A study by a team of researchers from the University of Surrey indicates that the economies of countries such as Germany, the United Kingdom, and the U.S. have been affected severely and should prepare for a slow recovery and more extended periods of stagnation.
The COVID-19 outbreak has brought about a decline in the growth rates across member states of the Organisation for Economic Co-operation and Development (OECD) since the 1970s — also referred to as ‘secular stagnation.’ Preliminary data suggests that the average growth in GDP per capita fell from more than 4% in the mid-1960s to over 1% in the pre-pandemic years. According to the International Monetary Fund (IMF), the overall GDP is expected to fall by 5% in 2020 alone, with a decline of around 3%, even in the developing and emerging economies.
Researchers from Surrey’s Centre for Understanding Sustainable Prosperity (CUSP) — in a study published by a peer-reviewed journal Scientific Reports — applied the critical slowing down (CSD) theory to study the long-term impacts in the global GDP datasets dating as far back as the 1820s.
The CSD theory suggests that when a deeply-impacted economy is close to a breaking point, its ability to cope up with the financial losses and recovery decreases. The uncertainties about pre-coronavirus global supply chains, concerns about self-reliance in necessities and resilience, and the fluctuations around the system’s equilibrium are all likely to become more pronounced — much after the COVID-19 crisis is stabilized — due to the already weakening of the internal stabilization forces.
The team found that, even during the pre-pandemic times, several of the world’s major economies were facing recession cycles, indicating precisely such a period of slowing down in the economy. The analysis by the team at CUSP suggests that the additional burden of the COVID-19 crisis may lead to one of the weakest and most unstable recoveries in the history of many countries’ economies.
“The world economy is facing one of the largest declines since the Great Depression in the 1930s. Putting the economy on hold to prevent further downfall in countries from the COVID-19 crisis was perhaps the right decision. Attempting our way back to normalization would be the wrong one. A post-growth world is the new normal,” said Professor Tim Jackson, Director of CUSP at the University of Surrey.
“Now is the time for us to rethink and rebuild the economic models that have been weakening for decades. The problem at hand is enormous, but so is the result. CSD theory indicates that a strong, lasting economic system that protects the well-being of people is now within our hold.”