Preliminaries

It is tempting to view the crisis that has engulfed the global economy as an aberration, a freak event that has disrupted the otherwise normal progression of events. A superficial glance at the data would tend to support that hypothesis. The volume of goods and services that the UK economy produces each quarter has been on an upward trend over the past half-century. In the years leading up to the crisis that trend was remarkably steady, with over a decade and a half of consecutive quarters of expansion; but, over a slightly longer perspective, the cycles of boom and bust around that trend are clear enough: although they look a lot less like the regular sine curve that budding economists encounter in the classroom in their first lecture on macroeconomics. In each of the major recessions of the past 50 years — the mid-1970s, the early 1980s and the early 1990s — output fell, but growth soon returned.