As the title says – what exactly causes recession? Especially in today’s times. I understand that Covid caused countries to spend more money, but on the other hand there was lots of remote work going on and big companies seemed to be doing quite fine (at least as far as I am aware). I am currently living in UK and I am specifically interested what causes recession in UK.
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Remember that the economy typically grows by somewhere between 2% and 5% a year, so a 5% drop in productivity would give us no growth which is a pretty severe ~~depression~~ *recession*.
For various parts of the pandemic a lot more than 5% of the workforce was on furlough so (theoretically) had zero productivity, and many others were working considerably less productively from home. It’s hard to be fully productive when your collaborators are on furlough, or you can’t get parts shipped from overseas, or you are ill.
The government spread that loss of output across the population and over time by borrowing money to pay for furlough, but the loss of output is still there and we will see it as a recession over several years.
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