Coronavirus could lead to an Economic Depression on a scale not seen since the 1930s – according to the International Monetary Fund. We’re already seeing people going without food and being kicked out of work. And when the virus subsides, it’s not going to be a return to business as usual. The damage that’s been done is way too severe.
Millennials experienced the 2008 crisis as a brutal coming of age. A long, deep recession that trashed people’s life chances. For Boomers, I’m losing count how many economic recessions we’ve been through now. Sterling crisis of the 1960s. Oil crisis of the 1970s. Manufacturing collapse under Margaret Thatcher. Housing market collapse in the early 1990s. And here we go again!
Only this time it will be very different. It’ll be way more catastrophic in terms of the impact on jobs and markets. And of course it’s happened not because of economic cycles or government policy but – a biological virus. You’d surely have to go back to the Black Death of the fourteenth century to see a disease hit our economy at such a scale.
Economic depression – all about oil in the 1970s
As Boomers, we’ve seen economic recessions with very different characteristics. The 1970s saw short bursts of recession that despite the reputation of the decade for crisis and gloom, actually saw the economy bounce back into positive growth pretty quickly. The psychological impact though was huge because we’d basically been booming since the end of the Second World War and suddenly, we experienced a taste of what our grandparents had lived through in the 1930s.
The cause of recession in 1973 was the decision by oil producing countries to quadruple the price of ‘black gold’. Basically, they weaponised oil and were punishing the UK, US and other nations for supporting Israel in the Yom Kippur War. I remember the news bulletins were always relaying the latest bad news from the meetings of Arab oil producers. And Sheikh Yamani – the Saudi oil minister – became a household name. Here he is blithely informing us that oil is now a weapon…
Monetarism turns economic recession into depression
1979 saw Margaret Thatcher become Prime Minister in the UK and she implemented what was called a “monetarist” policy in the face of an economic downturn. That meant Austerity-Max with public spending cut and state support to manufacturing industry reduced. What Thatcher wanted to do was break the trades unions, reduce inflation and privatise the state-run parts of the economy. So, a political agenda as much as an economic policy.
The result between 1979 and 1981 was benign if you lived in the south east. But in Scotland, the north and the Midlands of England – industries collapsed like dominoes. I went on a canal trip at the end of secondary school on the Cheshire Ring canal and we were gobsmacked as middle class southern kids to see mile after mile of closed factories. It was a scene of devastation that led to a summer of riots in cities across the UK in 1981.
Thatcher remained in power until 1990 – when she oversaw another, often forgotten, recession. Like 1979 to 1981, the recovery took way longer than the downturns of the 1970s. We’d had the yuppie boom of the late 80s when markets soared. But then 1987 saw a stock market crash on Black Monday with the FTSE falling nearly a quarter in two days. Two years later, the aftershock hit the ‘real economy’ with unemployment rising sharply all over the country.
What I recall the most about the early 90s recession was the collapse in house prices. There were a lot of what were termed ‘voluntary repossessions’ where people chucked their own keys through the letterbox and walked away from their own home. And there was a boom in auctions of empty properties.
I was a financial journalist at the time and the other thing I reported on was the massive amount of financial corruption that was exposed as the economy slowed down. From Lloyd’s of London to independent financial advisers on the high street – the reality of the 1980s Yuppie era revealed itself in one scandal after another.
Back to the 1979 to 1981 recession. Here is the Toxteth riot of 1981 – what happens when you let youth unemployment skyrocket…