Recession of 1737

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Recession of 1737

Time	1737 AN
Duration	6+ months
Location	Nouvelle Alexandrie  Oportia  Natopia  Constancia  Zeed  Lac Glacei  Moorland  Imperial Federation (regional)
Type	Economic recession
Cause	Collapse of Normark and Anahuaco Naval blockade of Benacian continent Defaulted Shirerithian loans Significant trade route & supply chain disruptions Regional market instability
Outcome	GDP contractions across multiple nations Rising unemployment Stock market declines Trade disruptions Increased regional cooperation Political instability in several nations

The Recession of 1737 is an ongoing global economic downturn that began in the second quarter of 1737 AN, affecting nations across multiple continents and economic blocs. While initially impacting Raspur Pact members like Nouvelle Alexandrie, Oportia, and Natopia most severely, the recession's effects have spread to other nations including Aerla, Senya, and parts of the Imperial Federation, demonstrating the interconnected nature of the global economy. The crisis was primarily triggered by the sudden collapse of Normark and Anahuaco, which caused significant disruptions to international trade routes and financial markets, and by the effects of the ongoing, grueling conflict in Benacia.

The severity and nature of the economic impact has varied significantly by region. Within the Raspur Pact, Nouvelle Alexandrie experienced two consecutive quarters of negative GDP growth, with a 1.1% contraction in Q2 followed by a 0.1% decline in Q3. Oportia faced a more severe downturn with a cumulative GDP contraction of 2.5% over two quarters, while Natopia saw its economy slow significantly with a 0.7% GDP decline. Beyond the Pact, Aerla has seen unemployment rise to 3.1% amid a dramatic slowdown in port activity and trade, while Senya's trade-dependent economy entered recession despite not being a Pact member. The Imperial Federation, though showing overall resilience, experienced regional recessions in its Keltian territories.

The crisis has highlighted vulnerabilities in global trade networks and the ripple effects of regional instabilities. Export-dependent industries have been particularly affected, with major trading hubs like Aerla's Port Aerla and Nouvelle Alexandrie's Port of Wechuahuasi seeing dramatic declines in activity. The governments of affected countries have responded with various monetary and fiscal measures, including interest rate cuts, industry support programs, and worker retraining initiatives. Additionally, the recession has sparked increased economic cooperation efforts between nations as they work to stabilize their economies and adapt to the new economic situation.

Causes

The Recession of 1737 emerged from a complex interplay of geopolitical events, trade disruptions, and financial market instabilities. Several key factors contributed to the economic downturn.

Collapse of Normark and Anahuaco

The sudden dissolution of Normark and Anahuaco, both integral members of the Raspur Pact in Keltia, served as the primary catalyst for the recession. These nations were significant cultural, political, and economic centers within the alliance. Normark's collapse disrupted established trade routes and financial networks, particularly affecting Natopia and northern Keltia. Similarly, the dissolution of the Anahuaco Empire created a power vacuum in central Keltia, destabilizing regional markets and trade relationships. Both collapses led to significant refugee movements, straining neighboring economies and social systems. The sudden loss of these markets caused immediate shocks to export-dependent industries across multiple nations.

Naval blockade of Benacia

The increasingly effective naval blockade of the Benacian continent by the Shirerithian Navy by 1737 AN had severe implications for international trade. Beyond the immediate disruption of major shipping lanes and trade routes, the blockade led to increased insurance and security costs for maritime commerce. The reduced access to Benacian markets and resources created supply chain bottlenecks that affected global trade patterns, forcing many nations to seek alternative, often more expensive, trade routes.

Financial market disruptions

Several financial factors contributed to the broader economic crisis. The Shirerithian government's refusal to service its pre-war loans to Raspur Pact nations, particularly affecting Nouvelle Alexandrie and Natopia, created significant strain on financial markets. This default coincided with growing market uncertainty, leading to reduced investment and capital flight. Financial institutions became increasingly risk-averse, resulting in credit market tightening. The subsequent currency volatility further complicated international trade and investment decisions.

Supply chain disruptions

The recession was exacerbated by widespread supply chain disruptions. The interruption of established trade routes due to geopolitical instability forced many businesses to fundamentally restructure their supply networks. Shipping costs increased dramatically as vessels were forced to reroute around blocked areas, while businesses struggled with inventory management challenges as they adapted to new trade patterns. The combined effect led to reduced production capacity in affected regions and ripple effects throughout global supply chains.

