As one nation after the other slips into recession, dark memories of the Great Depression of 1929 are coming back. One wonders whether this free-fall will only end in a ‘mother-of-all’ depression. But then, what is a depression? Someone said recession is when your neighbour loses his job and depression is when you lose yours. Plausible, but there are more serious descriptions for those willing to consider them.
All Fall Down
Investopedia defines depression as “a severe and prolonged recession characterised by inefficient economic productivity, high unemployment and falling price levels.”
According to Dilip M. Nachane of Indira Gandhi Institute of Developmental Research (IGIDR), it is difficult to define economic depression in a few words. But he feels it would possibly be a dip from the long-term trend, which is based on average growth of output. Here, the number of output series is turning down simultaneously.
A click on www.askoxford.com , the online Oxford English Dictionary, shows depression to be a long and severe recession in an economy or market. Webster defines it as a period of low general economic activity marked especially by rising levels of employment.
Saul Eslake, chief economist at ANZ Bank, says that depression is “a result of a bursting of asset and credit bubble, a contraction in credit and a decline in general price level.”
Three Bad Signs
According to Wikipedia.org , a recession has many attributes that can occur simultaneously and can include declines in coincident measures of activity such as employment, investment and corporate profits. A severe or prolonged recession is referred to as an economic depression.
The Economist quotes various sources to conclude that depression is a period when gross domestic product (GDP) growth rate falls more than 10 percent or lasts for more than three years.