Campus - 02.10.2014 - 00:00
6 October 2014. Secular stagnation is an economic term first coined in the aftermath of the Great Depression. Economic stagnation theories came to be associated with early Keynesian economics and Harvard University economics professor Alvin Hansen to mean a prolonged period of negligible or no economic growth in a market-based economy.
Many macroeconomists are starting to ask whether our current global economy is experiencing economic stagnation. Researchers Coen Teulings of Cambridge University and Richard Baldwin of the Graduate Institute in Geneva currently ask the question in a new e-book Secular Stagnation: Facts, Causes and Cures and Lawrence Summers, an American economist who served as Chief Economist for the World Bank, suggested last year that advanced economies may be suffering from it.
Evenett brought together professors Schui and Emmenegger for their historical, social and political thoughts on this mainly economic concept. Schui, who in his most recent work “Austerity, the Great Failure,” shows that arguments in favour of austerity are mainly based on moral and political considerations, rather than on an in-depth economic analysis. Schui finds that austerity has failed intellectually and in economic terms every time it has been attempted. “This is a crisis of under-consumption,” noted Schui. “Societies are slow to react when it comes to increasing consumption… but this is more than economic, this is political and ethical as well.” He continued pointing out that the Great Depression ended with a drastic increase in consumption… unfortunately this was for the Second World War.
Schui was quick to point out that in the Judeo-Christian tradition, consumerism is met with conflicting beliefs and that many consider an absolute focus on individual material wealth as having negative spiritual consequences. He points out that consumerism doesn’t need to be selfish – that it can be focused on the common good – the collective – like building school and hospitals, which has the ability of balancing out societal inequalities. Unfortunately expanding collective consumption can be seen in western societies as problematic as well. Some see the increase of collective consumerism as an expansion of the state and therefore to be crushing individual freedom.
Emmenegger brought a political angle to the discussion. After watching a short video clip of renown economist Lawrence Summers, who has worked for the Clinton and Obama administrations, he noted that although Summer works in the political spectrum he does not speak about the effect of politics on the economy, which for Emmenegger, shows that there is a disconnect between the practical/political world and the world of economists who do not always make an attempt to find practical applications for their theories.
Identifying the problem comes first
He points out that for a political solution to be found, one needs to first identify the problem. “I don’t believe that there is agreement here on what the problem is. Experts disagree on what is happening and without a strong consensus, no big reforms can be done.”
Emmenegger points out that political parties on one end of the spectrum might try to put reforms in place that can be seen on the other side as harmful. “We need to find a way to find agreement, build trust and make fair deals that a majority of people can get behind.”
Photo: simosg / photocase.com
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