What Is An Economic Crisis?
An economic crisis is defined by IGI Global as a “situation in which the economy of a country experiences a sudden downturn in its aggregate output or real gross domestic product (GDP).”
Economic crises’ are caused by a sudden downturn or crash in the stock market, heightened inflation, or increased unemployment.
The saying “money makes the world go around” may sound shallow but has some serious basis. When things change dramatically in the economy it can cause a serious crisis that affects everyone.
The Great Depression
The Great Depression was a worldwide economic downturn that lasted nearly all of the 1930s. It had widespread effects across the whole globe, particularly on industrial industries that were at the forefront of modern development.
This caused a lapse in development such as construction and farming and a lack of alternative jobs that sent the unemployment rate skyrocketing.
The Great Depression lasted until World War II began and boosted the economy thanks to a large jump in industrial production to provide for the war.
The pandemic recession that began after 2019 saw an economic slowdown and lower consumer activity and quickly became a recession when the worldwide COVID-19 pandemic forced countries across the globe into lockdowns to preserve human health from the devastating virus.
The pandemic recession is commonly called the worst economic crisis since the Great Depression, and the sharp downturn in economic activity, a direct effect of pandemic lockdowns, definitely reflects that.
But, is the pandemic recession as bad as the Great Depression?
Comparing The Pandemic Recession and The Great Depression
While the pandemic recession is certainly showing concerning rates of low GDP and rates of unemployment it argumentatively is not as bad as the Great Depression.
While the quarterly statistics show that the first few quarters of the pandemic had a sharper and more dramatic decline than the Great Depression did in any of its quarterly stats, the Great Depression lasted significantly longer than the pandemic recession.
While it feels like we are still in the thick of it, technically the recession is over. The recession only lasted a few months. The Great Depression lasted almost a decade.
The pandemic recession did not meet the all-time lows that the Great Depression did when it came to low GDP and high unemployment, but the impact was sharp and hard, meaning recovery may take some time.
While things are still tough for the economy, experts speculate that the worst is over and from here on out the economy is in recovery mode as lockdown restrictions ease.
The pandemic recession is not expected to have the lasting and significant lifestyle change that the Great Depression brought, but it may take up to 2025 to be considered “fully recovered.”
How Does a Recession Affect Me?
The pandemic recession will affect everyone in one way or another. The effects will vary depending on your job and lifestyle.
Recessions can cause widespread layoffs if organizations can no longer afford to support themselves and their staff. Industries most at risk include media, technologies, construction, and manufacturing, according to the USA today
You may find your hours decrease or worst case scenario you lose your job. Now is a good time to upskill and fill important gaps in vital workforces in the public sector.
While these public sectors are unlikely to see widespread job loss, they also shouldn’t expect any pay raises anytime soon.
Economic Crisis Household Survival Guide
There’s little we can do to control the economic health of our country. Most of it is well beyond our control, but what we can try to control is how we manage ourselves and our families in the face of economic uncertainty to ensure we keep a roof over our head and food on the table.
Reducing the Effect of a Recession on Your Household
- Emergency funds – if you don’t have one of these already, you should! Put a small manageable amount of money aside each week to be used in emergencies. When big expenses pop up, they can easily knock you off your feet. Limit this by being prepared for anything.
- Side gigs – you should try to work smarter, not harder. Pay attention to the market around you and identify where you can profit from gaps. Put your skills to good use, put in some hard work initially to set up some passive income side gigs to help cushion you through hard times.
- Pay off debt – no one wants to be in debt, right? Sometimes life corners us into borrowing money and we find ourselves chained to repayment obligations. You should make debt payment a priority so that you can have some freedom and be more resilient to the changing economy.
Support Local, Ethical, and Eco-friendly
Recessions provide an opportunity for consumers to rebuild the economy we want to see. Your money now holds much more power than it ever did before!
Chose wisely when making purchases. Support local businesses to watch your community grow, support ethical organizations to set a new standard, and focus on choosing eco-friendly products to allow them to grow and change the fate of the planet.
You, as the consumer, have all the power to build the world you want to see!
Frugal Tips for the Home
Money is tight as it is, especially if you are building your emergency fund or paying off debt. There are a lot of things we can learn from our resourceful ancestors that lived through the great depression. Use these top tips to be more mindful of where your money goes.
- Learn new skills – learn to sew, fix a leak, or even knit socks. Why pay someone to do something you are capable of doing?
- Meal plan and cook at home – our grocery bills are often the largest of all bills, but the easiest to reduce with a little bit of planning and motivation.
- Make your own gifts – not only does this save you a heck of a lot of money, but the time and energy spent on a homemade gift can mean a lot more to your loved ones than something mass-produced.
- Budget – learning to manage your expenses can help you view your spending in an entirely new light. There are all sorts of fun and accessible tools and apps to help you budget.
To read more on topics like this, check out the Lifestyle category