Regional market instability

The economic crisis was further complicated by regional market instability beyond the immediate impact zones. The loss of market access in collapsed nations created immediate economic pressures, while reduced consumer confidence in affected regions dampened economic activity. These changes disrupted regional economic integration efforts and placed significant strain on existing trade partnerships and agreements. The resulting uncertainty complicated economic planning and investment decisions across multiple regions.

Secondary effects

Several secondary factors amplified the initial economic shock. Foreign direct investment in affected regions declined sharply as investors reassessed risk profiles. Rising unemployment in affected nations led to decreased consumer spending, creating a negative feedback loop that further depressed economic activity. Political instability in several nations complicated economic decision-making processes, while migration pressures created additional economic challenges for receiving nations.

The combination of these factors created a domino effect that spread beyond the immediate impact zone of the Normark and Anahuaco collapses, affecting nations outside the Raspur Pact and contributing to the global nature of the recession. The interconnected nature of modern trade relationships meant that even nations without direct exposure to the initial triggers experienced significant economic impacts through secondary and tertiary effects.

Impact

The Recession of 1737 had varying impacts across Nouvelle Alexandrie, Oportia, and Natopia, with the severity differing significantly between these nations. The recession's effects were felt across multiple sectors, including export-oriented industries, domestic consumption, labor markets, and financial markets.

Nouvelle Alexandrie

Nouvelle Alexandrie experienced a moderate economic contraction, with GDP declining by 1.1% in Q2 1737 AN and a further 0.1% in Q3 1737 AN, officially marking the country's entry into a recession. The unemployment rate rose to 3.9%, a significant increase from pre-recession levels but lower than in some neighboring countries.

Despite the overall economic downturn, Nouvelle Alexandrie exhibited an unusual resilience in domestic consumption. The Retail Sales Index rose by 4 points to 112, defying typical recession trends. This resilience was partly attributed to a 2.1% increase in average hourly earnings, which outpaced the inflation rate of 3.1%, resulting in a 3.2% boost to real disposable income for many middle-class families. The nation's stock market saw a 15% decline, reflecting investor uncertainty and reduced corporate earnings forecasts. However, this decline was less severe than in some other affected countries.

Oportia

Oportia was the hardest hit among the three main affected nations, experiencing a severe economic downturn. The country's GDP contracted by a cumulative 2.5% over two quarters, more than double the contraction seen in Nouvelle Alexandrie. Unemployment in Oportia reached 5.2%, the highest among the three countries, indicating significant job losses across various sectors. The nation's heavy reliance on exports, particularly to Normark and Anahuaco, left it especially vulnerable to the trade disruptions. The Vanie Stock Exchange experienced a sharp 22% decline, the most severe among the affected countries. This substantial drop reflected deep investor concerns about the country's economic prospects and the long-term impact of the trade disruptions.

Natopia

While not officially entering a recession, Natopia experienced a significant economic slowdown. The country's GDP declined by 0.7% cumulatively over two quarters, a notable deceleration for an economy that had been experiencing steady growth. Natopia's unemployment rate increased to 3.3%, a more modest rise compared to Nouvelle Alexandrie and Oportia. This relatively lower impact was partly due to Natopia's more diversified economy and its ability to pivot some of its trade relationships away from the collapsed Normark market. The Natopian stock market saw a 10% decline, the least severe among the three main affected countries. This reflected investor perception of Natopia as a relatively stable economy despite the economic difficulties.

Constancia

Significant political, foreign policy, economic, and even military capital had been expended and invested in the Anahuaco Empire, due to the Imperial and colonial designs of the elites of the Imperial State. Despite opposition from the elected government, this Eastern Keltian Gambit continued, and when things went sour, due to the implosion and collapse of Normark and Anahuaco, it became very politically expedient and convenient to blame the entire mess on the allegedly-dithering, distracted, analysis-paralysis government. Public anguish was muted due to scheduled elections to be held at the close of 1737 AN.

Zeed

The relatively-newly-independent Commonwealth of Zeed suffered significantly, due to the slowing of exports to its primary markets, its Euran neighbors: Oportia, Constancia, Suren, and most importantly, Nouvelle Alexandrie. This credit crunch, trade deficit, and economic contraction suddenly caused a domestic political crisis, as well as a sudden foreign policy push in support of Natopian interests, as well as a diplomatic flurry to gain new markets elsewhere. Local unrest was alleviated by promises for a referendum and elections by 1738 AN, in accordance with Article 61 of the Constitution of the Commonwealth of Zeed.

