Page 54 - Accelerating out of the Great Recession

THE DAMAGED ECONOMY

two surveys of senior management in large corporations. The
first survey, conducted in March 2009, focused on the priorities
that companies had set for themselves to deal with the rapidly
deteriorating economic environment and sharp fall in consumer
spending. The second survey, completed in September 2009,
focused on companies’ expectations for the future development
of the world economy.
With regard to economic growth and the shape of the reces-
sion, executives were quite cautious (but not unduly pessimistic)
in the March survey. The majority (63 percent) expected a U-
shaped recession, with an upswing in 2010 or 2011. The minor-
ity, 13 percent, expected a V-shaped recession, meaning a
sharper and faster recovery. A sizable group of 22 percent
favored an L-shaped recession, similar to that of the Lost
Decade in Japan. It came as no surprise to us that Japanese
executives were the most skeptical of our respondents—41 per-
cent of them expected an L-shaped recession. This gloomy view
may well stem from the fact that Japanese executives have seen
all this before, and base their expectations on bitter experience.
In our second survey, we again asked executives about their
expectations for growth in the coming years. A striking major-
ity expected a sustained period of lower growth (46 percent
expected the aftermath of the Great Recession to proceed in an
L-shaped pattern, a further 43 percent expected a U-shaped
pattern, and only 10 percent expected a V-shaped pattern).
Nearly half of U.S. executives expected an L-shaped pattern,
along with 50 percent of Germans and 74 percent of the
Japanese, who became more skeptical than they were in March
(up from 41 percent)—again, presumably because they have
been here before. Higher numbers of respondents in Italy and
France assumed a fast return to precrisis levels. In specific

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