The Big Picture

Debate: Stiglitz vs. Summers on Secular Stagnation

During the slow recovery after the 2008 financial crisis, Larry Summers, the Director of President Barack Obama's National Economic Council, argued that the US economy was in the grips of "secular stagnation": neither full employment nor strong growth could be achieved under stable financial conditions.

In this BigPicture debate, Joseph E. Stiglitz argues that Summers's theory has been invalidated by the effectiveness of today's fiscal stimulus policies – and that the Obama administration should have doubled down on them when it had the chance.

Summers responds that Stiglitz has mistakenly framed his theory as a passive justification of the status quo, rather than as a call to arms for precisely the type of intervention Stiglitz himself advocates. Stiglitz counters that the shape and size of the intervention matters as much as the decision to go through with it, and hopes that the right lessons will have been heeded by the next downturn. And Summers offers his final thoughts on the matter, noting that the Obama-era stimulus package did indeed fall within the range Stiglitz had prescribed at the time.

And in a commentary following the debate, Roger E.A. Farmer weighs in to argue that both Summers and Stiglitz would still need a new economic model to justify a fiscal expansion as the default response to the next recession.

Featured in this Big Picture

  1. Joseph E. Stiglitz Joseph E. Stiglitz
  2. Lawrence H. Summers Lawrence H. Summers
obama biden signing financial recovery act Charles Ommaney/Getty Images
Wall Street Bull The Fearless Girl Drew Angerer/Getty Images
Man with need work sign Joe Raedle/Getty Images
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