BY COZETTE CALDERON
Living in America, it is easy to worry about our financial woes. Our government is $34 trillion in debt. Though many citizens may be watching in terror thinking that we are approaching a recession, many economists assure that we will scrap by 2024 without officially declaring a recession. However, it is easily understandable to be furious and/or worried because of high living costs, inflation, and an endless amount of taxes. However, we are not alone in our economic struggles—many other countries are sinking along with us.
Currently, there are 4 countries who have hit the recession mark: Ireland, Finland, and, most recently, Japan and the UK. Why does this matter? A recession is considered to be a few steps away from reaching a depression.
What is a recession? Economists have differing opinions on the moment when a country really falls into a recession, but they all agree on the fact that recessions are a fuzzy concept. A typical guide for declaring a recession is when a country’s Gross Domestic Product has “two consecutive quarters of decline in a country’s real (inflation-adjusted)” GDP. Gross Domestic Product (GDP) is the value of all goods and services that a country produces.
However, if you are going by the National Bureau of Economic Research (NBER), ‘a recession’ has a broader definition: “NBER’s Business Cycle Dating Committee defines a recession as ‘a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough’.” So, NBER’s definition includes factors like employment, income, sales, and industrial production.
Though it seems that countries are scared of merely the word recession, these countries have good reasons. Recessions often cause high unemployment rates, company failure, and housing market instability. These have a major influence on people’s quality of life, which can destabilize a country.
The U.K declared a recession at the end of 2023, but claimed that it was mild. Still, this recession comes after the 2009 economic struggle in Britain, which was followed by 2020 and the Covid-19 pandemic. Simply, the U.K.’s financials were already in an uneasy position. The U.K. was considered to be the second-worst performer economically in 2023. Liz Mckwoen, a director of economic statistics, stated,“All the main sectors fell on the quarter, with manufacturing, construction and wholesale being the biggest drags on growth, partially offset by increases in hotels and rentals of vehicles and machinery.” Though there is some hope of cutting borrowing rates by summer time, “GDP per person has not grown since early 2022, representing the longest such unbroken run since records began in 1955.”
JAPAN:
Japan fell into a recession after foreign demand for products dropped. The housing and business market took notice, cutting “spending for a third straight quarter.” Japan was once known as the world’s 3rd largest economy, which was a proud accomplishment considering the country’s history of a brutal economic era after WWII. However, China and Germany recently stole 2nd and 3rd place, respectively. One of the key causes for Japan’s recession is the dwindling population, along with its slowing productivity. With lower birth rates and low rates of immigrants, Japan is lacking in workers to compete with other countries. Japan has also been rejecting foreign workers, so immigration will not likely produce much change. Some may be wondering about Japan’s well-known presence in the automotive industry. Will such a sector have a chance of saving the economy? Tetsuji Okazaki, professor of economics at the University of Tokyo, stated, “with the advent of electric vehicles, even that advantage is shaken.” Wages are slowly declining in Japan, resulting in households becoming more frugal and reluctant to spend money, especially with no real sign of change in the economy.
IRELAND:
Ireland’s GDP has decreased by 0.7 per cent, which seems small. However, Ireland has been facing a recession for around half a year. The leading causes of the recession can be seen in Ireland’s lack of pharmaceutical exports. Additionally, according to Rachel O’Carroll, senior statistician in the national accounts data collection and quality division, “the drop in volume terms was driven by decreases in the multinational-dominated sectors of industry and information and communication.” Even as time passes, we see little improvement: “The Irish economy contracted more than initially expected in the third quarter between July and September as GDP fell by 1.9 per cent.”
FINLAND:
Finland is one of the few countries on this list that has had a moment of growth during their respective recessions: “The Finnish economy briefly bounced back with 0.4% [percent] growth during the second quarter of 2023,” which was an improvement compared to the previous year. However, the uncertainty of the future and fewer investments have continued to affect the economy. Even with such concerns, a recovery is expected in 2024.
What can we, as U.S. citizens, learn from such economic trends? We are not alone. Other people are struggling with inflation, unemployment, and uncertainty about their country’s stability. In such a polarized world, the worst possible thing one can do is fall into isolationism. Let us not forget that we are all connected through experiences—even ones as broad or as narrow as money troubles.
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