Whether you’re alarmed or reassured by this chart, from the National Institute for Esonomic and Social Research, probably depends whether you’re a glass half-full or glass half empty sort of a person. It shows the comparative paths of five recessions – the red tracks the 1930s, the incomplete black line tracks the present slump. It scared me.
The first ‘bounce’ in the 1930s was when Britain left the Gold Standard. But despite the billions of pounds pumped into the economy now by the Bank of England, and seventy years of learning about macro-economic management, the fall has been as steep as in the ’30s, even if the small turn in September came after a decline of only six percentage points in GDP, rather than the eight of the 1930s.
If you are a glass half full person, you’ll be reassured to learn that the economics editor of the FT, Chris Giles, quotes the NIESR as saying that the recession is ‘on track’ to be less severe than the ’30s. But in the coming months output is still as likely to go down as up. Giles also quotes the NIESR’s Director, Martin Weale, as saying: “The end of the recession should not be confused with a return to normal economic conditions.”