Stagflation (stagnation and inflation in one word) depicts a time period when an economy is not only suffering from a recession (declining GDP), but high unemployment and inflation rates as well. Usually unemployment and inflation are inversely related, which makes stagflation a rare occurrence. It first happened in the 1970s, when OPEC put an oil embargo on the United States, resulting in oil prices skyrocketing to three times the standard value at that time. As of September 2023, the price of oil fell by 20 percent in comparison to last year after having increased by 76 perent as a result of Russian invasion of Ukraine. The has been signs of stagflation in some countries through 2022 and 2023, but falling inflation rates indicate that the worst has been avoided.

The 1973-1975 recession marked the end of a remarkably prosperous period for developed economies. Apart from the United States, who experienced a brief recession in 1969-70, the other nations had enjoyed a period of uninterrupted growth in the 25 years leading up to this event. Japan in particular had the fastest growth of any major economy. This ended, however, following the 1973 oil crisis, which saw the member states of the OAPEC (Organization of Arab Petroleum Exporting Countries) place an embargo on the nations who supported Israel during the Yom Kippur War, particularly the U.S., who supplied arms to Israel. As a result, oil prices quadrupled in some periods; the U.S. and most of its major economic partners then went into recession due to their dependency on oil imports. Additional factors exacerbated the effects of the recession in each country, such as the miners' strike in the United Kingdom, or Nixon's unstable economic policies in the early 1970s. It was not until 1976 when the major OECD economies would come out of their recession, although real GDP growth rates would not return to the consistent highs experienced in the 1950s and 1960s. Additionally, while GDP growth resumed within a few years, inflation rates and unemployment rates generally remained higher going into the 1980s.

During the period beginning roughly in the mid-1980s until the Global Financial Crisis (2007-2008), the U.S. economy experienced a time of relative economic calm, with low inflation and consistent GDP growth. Compared with the turbulent economic era which had preceded it in the 1970s and the early 1980s, the lack of extreme fluctuations in the business cycle led some commentators to suggest that macroeconomic issues such as high inflation, long-term unemployment and financial crises were a thing of the past. Indeed, the President of the American Economic Association, Professor Robert Lucas, famously proclaimed in 2003 that "central problem of depression prevention has been solved, for all practical purposes". Ben Bernanke, the future chairman of the Federal Reserve during the Global Financial Crisis (GFC) and 2022 Nobel Prize in Economics recipient, coined the term 'the Great Moderation' to describe this era of newfound economic confidence. The era came to an abrupt end with the outbreak of the GFC in the Summer of 2007, as the U.S. financial system began to crash due to a downturn in the real estate market.

Causes of the Great Moderation, and its downfall

A number of factors have been cited as contributing to the Great Moderation including central bank monetary policies, the shift from manufacturing to services in the economy, improvements in information technology and management practices, as well as reduced energy prices. The period coincided with the term of Fed chairman Alan Greenspan (1987-2006), famous for the 'Greenspan put', a policy which meant that the Fed would proactively address downturns in the stock market using its monetary policy tools. These economic factors came to prominence at the same time as the end of the Cold War (1947-1991), with the U.S. attaining a new level of hegemony in global politics, as its main geopolitical rival, the Soviet Union, no longer existed. During the Great Moderation, the U.S. experienced a recession twice, between July 1990 and March 1991, and again from March 2001 tom November 2001, however, these relatively short recessions did not knock the U.S. off its growth path. The build up of household and corporate debt over the early 2000s eventually led to the Global Financial Crisis, as the bursting of the U.S. housing bubble in 2007 reverberated across the financial system, with a subsequent credit freeze and mass defaults.

There was a significant difference in consumer prices between the 1960s, during the "Golden Age of Capitalism", and the 1970s, where the 1973-1975 recession brought this period to an end. Across the OECD the annual rate of growth in the given periods more than doubled in most countries (even tripling in the UK and Italy) increasing from 3.4 percent annually between 1961 and 1970 to 8.2 percent between 1970 and 1978. The difference was larger again when one looks at Western Europe alone, where prices grew by almost ten percent annually.

The decades that followed the Second World War were among the most prosperous in modern history, and are referred to as the Golden Age of Capitalism in many countries. This period came to an end, however, with the 1973-1975 recession. Differences across the bloc Across the OECD member states, there was a significant drop in real GDP growth over the two decades, falling from an average of five percent annual growth in the 1960s to just 3.5 percent annually in most of the 1970s. Of all OECD countries shown here, Japan experienced the highest rate of real GDP growth in both decades, although it dropped from 11 to six percent between these years (Japan's real GDP growth was still higher in the 1970s than the other members' rates in the 1960s). Switzerland saw the largest relative decline over the two periods, with growth in the 1970s below one third of its growth rate in the 1960s. What caused the end of rapid growth? The Yom Kippur War between Israel and its Arab neighbors (primarily Egypt and Syria) resulted in the Arab oil-producing states placing an embargo on Israel's Western allies. This resulted in various energy and economic crises, compounded by other issues such as the end of the Bretton Woods financial system, which had far-reaching consequences for the OECD bloc. Additionally, the cost of agricultural goods and raw materials increased, and there was a very rare case of stagflation across most of the world's leading economies.

