The Long Recession and Economic Consequences of the COVID-19 Pandemic

Tsoulfidis, Lefteris and Tsaliki, Persefoni (2021): The Long Recession and Economic Consequences of the COVID-19 Pandemic.

Abstract

In this article, we argue the rate of profit in combination with the movement of the real net profits determines the phase-change of the economy in its long cyclical pattern. Since WWII, the US and the world economy have experienced two such long cycles. The pandemic COVID-19 has deepened a recession that has been already underway since 2007. The growth rates in the first post-pandemic years are expected to be high; however, soon after, the economies will find themselves back to their old recessionary growth paths. The onset of a new long cycle requires the restoration of profitability, which can be sustained only through the introduction of ‘disruptive’ innovations backed by suitable institutional arrangements.

• Item Type: MPRA Paper
• Language: English
• Keywords: Long recession, secular stagnation, pandemic, long cycles, institutional changes, disruptive innovations
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B0 - General; B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; N - Economic History > N1 - Macroeconomics and Monetary Economics ; Industrial Structure ; Growth ; Fluctuations > N10 - General, International, or Comparative; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights

References

Acemoglu D. and Restrepo P. (2017). Secular stagnation? The effect of aging on economic growth in the age of automation. American Economic Review, 107(5): 174–79.

Feenstra R., Inklaar R. and Timmer M. (2015). The Next Generation of the Penn World Table. American Economic Review, 105(10): 3150-3182, www.ggdc.net/pwt

Gordon D., Weisskopf P. and Bowles S. (1987). Power, Accumulation, and Crisis: The Rise and Demise of the Postwar Social Structure of Accumulation, in Cherry R., D'Onofrio C., Kurdas C., Michl T., Moseley F. and Naples M. (eds.), The Imperiled conomy: Macroeconomics from a left Perspective (43- 58), New York: Union for Radical Political Economics.

Gordon, R. J. (2015). Secular Stagnation: A Supply-side View. American Economic Review, 105(5):54– 59. Horgan J. (1996). The End of Science: Facing the Limits of Science in the Twilight of the Scientific Age. New York: Broadway Books.

Komlos J. (2021). The Actual U.S. Unemployment Rate in 2019 Was Twice the Official Rate, and the Phillips Curve. Challenge, 64(1): 51-74

Kondratiev N. (1935). The Long Wave in Economic Life. Review of Economics and Statistics, 17: 105-15.

Kondratiev N. (1998).The Works of Nikolai D. Kondratieff. Edited by Makasheva N., Samuels W. and Barnett V. London: Pickering and Chatto.

Kotz D. and Basu D. (2019). Stagnation and Institutional Structures. Review of Radical Political Economics, 51(1): 5–30.

Krugman P. (2014). Inequality is a drag. New York Times, August 7; http://www.nytimes.com/2014/08/08/opinion/paul-krugman-inequality-is-a-drag.html

Perez C. 2002. Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages. Cheltenham: Edward Elgar.

Piketty T. (2014). Capital in the Twenty-First Century. USA: Harvard University Press.

Reinhart C. and Rogoff K. (2009). This Time is Different: Eight Centuries of Financial Folly. Princeton: Princeton University Press.

Schwab K. (2017). The Fourth Industrial Revolution. New York: Blackwell.

Shaikh A. (1992). The Falling Rate of Profit as the Cause of Long Waves: Theory and Empirical Evidence. In Kleinkenecht A., Mandel E. and Wallerstein I. (eds.) New Findings in Long-Wave Research. New York: St. Martin’s Press.

Shaikh, A. (2016). Capitalism: Competition, Conflict, Crises. Oxford: Oxford University Press.

Summers, L. H. (2014). U.S. Economic prospects: Secular stagnation, hysteresis, and the zero lower bound. Business Economics, 49(2): 65–74.

Tsoulfidis L. and Papageorgiou A. (2019).The Recurrence of Long Cycles: Theories, Stylized Facts and Figures. World Review of Political Economy, 10(4): 1-36.

Tsoulfidis L. and Tsaliki P. (2019) Classical Political Economics. Theories of Value, Competition, Trade and Long Cycles. Berlin: Springer.

Tsoulfidis L., Tsimis A. and Paitaridis D. (2019) The Rise and Fall of Unproductive Activities in the US Economy 1964–2015: Facts, Theory and Empirical Evidence. World Review of Political Economy, 10 (2): 142-170