Conceptual Issues—Depressions, Recessions, Crisis Cyclescrisis cycle, Business Cycles

This chapter reviews the terminology that has been used in the past two centuries for the phenomenon of economic crisis, which in mainstream economics is either glossed over or subsumed under the discussion of the so-called business cycle, boom-and-bust cycle, macroeconomic fluctuations, and even other terms. The notion of economic crisis as proposed by Marx, who saw them as temporary and sudden periods of major financial, industrial, and commercial disarray, lasting months or few years, was largely modified by Engels and the Marxists who used the term to mean long periods lasting many years, or even decades. The Keynesian notion of economic crisis as presented in The General Theory evolved in the post-World War II, modified by Paul Samuelson and others, into the concept of a mild business cycle that would be avoidable by the application of smart economic policy. This notion proved inconsistent with economic realities in the 1970s and thereafter, and the three decades before the Great Recession were marked by a kind of nihilistic attitude of mainstream economics toward the phenomenon of economic crises, which were either ignored or considered phenomena of undefined nature and causes.