Archive · 20 Jan 2026
Rare Recessions Pose Economic Risks
Recessions used to happen a lot more often, but now they're rare.
This might seem good, but it could be causing problems.
Some people think recessions help the economy by getting rid of bad businesses and making room for better ones.
However, when recessions don't happen, risky investments increase, governments spend a lot to prevent downturns, and unproductive companies stay in business.
This can lead to bigger problems later, like financial crises or slower economic growth.
So, while avoiding recessions might feel good in the short term, it could be making the economy weaker in the long run.
Recessions have become increasingly rare, with the last synchronized global recession occurring over 15 years ago, excluding the COVID-19 downturn.
Prolonged economic stability has led to risks such as increased risky investments, high government spending to prevent downturns, and the survival of unproductive 'zombie firms'.
Recessions can drive 'creative destruction', where failing firms leave the market, capital moves to more promising technologies, and workers find more productive jobs.
The 2020 pandemic recession in America encouraged creative destruction, with workers moving to areas of growing demand, leading to a 10% increase in labor productivity since 2019.
Prolonged economic stability has led to increased financial, fiscal, and allocative risks, with governments accumulating high debt and contingent liabilities to insure against recessions.
- Who
- Global economies and policymakers
- What
- The rarity of recessions and its potential economic risks
- When
- Historically from 1300 to present, with recent focus on 2022-2025
- Where
- Globally, with specific mentions of America, Europe, and Japan
- Why
- To understand the implications of prolonged economic stability and the potential need for recessions to drive creative destruction
- Historical Recession Frequency
- 1300-1800: ~50%, 19th Century: ~25%, 20th Century: Lower, 21st Century: Very Low
- Recent Global GDP Growth
- 3% annually from 2022-2024
- OECD Unemployment
- Near historical lows
- Global Company Profits (Q3 2025)
- 11% increase year-over-year
- Last Synchronized Recession
- Over 15 years ago (excluding COVID-19)
- American Workforce Experience
- 1/3 has never experienced a prolonged downturn
- American Labour Productivity Growth
- 10% since 2019
- EU Labour Productivity Growth
- 2% since 2019
- American Fiscal Deficit
- Exceeds 5% of GDP
- American Contingent Liabilities
- Exceeds $130 trillion