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An economic meltdown is a severe downturn that negatively affects people’s standard of living, often caused by major industry failures and job losses. Recovery can take years, as seen in the Great Depression and the Russian Federation’s collapse. The 2007 worldwide recession caused high unemployment and debt defaults. Local economies can also experience this, as seen in American textile towns.
An economic meltdown is a situation where the local, regional or national economy goes through a dramatic downturn that negatively affects the ability of people living in the area to maintain an equitable standard or standard of living. Often, with an economic meltdown, major industries fail, jobs are lost, and disposable income is almost non-existent. Typically, even after the economy begins to recover from an economic meltdown, that recovery can take years to complete, a fact that leaves consumers struggling for a long period of time. Although sometimes seen as a crisis of capitalism, an economic meltdown can also occur when the economy is controlled by the state.
The Great Depression of the early 20th century is often cited as an event that exhibited all the earmarks of a classic economic meltdown. Beginning with the US stock market crash of 1929, this era was marked by the closure of many businesses and mass unemployment. As a result, many people lost their homes or were unable to feed their families. The recovery was incremental throughout the 1930s, although many economists believe that the United States was fully recovered when the nation entered World War II, a situation that positioned the country to experience an economic boom as manufacturing increased to levels that were beyond those previously projected. .
Likewise, the economic collapse of the Russian Federation towards the end of the 20th century also led to a long period of recovery. Decreased production combined with low oil prices created the crisis as the country adjusted to the changes that took place after the end of the Cold War. Only when oil prices recovered and other internal adjustments were made did the country begin to emerge from the meltdown and into a more prosperous economy.
More recently, the worldwide recession believed to have started in 2007 brought conditions associated with an economic meltdown. In nations around the world, the crisis has undermined key investment markets, with unemployment rising significantly. As a result, people started defaulting on their debts, including mortgages, car loans and credit cards. In 2010, many countries were entering a period of recovery, with unemployment falling in at least some countries and the rate of bank loan defaults beginning to stabilize and even reverse in some places.
While an economic meltdown can be a national or global crisis, it is also possible for a city or region to experience this type of economic reversal. This phenomenon was observed in the mid-twentieth century in many cities in the American South, where textile factories were an important source of employment in the community. As production of many textile products was outsourced to less expensive facilities outside the United States, local factories initially reduced operations and eventually closed. Over time, many of these former mill towns cultivated other forms of industry and managed to stabilize the local economy. Others have yet to fully recover and continue to experience population declines as citizens move to other areas with more promising economic opportunities.
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