Late 1980s recession
According to the economists' definition of a recession, two quarters of negative growth, the late eighties recession only covered a brief period in 1987 (although not in the United States), and another in 1990-1991. By measures such as unemployment and public perception the North American economy was in recession continuously for years after 1987, with only brief periods of revival.
(19 July 1987 through 19 January 1988)On Black Monday of October 1987 a stock collapse of unprecedented size lopped twenty-five percent off the Dow Jones Industrial Average. The collapse, larger than that of 1929, was handled well by the economy and the stock market began to quickly recover. However the lumbering savings and loans were beginning to collapse, putting the savings of millions of Americans in jeopardy.
The panic that followed lead to a sharp recession that hit hardest those countries most closely linked to the United States, including Canada, Australia, and the United Kingdom. The economies of Europe and Japan were hurt, but not as badly. The US economy continued to grow as a whole, although certain sectors of the market such as energy and real estate slumped.
The first burst of the recession was short-lived, as fervent activity by the government leading up to elections in both the United States and Canada created what many economists at the time saw as an economic miracle a growing consumer confidence and increased consumer spending almost single handedly lifted the North American economy out of recession.
It soon turned out that the quick recovery was illusory, and by 1989 economic malaise had returned. For the next several years high unemployment, massive government deficits, and slow GDP growth affected the United States until 1992 and Canada until 1995. While Canada enjoyed a brief recovery in 1994 the recession is believed to have lasted longer there due to the gross fiscal mismanagement of the Mulroney government and the stress placed on the economy by the spectre of Quebec separatism.
The rest of the world was less affected by the downturn, Germany and Japan both grew rapidly. Some pundits guessed that this would be a permanent state of affairs and that both the German and Japanese economies would grow to be larger than the American one.
Like all recessions the one of the late eighties and early nineties had a deep impact on society. Rates of alcoholism and drug use increased, as did rates of depression.
While the Progressive Conservative government of Brian Mulroney in Canada and the presidency of George Bush Sr in the United States were saved by the brief recovery of 1988, neither could hold on to power though the last part of the recession, both being swept out of power by opponents running on pledges to restore the economy to health.
In Australia, Paul Keating, the Australian Federal Treasurer during this recession, referred to it as the "recession we had to have". This quote was used by the Liberal Party of Australia during the 1993 election as a cornerstone of their campaign, pointing out that the Australian Labor Party didn't manage the national economy effectively. But unlike in North America this didn't help the Liberal Party to enter government.
Perhaps the most lasting result of the recession was its impact on Eastern Europe and the Soviet Union. More closely enmeshed in the world economy than ever before the teetering communist regimes may very well have been pushed over the edge by the recession of the late 1980s ending the Cold War and leading to an unprecedented increase in democracy around the world.
