Anti-austerity protest in London Mary Turner/Getty Images

Long Reads

The Advanced Economies’ Lost Decade

A review of the policy debates of the post-crisis years suggests that flawed macroeconomic theories were given too much weight for too long. The result has been slower growth, lost economic capacity, and surplus misery for millions of people around the world.

LONDON – Ten years after the 2007-2008 financial crisis, it is worth asking where the world’s developed economies are today, where they would have been had there been no crisis, and, perhaps more important, where they might have been had different policy choices prevailed before and after the collapse.

The first two questions can be answered with a single graph, which shows real (inflation-adjusted) per capita GDP growth for OECD countries from 2000 to 2018. As a bloc, the OECD spent five years getting back to where it was just before the crash (the eurozone took two years longer). And its average annual growth rate (1.5%) has remained at three-quarters of the pre-crash level (2%).

Figure 1

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