The US Recession in Comparative Perspective

by Joshua Tucker on June 3, 2009 · 5 comments

in Political Economy

Recession_by_country_Stratfor.jpg

Stratfor Global Intelligence has a thought provoking article up on their website that puts the US recession in comparative perspective. The article makes a number of interesting claims:

  • Despite widespread belief to the contrary, the current recession is only the worst in the US since 1982, not since the 1930s
  • Despite the fact that the recession started in the US, it is actually having a far milder effect here than in many other large economies (see table above, from the original article; India and China are noticeable omissions)
  • Perhaps most interestingly, the article argues that this is the case because “the American system is far more stable, durable and flexible than most of the other global economies, in large part thanks to the country’s geography ” (emphasis added). Valuable geographic attributes include usable land, its maritime transit system, and very little local competition.
  • In contrast, “If in economic terms the United States has everything going for it geographically, then Russia is just the opposite”.

While I was surprised not to see a bit more emphasis on the Russian economy’s reliance on the oil and gas industries—thus the extreme effect that a drop in natural resource prices can have on Russian GDP —the article is an interesting “outside the box” take on the recession and, perhaps more importantly, opportunities for recovering from the recession.

[Hat Tip to The Power Vertical, a fantastic blog that I strongly recommend for Russia watchers.]

{ 5 comments }

Andrew Therriault June 3, 2009 at 7:06 pm

While they applaud the US for having a “stable, durable and flexible” economy which keeps GDP high relative to other countries, that doesn’t mean that the US economic system limits the actual impact of the recession on individuals. Quite the opposite–while countries like Germany have a much higher GDP drop from the recession, they’re not seeing the kind of ground-level damage that we see in the US (bankruptcies, foreclosures, etc.) because they have much stronger social safety net. So if anything, this should be a critique of the US economy, rather than a reason for praise. While a relatively minor drop in GDP leads to high levels in individual distress in the US, more socialized economies such as those in Europe are able to withstand a much worse drop with less collateral damage. Not to say that things are fun in Europe these days, but the most dramatic incidents of financial pain (foreclosures, bankruptcies, loss of healthcare, inability to pay for education) are rarer or nonexistent in most European countries.

One other note: Not sure how much we should trust the US GDP figures. Remember that creative accounting procedures (such as the relaxing of mark-to-market valuation) are being used to delay or hide losses from a variety of securities and other investments. As such, a lot of companies haven’t written down the value of assets as much as they really have decreased, and so the real drop in GDP is probably somewhat larger–perhaps another explanation for why the crisis seems more troublesome in the US?

LFC June 3, 2009 at 11:39 pm

I very much agree with Andrew Therriault’s comment, esp. the first paragraph.

Eric June 4, 2009 at 12:04 am

I don’t think that Stratfor is an especially credible source for information.

Jeffrey Lazarus June 4, 2009 at 1:28 pm

Per Andrew’s note. Do we have any reason to believe that the U.S.’s GDP figures are less reliable than those from other nations? I’m not very well informed about international finance, but I would guess that corporations from all nations have incentives to engage in this behavior. This would mean that, for comparative purposes at least, these types of errors are a wash.

andrew June 4, 2009 at 7:40 pm

The analysis of Russia and U.S. geography sounds a lot like the contrast this article (JSTOR link; gated) makes between Frederick Jackson Turner’s frontier hypothesis and roughly contemporaneous attempts to account for the role of open space/the frontier in Russian history.

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