canadian provinces and
in only one did the governing party not lose seats.
The Soviet Union's last year of economic growth was 1989, and
throughout the 1990s, recession ensued in the Former Soviet Republics.
In May 1998, following the 1997 crash of the East Asian economy, things
began to get even worse in Russia. In August 1998, the value of the ruble
fell 34% and people clamored to get their money out of banks (see 1998
Russian financial crisis). The government acted by dragging its feet on
privatization programs. Russians responded to this situation with approval
by electing the more pro-dirigist and less liberal Vladimir Putin as
President in 2000. Putin proceeded to reassert the role of the federal
government, and gave it power it had not seen since the Soviet era.
State-run businesses were used to out-compete some of the more
wealthy rivals of Putin. Putin's policies were popular with the Russian
people, gaining him re-election in 2004. At the same time, the exportoriented
Russian economy enjoyed considerable influx of foreign currency
thanks to rising worldwide oil prices (from $15 per barrel in early 1999 to
an average of $30 per barrel during Putin's first term). The early 2000s
recession was avoided in Russia due to rebound in exports and, to some
degree, a return to dirigisme.
Japan's recession, which started in the early 1990s, continued into the
(8) of (8)
2000s, with deflation being the main problem. Deflation began plaguing
Japan in the fiscal year ending 1999, and by 2005 the yen had 103% of
its 2000 buying power. The Bank of Japan attempted to cultivate inflation
with high liquidity and a nominal 0% interest rate on loans. Other aspects
of the Japanese economy were good during the early 2000s;
unemployment remained relatively low, and China became somewhat
dependent on Japanese exports. The bear market, however, continued in
Japan despite the best efforts of the Bank.
Transition left the economy of the European Union in a cautiously
optimistic state during the early 2000s. The European Union introduced a
new currency on January 1, 1999. The euro, which was met with much
anticipation, had its value immediately plummet, and it continued to be a
weak currency throughout 2000 and 2001.