Recession or depression?

Writing in the New Republic, John Judis suspects that the crisis is a depression:

We may not simply be facing a steep recession like that of the early 1980s, from which we can extricate ourselves in a year or two, but something resembling the Great Depression of the 1930s. For starters, the current crisis is global, which means that one part of the world can't lift the other out of its misery; everyone will go down together, which is what happened in the 1930s. Secondly, the downturn has combined an unusual decline in the real economy — employment in durable-goods manufacturing fell by 21.9 percent from 2000 to 2008 — with a financial crash precipitated by the bursting of the housing bubble. The bubble resulted from an attempt to sustain growth and employment in the face of an underlying decline, which, too, is what happened in the late 1920s.

Peter Morici also believes the crisis is a depression:

The challenges facing President-elect Barack Obama could not be clearer. The current economic slowdown has two structural causes — bad management practices at the large money center banks and the huge foreign trade deficit. These problems are not self-correcting.

The economy will not recover without fundamental changes in banking and trade policy. A large stimulus package, though necessary, will only give the economy a temporary lift but then unemployment will rise again and continue at unacceptable levels indefinitely without successively larger stimulus packages and huge federal budget deficits. The economy is a depression, not a recession.

Both propose economic restructuring as the only feasible remedy to the crisis. When the implications are drawn from their arguments, both seem to suggest that any successful redevelopmental program will have reindustrialization is a necessary condition.

The real issue: Will the Obama administration have the political and economic resources it will need to realize these reforms.

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