CAMBRIDGE – Is today’s slow growth in advanced economies a continuation of long-term secular decline, or does it reflect the normal aftermath of a deep systemic financial crisis? More important, do we need to answer that question definitively in order to boost the pace of economic recovery?
At a recent International Monetary Fund (IMF) conference, former US Treasury Secretary Lawrence Summers argued that today’s growth blues have deep roots that pre-date the global financial crisis. Summers placed particular emphasis on the need for more infrastructure investment, a sentiment that most economists wholeheartedly share, especially if one is referring to genuinely productive investment.
Others also certainly worry about secular decline, though most have emphasized the supply side rather than the demand side. The economist Jeffrey Sachs, for example, has argued that the US economy needs to confront a plethora of structural impediments to sustained growth, including offshoring, skill mismatches, and decaying infrastructure.
The Internet entrepreneur Peter Thiel and the legendary chess champion Garry Kasparov have suggested that the malaise runs even deeper, as has the economist Robert Gordon. They argue that the technology engine that has driven mankind from one economic plateau to the next over the past 200 years is running out of steam. Simply put, the Internet may be cool, but it is hardly as essential as running water, electrification, or the internal combustion engine.