Chart of the Day: Why Global Recovery Has Been So Slow

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Over at Vox, a trio of IMF researchers summarize their explanation from the latest World Economic Outlook of why the recovery from the Great Recession has been so much slower than previous recessions. The two charts below tell most of the story:

  • In previous recessions, government expenditures in advanced economies continued to rise during the recovery period, helping to bootstrap a return to growth. This time, spending spiked up during the recession itself, but since then it’s fallen. Austerity, not stimulus, has ruled the day.
  • Why? Probably because advanced countries entered the Great Recession with higher debt ratios than in the past. This is what’s spooked governments into cutting back on spending.

Rightly or wrongly,1 most central governments have a limited tolerance for debt, and a high debt level therefore restricts their responses to a serious recession. That’s what happened this time around, and it will be even worse next time if debt levels don’t come down over the long term.

1But which is it, rightly or wrongly? Mostly it’s wrong, especially in the short term during and after a serious recession, but it’s not entirely wrong. There’s certainly some point at which debt service can overwhelm a government, and if investors feel that a country is headed toward that point with nothing to stop it, they’ll start demanding higher interest rates on government bonds. Needless to say, this just makes debt service problems even worse, leading to a death spiral of sorts. So the trajectory of debt probably matters, even if there’s no special debt level at which things fall apart. This, along with the plain fact that governments are spooked by debt, whether we like it or not, is one of the reasons that long-term deficit reduction really is pretty important.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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