A Productivity Boom-in-Waiting?

There is growing concern In the US that the worst recession since the Great Depression has damaged the economy’s capacity to grow. But it is often forgotten that, in addition to the similarities between then and now – credit rationing by banks, low investment, and jobless growth – the 1930's witnessed the fastest productivity growth in US history.

BERKELEY – A double-dip recession is one thing, but a lost decade is something far more sinister. In the United States, there is growing concern that the worst recession since the Great Depression has damaged the economy’s capacity to grow.

Indeed, there are good reasons for worrying that the US and other advanced countries will now be consigned to a long period of sub-par growth. Having been burned by the crisis, banks have tightened their lending standards, and will now be subject to more stringent capital and liquidity requirements. As a result, bank credit will be harder to obtain.

A more limited supply of bank credit will mean higher capital costs. Small and medium-sized firms – the most important sources of innovation and employment growth – will feel the effects most acutely.

To continue reading, please log in or enter your email address.

To read this article from our archive, please log in or register now. After entering your email, you'll have access to two free articles from our archive every month. For unlimited access to Project Syndicate, subscribe now.

required

By proceeding, you agree to our Terms of Service and Privacy Policy, which describes the personal data we collect and how we use it.

Log in

http://prosyn.org/VaFHrr3;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.