1-Definition
Before the Great Depression of the 1930s any downturn in economic activity was referred to as a depression. The term recession was developed in this period to differentiate great depression of 1930 from smaller economic declines .
You should be able now to determine the difference between a recession and depression:
A depression is a severe downturn in the economy.
A recession is an economic downturn smaller than 1930s downturn (The great depression).
The economists didn’t have a unique definition for recession and depression but all of them look at the changes in the gross domestic product (GDP) like major variable to study first. A depression is any economic downturn where real GDP declines by more than 10 percent. A recession is an economic downturn where real GDP declines less than 10 percent. We still in need to study the changes in other variables like unemployment rate, business activity, the average length of the economic downturn , The consumer confidence…
2- Differences:
2-1-The GDP
During the great depression the GDP contracted by 28% between 1930 and 1932. In this actual economic downturn the GDP is up 3.5 % .The Commerce Department reported that the nation's gross domestic product GDP rose at a 3.5 % annual rate in the July-through-September 2009 quarter which followed a 6.4 percent rate of contraction in the first quarter and a 0.7 percent decline in the second. With all those rates of our GDP during 2008 and 2009 we still far enough from the 28% down of the great depression GDP.
2-2- The unemployment
During the Great Depression, the unemployment rate hit 25% However, the fact that the recession is now at her end, and the unemploymet rate still less than the half of the unemployment Great Depression rate.
2-3-The people confidence
During the Great Depression the people lost confidence in banks system and in stock market because they didn’t find the regulations at this time to let them avoid the fear and the panic that worsened the situation.
In our recession now we got a big benefit from all the rules and regulations created after the great depression .These included the creation in 1933 of Federal Emergency Relief Administration, the Civilian Conservation Corps, the Reconstruction Finance Corporation, and the Tennessee Valley Authority. Congress also gave the Federal Trade Commission broad new regulatory power, then in 1934 Congress authorizes creation of the Federal Communications Commission, the National Mediation Board and the Securities and Exchange Commission. the Securities and Exchange Act and the Trade Agreement Act, and all modifications and upgrades and other regulations from this time until now.
On October 3, 2008,the federal deposit insurance corporation FDIC deposit insurance temporarily increased from $100,000 to $250,000 per depositor, per deposit category, through December 31, 2013. so no panic, no fear, no rush to the banks like what happened in the great depression.
All those regulations were created based in learning lessons of the 1930s great depression in addition the Unemployment insurance, the Social Security payments and larger government at the federal, state and local levels, the $787 billion stimilus keep money flowing into the economy even as consumers and businesses pull back on their own spending.
The Federal Reserve has pumped trillions of dollars into the economy .the central bank has never tried before.
During the great depression The government imposed limits that killed international trade. Learning from this lesson and dropping the strict protectionism of the 1930s the government policy now is helping the GDP to rose and to be in safe side.
The 3.5 percent up of the GDP can clearly predict the end of this recession very soon.
At the end I say :Above the dark clouds, there is a bright blue sky, keep smiling it can shine on you.this recession will not turn into a depression.
Mona Ata
