Green Shoots: Meaning and Popularization by Ben Bernanke

What Is Green Shoots?

"Green shoots" is a term used to describe signs of economic recovery or positive data during an economic downturn. The term "green shoots" is a reference to plant growth and recovery, when plants start to show signs of health and life, and, therefore, has been employed as a metaphor for a recovering economy.

Understanding Green Shoots

One of the first uses of the term "green shoots" was by Chancellor Norman Lamont, who was a politician in the United Kingdom. He used it to describe signals of economic growth during the economic downturn in the United Kingdom in 1991.

The comment was widely criticized due to the dire financial straits that many UK citizens were dealing with, despite whatever signs of recovery the chancellor saw. Even with this controversial start, the phrase has caught on with economists and politicians as a way to imply that recovery is underway even if it doesn't seem to be the case from the general public's perspective.

Ben Bernanke and Green Shoots

Green shoots gained greater notoriety when it was used by U.S. Federal Reserve Chair, Ben Bernanke, to describe a nascent recovery during the financial crisis in a 2009 interview with 60 Minutes.

Bernanke stated, "We are seeing progress in the money market mutual funds and in the business lending area. And I think as those green shoots begin to appear in different markets, and as some confidence begins to come back, that will begin the positive dynamic that brings our economy back."

He went on to say in the same interview, "I do. I do see green shoots. And not everywhere, but certainly in some of the markets that we've been functioning in."

As with earlier usages, it was seen by Bernanke critics as wishful thinking combined with a lack of appreciation for the economic pain that Americans were experiencing as part of the financial crisis.

Other people saw it as a vote of confidence in the U.S. economy's ability to recover. A few at the time even tried to extrapolate the statement into a signal on interest rate hikes as is the norm with any statement from the Fed or its chair. 

When Green Shoots Don't Grow

Bernanke wasn't entirely wrong with his comments. The worst of the economic damage from the mortgage meltdown, including the failure of Lehman Brothers, was in fact over. However, the green shoots Bernanke saw were not a robust growth that led to a quick recovery.

It is true that the rate of economic contraction and the risk of more large-scale financial system failures had lessened, however, it would be years after the green shoots comments before the recovery impacted the lives of the average citizen. For years people continued to struggle with underwater mortgages and job losses as economic growth failed to come anywhere near the pre-financial crisis levels. 

So even though Bernanke saw improved signs, it would take time for that to trickle down to society as a whole. And people are still struggling with the effects of the recession.

Green Shoots and Similar Phrases

"Green shoots" falls in that class of statements that economists and politicians roll out when they need people to believe that the worst is over. Other favorites include the "glimmers of hope" that Obama used that same year to describe the state of the economy or the oft-used "we are on solid footing."

Whether these statements are backed by solid economic data or not, they do have the power to take over the media narrative and shape public opinion. Sometimes they instill much-needed confidence in consumers and investors that allows for spending in the economy that eventually spurs growth towards a full recovery.