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.
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