depression, in economics, period of economic crisis in commerce, finance, and industry, characterized by falling prices, restriction of credit, low output and investment, numerous bankruptcies, and a high level of unemployment. A less severe crisis is usually known as a recession, a more common occurance generally thought to be a normal part of the business cycle; it is traditionally defined as as two consecutive quarterly declines in the gross national product. Recessions mark a downward swing in the curve of the business cycle and are caused by a disequilibrium between the quantity of goods produced and the consumers' ability to purchase. If a recession continues long enough, it can turn into a depression. Neither term has ever been distinctly defined by a set of criteria, however, so it is difficult to say at what point the two merge, but some statistics regarded by economists as indicative of a depression include a 10% decrease in per-capita gross domestic product and consumption and 10% unemployment that persists for at least 24 months. A short period in which fear takes hold of companies and investors is more properly called a panic and does not necessarily occur in every depression, but lack of confidence in business is always present in an economic downturn.

A depression develops when overproduction, decreased demand, or a combination of both factors forces curtailment of production, dismissal of employees, and wage cuts. Unemployment and lowered wages further decrease purchasing power, causing the crisis to spread and become more acute. Recovery is generally slow, the return of business confidence being dependent on the development of new markets, exhaustion of the existing stock of goods, or, in some cases, remedial action by governments. Depressions and recessions today tend to become worldwide in scope because of the international nature of trade and credit.

Insufficient numbers of profitable investment outlets, overexpansion of commerce, industry, or agriculture, a stock-market crash, the failure of a great banking or industrial firm, or war may be among the precipitating factors of a downturn. In antiquity, and even up to the 18th cent., depressions had chiefly noneconomic causes, such as wars and weather-induced crop failures. From c.1700 to 1825 economic crises were in the main speculative or commercial; since 1825 they have been increasingly industrial, although the Japanese recessions of the 1990s were caused in part by reduced consumer demand.

The economic crises of the 20th cent. saw the entry of governments into large areas of the economy that had previously been in private hands. Job reeducation programs, government employment of the previously unemployed, and increased public welfare responsibilities are among the programs adopted to alleviate depressions. Moreover, by applying Keynesian economic principles to public policy, governments have sought to affect the business cycle directly and prevent depressions. Large-scale public works expenditure (pump priming), tax cuts, interest rate adjustments, and deficit spending during recession are among the measures that have been taken to reduce the severity of periodic economic downturns such as those experienced in the United States in 1982 and internationally in the early 1990s and 2000s. In the collapse of the U.S. housing bubble that began in 2007, the uncertainties associated with mortgage-related securities and other financial instruments that had pervaded the international financial system undermined or threatened a wide range of financial institutions, leading in 2008 to unprecedented measures by the Federal Reserve in an attempt to avoid a financial collapse and depression. Nonetheless, the resulting financial crisis and recession was the worst in the United States since the 1980s and also severely affected many other nations.

See also Great Depression.

See M. Bernstein, The Great Depression (1987); C. P. Kindleberger, The World in Depression, 1929-1939 (rev. ed. 1986) and Manias, Panics, and Crashes (rev. ed. 1989); W. C. Mitchell, Business Cycles and Their Causes (1989); A. W. Mullineux, Business Cycles and Financial Crises 1990).

depression, in psychiatry, a symptom of mood disorder characterized by intense feelings of loss, sadness, hopelessness, failure, and rejection. The two major types of mood disorder are unipolar disorder, also called major depression, and bipolar disorder, whose sufferers are termed manic-depressive (see bipolar disorder). Other types of depression are recognized, with characteristics similar to the major mood disorders, but not as severe: they are adjustment disorder with depression, dysthymic disorder, and cyclothymic disorder.

Close to 20% of Americans are likely to suffer major depression at some time, and women tend to be more susceptible to the disorder than men. Major depression is likely to interfere significantly with everyday activity, with symptoms including insomnia, irritability, weight loss, and a lack of interest in outside events. The disorder may last several months or longer—and may recur—but it is generally reversible in the short run.

Bipolar disorder is much rarer, affecting only about 1% of the U.S. population; women and men tend to be equally susceptible. Its sufferers alternate between states of depression—similar to that which is experienced in unipolar disorder—and mania, which is characterized by intense euphoria and frenetic activity. Bipolar disorders are often interspersed with periods of relatively normal behavior, which may last for long periods of time between episodes of depression or mania. Manic-depressives have an extremely high rate of suicide, and episodes of the disorder tend to recur.

Medical evidence suggests that depressive states may be connected to deficiencies in the neurotransmitters norepinephrine and serotonin. Drug therapy includes various antidepressants that act on the flow of neurotransmitters and lithium for bipolar disorder (antidepressants can cause mania when used to treat depression in bipolar patients). There also has been success with electroconvulsive therapy (ECT) for major depression.

In recent years, theorists have argued that many depressed individuals depend upon others for their self-esteem, and that the loss of one of these emotional supports often precipitates a depressive reaction. A number of psychologists contend instead that depression is a result of learned helplessness, which occurs when a person determines through experience that his actions are useless in making positive changes. Other theorists have shown that genetic factors play a role in depression.

See L. Wolpert, Malignant Madness (2000).

or manic-depressive psychosis

Mental illness characterized by the alternation of manic and depressive states. Depression is the more common symptom, and many patients experience only a brief period of overoptimism and mild euphoria during the manic phase. The condition, which seems to be inheritable, probably arises from malregulation of the amines norepinephrine, dopamine, and 5-hydroxytryptamine. It is most commonly treated with lithium carbonate.

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Neurotic or psychotic disorder marked by sadness, inactivity, difficulty in thinking and concentration, a significant increase or decrease in appetite and time spent sleeping, feelings of dejection and hopelessness, and sometimes suicidal tendencies. Probably the most common psychiatric complaint, depression has been described by physicians from at least the time of Hippocrates, who called it melancholia. Its course is extremely variable from person to person; it may be fleeting or permanent, mild or severe. Depression is more common in women than in men. The rates of incidence increase with age in men, while the peak for women is between the ages of 35 and 45. Its causes can be both psychosocial (e.g., the loss of a loved one) and biochemical (chiefly, reduced quantities of the monoamines norepinephrine and serotonin). Treatment is usually a combination of psychotherapy and drug therapy (see antidepressant). A person who experiences alternating states of depression and extreme elation is said to suffer from bipolar disorder.

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Longest and most severe economic depression ever experienced by the Western world. It began in the U.S. soon after the New York Stock Market Crash of 1929 and lasted until about 1939. By late 1932 stock values had dropped to about 20percnt of their previous value, and by 1933 11,000 of the U.S.'s 25,000 banks had failed. These and other conditions, worsened by monetary policy mistakes and adherence to the gold standard, led to much-reduced levels of demand and hence of production, resulting in high unemployment (by 1932, 25–30percnt). Since the U.S. was the major creditor and financier of postwar Europe, the U.S. financial breakdown precipitated economic failures around the world, especially in Germany and Britain. Isolationism spread as nations sought to protect domestic production by imposing tariffs and quotas, ultimately reducing the value of international trade by more than half by 1932. The Great Depression contributed to political upheaval. It led to the election of U.S. Pres. Franklin Roosevelt, who introduced major changes in the structure of the U.S. economy through his New Deal. The Depression also advanced Adolf Hitler's rise to power in Germany in 1933 and fomented political extremism in other countries. Before the Great Depression, governments relied on impersonal market forces to achieve economic correction; afterward, government action came to assume a principal role in ensuring economic stability.

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