Comparing the Intensity of Economic Crises

Domestically, there is an investment crisis and cost shocks have weakened the competitiveness of German industry. This paper analyses the country’s current economic plight in comparison with the other crises it has experienced since 1991. A simple concept is used to measure the intensity of these crises’ economic impact. By comparing actual economic developments with the long-term growth path it is possible to identify the periods when the economy as a whole and manufacturing in particular were functioning below par, a procedure that can also be used for regular economic and crisis monitoring. While it is too early to assess the duration of the current downturn and the ultimate degree of strain it will have caused, for the economy as a whole, the depth of the crisis resulting from the pandemic and geopolitical upheaval has already exceeded that of all three of the preceding crises, in some cases by a wide margin. For manufacturing industry, however, it is already clear that the ultimate periods of below-par performance were considerably broader in the preceding crises. A further way of assessing the state of underperforming economies is to determine the speed of recovery required to return from the current crisis levels to the previously experienced growth path. In the case of today’s Germany, this would necessitate annual economic growth of 2.5 per cent for the next six years, leading to serious doubts that the country’s economy can revert to ist accustomed rate of development and prosperity in the foreseeable future.