During the "Golden Age of Capitalism", from 1950 to 1973, GDP grew by annual averages of just under five percent in Western Europe*, four percent in the U.S., and ten percent in Japan. This period of prosperity came to an end with the recession of 1973-1975, however GDP growth rates did not return to their previous levels when the recession ended, as growth was fairly sporadic in the 1970s and then much slower throughout the 1980s. From 1973 to 1987, GDP grew annually at just two fifth of the Golden Age's rate in Europe and Japan, while the U.S.' annual rates were somewhat closer.

One major difference between the two given periods was that the U.S. was the dominant and most influential economy of all developed (non-communist) countries in the 1950s and 1960s, however, the 1970s and 1980s saw Japan and the European Communities (led by West Germany and France) emerge as major economic powers in their own right. While the U.S. remained the most powerful country in the world, other developed nations became more economically autonomous, and began asserting their own influence internationally.

The Covid-19 pandemic saw growth fall by 2.2 percent, compared with an increase of 2.5 percent the year before. The last time the real GDP growth rates fell by a similar level was during the Great Recession in 2009, and the only other time since the Second World War where real GDP fell by more than one percent was in the early 1980s recession. The given records began following the Wall Street Crash in 1929, and GDP growth fluctuated greatly between the Great Depression and the 1950s, before growth became more consistent.

Industrial output across the OECD fell by significant amount between the 1960s and 1970s, when annual averages are compared. Overall, the OECD saw industrial output grow by almost six percent in each year between 1960 and 1970, whereas this growth fell to just 3.5 percent per year between 1971 and 1978. The largest individual decline of the major economies was observed in Japan, who saw a difference of nine percent between the two periods. The largest proportional decline of the given countries, however, was observed in Switzerland, where annual industrial output between 1971 and 1978 was less than one tenth of the rate in the previous period. The primary reason for this decline was due to the 1973-1975 recession that resulted from the oil embargo of 1973, which highlighted the developed world's increasing dependency on foreign oil imports. This recession also marked the end of the post-war economic boom, but saw the transition of economies such as Japan, West Germany, and wider European Economic Community in general (i.e. the predecessor to the EU) into global economic powers.

The period between 1950 and 1973, known as the "Golden Age of capitalism" in the west, was the most prosperous period in Europe's modern history. The economic boom in the post-war period saw GDP grow by an average of almost four percent in Western and Eastern Europe, and almost five percent in the south. Although the west was the most technologically advanced of the three, this period did see a significant amount of catching up in the other two regions, whose rapid industrialization and urbanization changed the lives of its citizens forever. Recession hits the west The recession of 1973-1975 brought this economic and industrial growth to an end, however, as conflict in the Middle East saw oil prices skyrocket. Virtually all of Western Europe's industrial powers went into recession, and this had a detrimental knock-on effect in Poland and Romania due to their indebtedness to the west. While the recession ended in most countries by 1976, factors such as unemployment, inflation, and industrial output often remained high until the 1980s. The 1980s and 1990s also saw the rapid economic growth of countries such as Ireland and Finland. However, growth was much slower in these decades for most western economies than it had been in the 1950s and1960s. Collapse of communism The 1970s marked the beginning of the economic decline in Eastern Europe, as the command economies of the East Bloc could not maintain pace with the capitalist west and failed to adapt to the challenges that emerged in this period. Communism in Eastern Europe eventually ended around the early 1990s, and the largest power, the Soviet Union, was dissolved. This resulted in severe economic hardships in the former communist states, and recovery in the former-Soviet states did not begin until the late 1990s. The effects of communism's collapse in Europe was so severe that GDP in the east actually fell by an average of 0.9 percent per year between 1973 and 1998

From the late 19th century until the 1980s, the United States' unemployment rate was generally somewhere between three and ten percent of the total workforce. The periods when it peaked were in times of recession or depression - the Panic of 1893, which lasted until 1897, saw unemployment peak at over 18 percent, whereas the post-WWI recession saw unemployment spike to almost 12 percent in 1921.

However, the longest and most-severe period of mass unemployment in U.S. history came during the Great Depression - unemployment rose from just 3.2 percent in 1929 to one quarter of the total workforce in 1933, and it was not until the Second World War until it fell below five percent once more. Since this time, unemployment has never exceeded 10 percent, although it did come close during the recessions of the 1970s and 1980s.

More recent unemployment statistics for the U.S. can be found here.

The economic failures of the communist began to show throughout the 1970s, as the oil crises of 1973 to 1980 exposed the Eastern Bloc's many financial instabilities. The 1973-1975 Recession in the West had a knock-on effect on the Eastern Bloc, particularly on Poland and Romania, as Western debtors began demanding repayment, imports into the Eastern Bloc became more expensive, and exports were no longer in high demand. Growth rates also began to fall further at the end of the decade, as the post-war economic boom ended. At the beginning of the 1970s, Eastern Europe's debt totaled six billion U.S. dollars; by the end of the decade, it was almost 80 billion. Although austerity in the 1980s did bring some measure of control to the Eastern economies, it only limited the growth rate of indebtedness across the region, which eventually rose to 110 billion dollars (over a third of which belonged to Poland alone) when European communism fell, around 1990.

