Q&A: Recession returns in Britain and Europe

The dreaded ‘double-dip recession’ is upon us. To the surprise of most economists, new figures have shown that the UK economy is once more shrinking. We take a look at what that might mean.

Q: Why is everybody suddenly talking about the economy again?

A: Once every three months (known as ‘a quarter’), the British government releases an update on the UK’s Gross Domestic Product. GDP measures the value of all the goods and services traded over the course of a year – everything from mobile phones to manicures. It gives a snapshot of overall productivity, and is the main way of judging a country’s economy. GDP is in the news today because the figures for the first quarter of 2012 have just been released.

Q: How do they look?

A: Bad: for the second quarter in a row, GDP has fallen. Two consecutive quarters of shrinking output is the official definition of a recession – that means we are back in recession for the second time in four years. This is a scenario economists have long feared: the dreaded ‘double dip.’

Q: Sounds ominous – is this a whole new crisis?

A: It’s not a big recession – the economy only shrunk by 0.2%. Things aren’t getting much worse, but they’re not getting any better either.

Q: I bet the politicians are unhappy!

A: They certainly are. These new figures could not have come at a worse time for David Cameron’s government. Poll numbers have been slipping. Support for Cameron has been ebbing away. His political opponents will now try to blame him for causing this recession.

Q: What does that mean for ordinary people?

In short, fewer jobs and lower wages. Unemployment won’t necessarily rise; but those hoping for relief from financial woes will probably have to wait: it looks like the tough times are far from over.

Q: What’s caused this recession?

A: There’s a saying that certainly applies here: ‘if you ask three economists one question you’ll get five different answers.’ Some blame the government’s spending cuts, which they claim take money and jobs out of the economy; though supporters say they are necessary and helpful in the long run. Either way, international factors also play a lead role. The continuing crisis in the Eurozone hurts trade, while in uncertain times people are cautious about spending money on investments.

Q: So other countries are suffering as well?

A: Plenty. The Eurozone too looks set for another recession, with some of its member countries teetering on the brink of a major crisis. The Netherlands, for example, has also double-dipped. Growing economies are hard to come by in this part of the world.

Q: Is that really so surprising? Economies can’t keep growing forever, can they?

A: The USA started measuring GDP during the Second World War. Consistent growth has been the norm and the expectation ever since. But some question whether this is sustainable, or even desirable.

Q: How come?

A: For a start, do we really want to encourage the endless consumption of goods? A narrow focus on GDP encourages all economic activity, regardless of how beneficial it is. Unnecessary disposable goods, cheap alcohol and fatty foods, mining and burning natural resources... it all counts. Even divorce leads to a growth in GDP, through payments for lawyers and houses.

Q: Oh... so this isn’t bad news after all?

A: Whether there is a better way of measuring economic success is a fascinating and complex question. But GDP is still a good general indicator, and we must work with what we have. If there is less money, people will be poorer and jobs more scarce – few would deny that this is a bad thing.

You Decide

  1. Should increasing wealth always be celebrated?
  2. Is it right to blame national governments for this recession, or are they helpless in the face of global forces?


  1. How should you judge a country’s success? List the following factors in order of importance, and explain your choices: wealth, health, employment, happiness, education, military power and sustainability.
  2. Research a recession from history and write a short description of its causes and consequences.

Some People Say...

“The cuts aren’t working – governments must stop this madness!”

What do you think?


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