How Prolonged Recession Reduces The Potential Of An Economy

This article in The Economist makes a good point that is worth repeating.  Recessions are periods of low demand and high unemployment.  Businesses do not invest in new and better technologies in periods of low demand.  Therefore, the potential for future output is affected by the decline in investment.  When people are unemployed for long periods they lose some of their economic value as well.  The economy will have less capital and lower levels of human capital available for future output as a result of a prolonged recession.  The failure to deal with weak demand in the current period, reduces the potential for future economic growth.