Moorland

The economy of Moorland suffered an odd mixture of inflation but also economic growth as a result of the collapse of its two major neighbors; Anahuaco and Normark, with a partial collapse in the Imperial Federation's territory in Haifa, with a loss of most holdings in that area. The loss of trade with both these nations resulted in a significant loss of economic revenue, and the influx of refugees from Anahuaco saw a sharp rise in inflation as demand for goods - especially food - skyrocketed. But the added demand for goods from Moorland to neighboring communities helped spur economic growth in many areas, with factories reporting record production levels and farmers reporting increased demand for products. Export declines in Natopia and Nouvelle Alexandrie shifted the demand for goods from imports to domestic production, and increased trade with neighboring Mercury. The loss of the Normark route of the Trans-Keltian Express also served to isolate Moorland's economy further, increasing a reliance on goods traded closer to home. King MacMartin promised to explore new trading partnerships in order to alleviate inflation.

The Imperial Federation

The Imperial Federation, while on the whole not experiencing recession during 1737 AN, did see its economic growth slow down on a macro level. On the whole, the new period of peace allowed the central government to immediately shift to economic/infrastructure initiatives, allowing it to dodge the worst of the effects as a whole. Recessions did happen regionally, however, and those hit hard and fast between its holdings on mainland Keltia and southern Eura.

The entirety of its territories on mainland Keltia were badly affected according to their proximity to the northern Strait of Haifa. The recession in Haifan lands (those now being Haifa, Geneva, and Blore Heath) was a strange one, characterized by four primary things: The ultimate (although localized) victory of joint Ralgonese-Bassarid forces in the Wars of the Dispossessed across the southern banks of the Straits of Haifa, the Ralgonese loss of territory (allowing concentration of local Imperial assets there), the dual migrant/refugee influx from the Green, newly acquired Bassarid lands, and from the collapsed Normark/Anahuaco, and the enhancement of already-heavy stimulus in advance already earmarked for postwar reconstruction efforts.

While Haifa's situation was quickly salvaged thanks to good preparation and advanced funding, Eternia and its surrounding Ralgonese territories weren't as fortunate. Depending heavily on tourism and trade from Eura, the economy suffered when the rest of the continent experienced recession as well. While stimulus measures were applied here, the polar country's own economic woes would be considerably longer-lasting than faraway Haifa. It would take at least a year for the local economy to fully recover, and longer for its central treasury to fill its coffers due to fresh debts owed to the central government in Gondolin.

The Hexarchy

While not directly connected to the events befalling the other major powers of Micras, The Hexarchy fell into an economic depression unlike any suffered in its 50-year history. After a period of slowing growth past 1725 AN, the country found itself ill-prepared to face any pressing national crises. This came in the mid-1730's with the sudden abandonment of Lysstyrer by its inhabitants and removal of its entire infrastructure nearly overnight. This caused an economic collapse in the country's periphery, with few exceptions (such as the now-exclave of New Nippuur far to the north). The resulting economic crisis, the ill health of the Praetor Sargon Azulpolassar, and weakened central government lead to a lack of success in redeveloping these regions. These combined shocks after this shock led to a crippling depression in these regions, causing populations to move back to the country's core regions. The rise of regionalism caused further economic turmoil in the country's few megacities, and the strained national logistics network fell once again to dependence on maritime areas, causing inland economies to further stagnate.

This led to a general decline in the country's central power, leading to its near-absence on the world stage for an entire decade. The Recession of 1737 further affected the Hexarchy's external trade to falter. With its most important driver of economic growth decisively undermined, the already-weakened country slipped into a solid economic depression later in that year. With the Praetor's declining health and the fracturing of national unity due to his own weakened health, the country would not recover before the end of 1738 AN, leading to emigration of citizens from the periphery and other attached regions to other prosperous parts of the country (including Dromosker Island) or further abroad.

Aerla

The collapse of Normark, combined with the slowdown of commerce from Nouvelle Alexandrie, resulted in a vast economic downturn in Aerla. Operations at the docks of Port Aerla came to an almost complete standstill as imports and exports grinded to a hault, as well as concerns rose over pirate raids on commerce ships entering the Bay of Makonnia. Unemployment in Aerla rose to almost 3.1% by end of 1737 AN.

The nation also had to deal with a dramatic influx of refugees entering the country due to the collapse of both Normark and Cerulea. Most of these refugees were sent to camps in the Transcaledonian Territory for temporary accommodation. This led to even less government spending going towards the unemployment and welfare networks, alienating the already struggling working-class population.

