BRISBANE – The G-20’s upcoming meeting in Brisbane, Australia, comes at a time when a precarious global economy requires big decisions to be made. But it is far from clear who will provide the decisive voice needed to set a bold agenda – and then shepherd its implementation.
Economic data reveal that the global economy is shakier than at any time in the past two years. Capitalism is struggling to generate adequate demand. Wealth and income have become increasingly concentrated, while middle-class incomes in the developed world have stagnated. Tax avoidance by multinational companies is draining developing-country incomes, limiting their ability to invest in education and infrastructure. And much more action is needed to address the largest and most urgent structural weakness of all – climate change.
Many leading economists and policymakers are forecasting continued economic gloom. Stephen Roach has suggested that in the post-crisis global economy “relapse is the rule”; economist Brad DeLong, speaking of the “consequences of our lesser depression,” argues that the pretense of a eurozone recovery has collapsed; and European Central Bank President Mario Draghi has acknowledged the need not only for structural reform, but also fiscal expansion to boost aggregate demand.
At the heart of their concerns is the lack of sustained demand needed to drive growth. While structural reforms – particularly on the supply side – are required in developed and developing countries, they are not sufficient to address what former US Treasury Secretary Larry Summers has called “secular stagnation” – that is, the difficulty of sustaining sufficient demand to permit normal levels of output.