The Road to Recovery
WHEN THE NATIONAL Bureau of Economic Research (NBER) announced in December 2008 that the U.S. economy had been in a recession since the previous December, it hit American citizens with a dull thud. The word “recession” had been whispered over cubicles and at dinner tables, splashed in sensationalist headlines on tabloids and magazines, and calmly and firmly denied by politicians for months. By the time the rumors were confirmed, it was hardly news. Still, forewarned is not forearmed, and assuming the worst did nothing to diminish the ensuing fear. Traditionally, a recession is defined as two consecutive quarters of decreasing gross domestic product, although the official designation is determined by the NBER as “a significant decline in economic activity spread across the country, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production and wholesale-retail sales.” By either standard, the American economy is in a recession. While this is surely no cause for celebration, it is also not cause for apocalyptic speculation. Economic contractions are as natural and necessary as expansions, and although it may be more severe than normal, it is also bound to turn around.
Including the current one, there have been 11 recessions since the Great Depression according to the NBER—and the country has survived each. Read on to learn the history behind a few of America’s economic turmoils in recent memory, and see what the government did to remedy the situation.
The Duration: November 1973 to March 1975
The Cause: The Vietnam War led to increases in military spending at a time when America was suffering both international payment and trade deficits. As a response to international demands for payment, President Nixon abandoned the Bretton Woods system of basing currency exchange on the value of gold, effectively taking the dollar off the gold standard. This started a chain reaction of other countries abandoning the gold standard, leading to a period of economic volatility as international currencies stabilized in relation to one another. This precipitated the stock market crash of 1973, affecting economies worldwide. The same year, OPEC placed an oil embargo on the United States because of America’s support of Israel during the Yom Kippur War.