With the upcoming elections in 1740 AN, many outlets expressed their doubts about a repeat Reformist victory. Many Conservative politicians began to campaign on a platform of economic reconstruction, the creation of more jobs for the Aerlan populace, and the removal of refugees from Transcaledonia.

Senya

Despite not being a member of the Raspur Pact, Senya's economy, which was highly reliant on trade with neighbouring countries, including Natopia, also fell into recession. Senya's economy had already been declining thanks to mismanagement from the incumbent government, and the recession hit hard on many working people, compounding existing frustrations with the government.

Lac Glacei

Lac Glacei's close ties with the Imperial Federation and its cooperation with the Mala First Nation caused a significant recession for the Grand Duchy as resources had to be funneled to Keltia to stabilize the region following the federation's withdrawal from large portions of the Strait of Haifa. A significant loss of trade occurred as a result of the withdrawal, and the Malan economy, which had been thriving on the increased import/export business, ground to a halt overnight. The Grand Duchy quickly moved to shift emergency funds to the area to prop up struggling industries, but this caused serious inflation in Apollonia as the cost of goods skyrocketed and investors scrambled to find new sources of goods. The resulting catastrophe nearly bankrupted the government and caused a sharp recession for the Lac Glaceian economy.

Mercury

Mercury officially entered a period of recession in early 1838 AN, having lost its close trading links with neighbouring Normark, and further exacerbated by the knock-on effects from Senya's recession due to their ties via the Xäiville Convention.

Export-oriented industries

Export-oriented industries across the affected nations were severely impacted by the collapse of Normark and Anahuaco. In Nouvelle Alexandrie, manufacturing output dropped by 15%, with luxury goods and high-end electronics sectors being particularly hard hit. Oportia, with its greater reliance on exports, saw even steeper declines in its export-oriented manufacturing sectors. Natopia's export industries, while affected, showed more resilience due to the country's diverse trading partnerships. The Imperial Federation saw a deep recession in 1736 AN in its territory in Haifa and Eternia, and while this had knock-on effects elsewhere, the military recovery in relatively short order ensured that this recession was short-lived.

The Port of Wechuahuasi in Santander, where unused freight containers are piling up as trade plummets.

The Port of Wechuahuasi in Santander, Nouvelle Alexandrie, once a bustling hub of international trade, saw activity plummet by 30%, with unused freight containers piling up as long-distance trade routes with Normark and Anahuaco abruptly terminated.

Domestic consumption

Domestic consumption patterns varied significantly across the affected nations. Nouvelle Alexandrie exhibited unexpected resilience in this area, with the Retail Sales Index rising by 4 points to 112. This was largely driven by middle-class spending power, which was maintained through wage growth that outpaced inflation. In contrast, Oportia saw a sharp decline in domestic consumption as rising unemployment and economic uncertainty led to decreased consumer spending. Natopia's domestic consumption remained relatively stable, helping to offset some of the losses in its export sectors.

Labor markets

The recession's impact on labor markets varied across the three nations. Nouvelle Alexandrie's unemployment rate rose to 3.9%, representing a significant increase from pre-recession levels. However, this was moderated by the resilience of domestic-oriented sectors and government job creation initiatives. Oportia experienced the most severe labor market disruption, with unemployment reaching 5.2%. This high rate reflected the country's struggle to reallocate workers from declining export-oriented industries to other sectors of the economy. Natopia saw a more modest increase in unemployment, rising to 3.3%. This relatively lower impact was due to the country's more diversified economy and its ability to maintain stability in domestic-oriented industries. Across all three nations, youth unemployment emerged as a particular concern, with rates significantly higher than the overall unemployment figures.

Financial markets

Financial markets in all three countries experienced significant volatility and decline, though to varying degrees. Nouvelle Alexandrie's stock market saw a 15% decline, while Oportia's market plummeted by 22%. Natopia's stock market proved the most resilient, with a 10% decline. Bond yields and currency values also fluctuated as investors reassessed risk in light of the changing economic conditions. Central banks in all three nations responded with interest rate cuts, with Nouvelle Alexandrie's Federal Bank lowering the Federal Funds Rate to 2.25%. The recession also led to increased scrutiny of financial institutions, with multiple class-action lawsuits pending against banks and investment firms accused of exacerbating the economic crisis through risky lending practices or inadequate risk management.

See also

• Recession of 1737 (Imperial Federation)
• Economy of Nouvelle Alexandrie
• Economy of Oportia
• Economy of Natopia
• Economy of Constancia
• Economy of Zeed
• East Keltian Collapse
• Streïur uis Faïren