For most of the 20th century, Ireland stood out as one of the poorest countries in Western Europe, not experience the same post-war boom in prosperity that was felt by virtually all other countries in the region. At the onset of the 1973-1975 Recession, Ireland's GDP per capita was less than 60 percent of GDP per capita in the European Union and less than a quarter of GDP per capita in the U.S. Catching up in the 1980s By the 1980s, a wave of foreign investment saw Ireland's export sector grow exponentially, and between 1975 and 1990, Ireland had the second-fastest growth of exports in the world (behind Japan). Additionally, as Ireland joined the European Communities in 1973, it became more integrated into the European economy; before 1973, around three-quarters of Ireland's exports went to the United Kingdom, but this fell to one-third by the 1990s. Ireland's period of industrialization was relatively short in comparison to its neighbors, as it transitioned from an agriculture-based economy to a producer of high-tech products and services. Ireland's low tax rate and other incentives also attracted many American tech companies in the 1980s, such as Apple, Intel, and Microsoft, who were keen on establishing a presence in the European Union. The Celtic Tiger Named after the Four Asian Tigers (Hong Kong, Singapore, South Korea, and Taiwan), which experienced rapid economic growth in the 1970s and 1980s, the period of prosperity between the 1990s and 2000s in Ireland has been dubbed the "Celtic Tiger." Over this time, Ireland's GDP per capita grew to exceed the average in the EU by 10 percent in 2000, and it would eventually surpass that of the U.S. in 2003. Ireland was severely impacted by the financial crisis of 2008 due to the instability of its property sector and extensive lending by banks, and it was the first European economy to go into recession. By the late 2010s, most sectors of the economy had returned to pre-recession levels, and today, Ireland's GDP per capita remains among the top in the world, second in the EU only to Luxembourg.

Net national incomes have grown globally, growing from 694 U.S. dollars in 1970 to 9,750 in 2021. Much of this growth can be attributed to improvements in overall global development, as economies in developing countries have grown rapidly. Net national incomes grew steadily from the 1970s to the 2000s, and then experienced a sharper increase during the 2000s until the Great Recession, falling slightly in 2008.

Industrial production grew significantly in the 1960s, with Japan's output alone growing by an average of 13.6 percent each year. Growth in the U.S. and Western Europe grew at a relatively slower rate of 4.9 percent each year, however figures were much closer between Japan and the West in the 1970s and 1980s. The recession of 1973-1975 saw industrial output drop significantly across most of the countries shown, and growth rates among the major powers dropped again in the subsequent decade. There were, however, several southern European countries maintained growth rates of over five percent in the 1970s, while Ireland recorded its highest growth in the 1980s; the reason for these discrepancies is due to the fact that industrialization in Ireland and the Mediterranean countries began at a much later stage than the likes of France or Germany.

In 1820, the islands of present-day New Zealand had a population of approximately 100,000 people. This figure would fall until the early 1840s, partly as a result of European diseases brought by colonizers, and a series of destructive inter-tribal wars among the Māori peoples. These conflicts were named the Musket Wars due to the European weapons whose introduction instigated the conflicts, and the wars saw the deaths of between 20,000 and 40,000 Māori, from 1807 to 1837. After falling to just 82 thousand in the 1840s, the population would begin to rise again in 1841 following the establishment of New Zealand as an official British colony, with a strong promotion of European settlement by British citizens sponsored by the Church of England. European migration to New Zealand was low in these early decades, but increased in the mid-19th century, particularly following the discovery of gold in New Zealand’s South Island in the 1860s. This growth would continue throughout the 1870s, in part the result of a strong promotion of mass migration from Britain by Premier Julius Vogel’s administration.

Early 20th century However, between 1881 and the 1920s, the New Zealand government heavily restricted Asiatic migration to the islands, resulting in a fall of population growth rate, which would remain until the Second World War. The country would experience a dip in population during the First World War, in which New Zealand would suffer approximately 18,000 military fatalities, and another 9,000 lost to the coinciding Spanish Flu epidemic. The population would stagnate again in the Second World War, which resulted in the death of almost 12,000 New Zealanders. In the years following the war, New Zealand would see a significant increase in population due to the mixture of a baby boom and a migrant spike from Europe and Asia, following a large demand for unskilled labor. Recent decades This increase continued for several decades, until international factors, such as the oil crises of 1973 and 1979, and the UK's accession to the European Economic Communities (which ended most of New Zealand's trade agreements with Britain; it's largest trade partner), greatly weakened New Zealand's economy in the 1970s. As a result, population growth stagnated during the 1970s, while economic problems persisted into the early 2000s. In contrast, the Great Recession of 2008 did not impact New Zealand as severely as most other developed nations, which allowed the economy to emerge as one of the fastest growing in the world, also leading to dropped unemployment levels and increased living standards. In 2020, with a population of almost five million people, New Zealand is regarded as one of the top countries in the world in terms of human development, quality of life and social freedoms.