What is a Tortoise Economy
Tortoise economy is a term used to describe an economy that is growing slowly, or not at all.
BREAKING DOWN Tortoise Economy
Tortoise economy is a term that was first popularized by Robert Reich in his description of the U.S. economy during the financial crisis that began in 2007-08. In the years following the recession, U.S. growth remained slow and interest rates were very low.
“More than two and a half years after the Great Recession began, many months after we hit bottom and when in a normal "recovery” we’d expect growth to surge, the opposite is happening ... Growth is slowing when it should be surging. Think of a tortoise trying to get out of a deep ravine, who’s just begun to scale the wall when he gets tired and goes to sleep,” Reich wrote in the post titled “Tortoise Economy.”
Another classic examples of a tortoise economy is the Japanese economy during the Lost Decade in the 1990s, following Japan’s asset price bubble collapse in 1991. During this decade, interest rates in Japan remained near 0% while economic expansion was non-existent.
The Great Recession and the Tortoise Economy
The Great Recession was a period of extreme economic distress around the world between 2007 and 2009. As a result of the Great Recession, more than 7.5 million jobs disappeared from the United States, causing the unemployment rate to double. Additionally, because of the stock market plunge, American households lost roughly $16 trillion of net worth.
In the years following the recession, the US economy grew very slowly, at about half the rate of growth compared to other US economic recoveries in recent decades. According to the Congressional Budget Office (CBO), in the three years since the end of the recession, from the second quarter of 2009 to the second quarter of 2012, the growth of the United States’ real gross domestic product (GDP) was almost 9 percentage points below the average real GDP growth enjoyed by the economy during previous recoveries.
In fact, economists also described these years following the great recession, when the economy was growing at tepid rates, as a growth recession, because the economy was growing at such a slow pace that more jobs were being lost than are being added.
In the second quarter of 2011, for example, real GDP increased at a 1.3 percent annual rate, according to the Commerce Department, which is below robust 3 percent rate that economists say is necessary to create jobs.