Recession of 1971
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The Recession of 1971 was a mild recession centered in Belhavia that spread across the globe with fallout to close trading partners such as Emmeria, Eagleland, Yakima, and elsewhere. It is considered to have lasted from June 1971 until February 1974.
Origins
1969 Tax increases
In early 1969, Belhavian President Vern Callan passed a landmark and sweeping left-wing tax reforms labeled by his opponents as "Callan's Calumnious Tax Hikes". The significant and immediate skyrocketing and extremely-high tax rates on income and investment slowed economic activity and produced a capital flight and strike that chilled direct investment by at least $876 billion in 1969 and 1970, according to a 1973 report by the World Council Committee on Economic Affairs.
Callan currency crisis
The so-called "Callan Currency Crisis" erupted on June 14th, 1971, when President Vern Callan unilaterally ordered the cancellation of the direct convertibility of the Belhavian shekel to gold and silver in reaction to his economists' perceptions that currency fluctuations were disrupting his activist government policies through economic volatility and instability.
1970-71 Rodar-Belhavian crisis
In 1970, Callan attempted to end religious property tax exemption for Catholic properties in Belhavia, part of a subtle public campaign to shame and alienate religious authorities in the Empire, including the whole range of Jewish denominations, Protestants, and others. The resultant public uproar among Belhavians forced the Senate, including many Lib Dems, to oppose and defeat the measure. The Pope, Julius III, took the startling act of publicly praying for Callan's death on December 3rd, 1970, saying, "This man is the devil in disguise, he is as bad as any Godless liberal or Marxist, and uses the brutal tools of state like any coldhearted fascist to crush good, God-fearing people. I pray and hope he joins our Creator quite soon from this Earth."
In reply, Callan expelled the Archbishop of Provisa and levied economic sanctions on Rodarion, and Romula levied counter-sanctions. He labeled Rodarion an 'enemy of modernity' and sought to rally liberal and left-wing world leaders against the Papal Republic.
Several thousand Orthodox Jews, fearful of Callan's domestic attempts to secularize and ostracize traditional Jewish religious authorities, fled to Rodarion. The Church State was also quick to use its influence over the Catholic community in Belhavia, to urge them to vote for the Conservatives at the next Presidential and General elections, Catholic priests also took the Church's line against President Callan. In January 1971, the Church donated $3.2 million to the Belhavian Conservative Party. The same month Rodarian ISI agents murdered Viktor Orbanescu, a key anti-NCP activist who received asylum under the Callan Administration.
Tensions flared in February 1971, when a Rodarian Navy destroyer operating close to the Ross Archipelagos, fired on a Belhavian Navy frigate, causing some superficial damage and forcing the Imperial Navy warship to retreat. In March and April, a liberal businessman with ties to both Romula and the Callan Administration brokered a truce. Belhavian Catholic communities were left alone by Callan's secular liberal allies, and sanctions were progressively repealed between 1971 and 1973.
Capital flight and strike
Effects across the world
Belhavia
Beginning in June 1971 with the currency crisis, the economy generally stilled and ended the year with -0.3% economic activity. In the first economic quarter in early 1972, the Belhavian economy was -1.8% in decline relative to GDP. It continued to decline until its nadir of -4.6% in the third quarter of 1973, and then began to increase, although positive economic growth did not appear until February 1974.
Unemployment jumped from 6.9% in June 1971 to 15.9% in June 1973. It would not drop below 7% again until April 1982.
The country faced a wave of bankruptcies and bank runs, and capital stock declined modestly as new investment tapered off between 1969 and 1973. Inflation gripped the Belhavian economy, hitting a high of 18.9% in July 1973.
Yakima
Yakima's economic growth in the 1970s was based on the rapid expansion of heavy manufacturing in such areas as automobiles, steel, shipbuilding, chemicals, and electronics. The reduction in demand from major trading partners hurt these export oriented products causing a reduction in growth from 1972. By the late 1970s, however, the Yakimese economy began to move away from heavy manufacturing toward a more service-oriented base as a means to help strengthen economic growth. While attempting to undertake this shift the economy suffered reduced growth and a slight recession from June 1972 until March 1974.
The unemployment figures increased from 1.8% in July 1970 to 3.4% in June 1973 and would not fall until well into the 1980s. The government prevented any bankruptcies by protecting local firms and instead instituted a national stimulus package to revive economic growth. While the stimulus package and bailout for the large firms help avoid bankruptcies they left the major banks with a large percentage of non-performing loans which would later play a role in the hurting the Yakimese economy during the far more serious 2000 Far Eastern financial crisis which greatly damaged the Yakimese economy.
At the time, the stimulus package was welcomed by investors and Yakima was seen as secure and low-risk investment opportunity. As a result, investment increased between 1970 and 1973. While Inflation started to effect the Yakimese economy, the major Banks were swift to increase interest rates in 1971 which helped reduce the inflationary pressures, interest rates did harm consumer spending and reduce the overall economic growth leading to the recession.
Basileria
Eagleland
Temuair
Reactions
Communist World
The Communist World, which is believed to have reached its peak of geopolitical power and nation membership around the 1970s, issued a series of triumphant essays, propaganda platforms, art, film, and other expressions of joy, delight, and victory in what communist analysts falsely interpreted as the recession being a "sign of the downfall of the capitalist-bourgeois-imperialist-fascist world order," according to PDRS Premier Artur Tekere in a June 1973 keynote speech at the OttPact annual meeting in Antiytia.
This belief in coming victory was bolstered by the rise of left-leaning leaders in normally conservative anticommunist nations such as Belhavia and Emmeria, the near-victory of the WC Resolution 0032 in 1972, and a general sense of malaise in the Free World while communist revolutions succeeded in several Ashizwean nations in the early 1970s.
However, the effects of this recession were relatively mild and short lived with the rapid the recovery beginning amongst the developed capitalist economies in earnest in the late 1970s and culminating in the Neoliberal Revolution in the 1980s. While the Communist World continued to expand to its peak geopolitical power and membership in 1978. This triumphalist rhetoric cooled as structural issues had begun to emerge within the economic system of OttPac nations, leading many within the bloc to begin a series of economic reforms in an attempt to stimulate their economies.
The cost of supporting and maintaining proxy wars particularly within Ashizwe, also began to take their toll on Otterup Pact nations. As was graphically illustrated in the Nazali War where the blowback from the conflict led to the total collapse of Nazalite state. Negatively effective both sides and further destabilising neighbouring OttPac aligned Ovdalian Union weakening the strategic hold over the Northeast Ashizwe.