What would the effect of a very long bear market be on the Bitcoin economy?
From my understanding, the difficulty of the network will still keep increasing when the "target" block is mined, regardless of the number of miners (yes?)


No.

The difficulty readjusts every 2016 blocks, based on the average time taken to mine the previous 2016 blocks.  If the average is less than 10 minutes, the difficulty goes up.  If greater than 10 minutes, the difficulty goes down.

The rate at which blocks are mined is, on average, proportional to the total hash rate of the entire network.  So if mining power leaves the network, then blocks will be found more slowly, and at the next readjustment, the difficulty will decrease.