Skip to main content

financial crisis bailout protestors Spencer Platt/Getty Images

The Myth of Secular Stagnation

Those responsible for managing the 2008 recovery found the idea of secular stagnation attractive, because it explained their failures to achieve a quick, robust recovery. So, as the economy languished, a concept born during the Great Depression of the 1930s was revived.

NEW YORK – In the aftermath of the 2008 financial crisis, some economists argued that the United States, and perhaps the global economy, was suffering from “secular stagnation,” an idea first conceived in the aftermath of the Great Depression. Economies had always recovered from downturns. But the Great Depression had lasted an unprecedented length of time. Many believed that the economy recovered only because of government spending on World War II, and many feared that with the end of the war, the economy would return to its doldrums.

Something, it was believed, had happened, such that even with low or zero interest rates, the economy would languish. For reasons now well understood, these dire predictions fortunately turned out to be wrong.

Those responsible for managing the 2008 recovery (the same individuals bearing culpability for the under-regulation of the economy in its pre-crisis days, to whom President Barack Obama inexplicably turned to fix what they had helped break) found the idea of secular stagnation attractive, because it explained their failures to achieve a quick, robust recovery. So, as the economy languished, the idea was revived: Don’t blame us, its promoters implied, we’re doing what we can.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

https://prosyn.org/d5GvzII;

Handpicked to read next

  1. reinhart39_ Sha HantingChina News ServiceVisual China Group via Getty Images_jerome powell Sha Hanting/China News Service/Visual China Group via Getty Images

    Jerome Powell’s Dilemma

    Carmen M. Reinhart & Vincent Reinhart

    There is a reason that the US Federal Reserve chair often has a haunted look. Probably to his deep and never-to-be-expressed frustration, the Fed is setting monetary policy in a way that increases the likelihood that President Donald Trump will be reelected next year.

    2
  2. mallochbrown10_ANDREW MILLIGANAFPGetty Images_boris johnson cow Andrew Milligan/AFP/Getty Images

    Brexit House of Cards

    Mark Malloch-Brown

    Following British Prime Minister Boris Johnson's suspension of Parliament, and an appeals court ruling declaring that act unlawful, the United Kingdom finds itself in a state of political frenzy. With rational decision-making having become all but impossible, any new political agreement that emerges is likely to be both temporary and deeply flawed.

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated Cookie policy, Privacy policy and Terms & Conditions