Late 1980s recession
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The recession of the late nineteen-eighties was an economic recession that hit much of the world beginning in 1987.
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.
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 1990 economic malaise had returned. For the next several years high unemployment, massive government deficits, and slow GDP growth affected the United States until late 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 1980s and early 1990s had a deep impact on society. Rates of alcoholism and drug abuse increased, as did rates of depression.
While the Progressive Conservative government of Brian Mulroney in Canada and the successful election campaign of George H. W. Bush in the United States may have been aided by the brief recovery of 1988, neither leader could hold on to power though the last part of the recession, both being swept out by opponents running on pledges to restore the economy to health. Bush's 1992 re-election bid was particularly clogged by his 1990 decision to renege on his "Read my lips: no new taxes" pledge during his first campaign in 1988; the tax increase itself may also have delayed the recovery.
In Australia, Paul Keating, the Australian Federal Treasurer during this recession, referred to it as the "recession we had to have." This quote became a cornerstone of the Liberal Party's campaign during the 1993 election, as it seemed to underscore the Labor Party's ineffective management of the national economy. Unlike the opposition parties in North America, however, the Liberal Party failed 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 have been pushed "over the edge" by the recession of the late 1980s, ending the Cold War and discrediting Soviet-style government and economics.
