The US economy since the crisis: slow recovery and secular stagnation*

Abstract

The US economy has experienced a slowdown in its long-term growth and job creation that predates the Great Recession. The stagnation of output growth stems mainly from the depressing effects of rising inequality on aggregate demand, while both increased inequality and the delinkage of employment from output have their roots in profound structural changes to the US industrial structure and international position. Stagnation tendencies were temporarily offset by debt-financed household spending before the financial crisis, after which households became more financially constrained. Meanwhile, fiscal policy has shifted toward austerity while business investment has failed to keep up with the boom in corporate profits in spite of low interest rates. Slower US growth in turn exacerbates the global slowdown as it implies smaller injections of demand into global export markets.

Wage-led versus profit-led demand regimes: the long and the short of it

“…Historically, it was a stylized fact of capitalism that relative shares of wages and profits in national income varied only cyclically and had no long-run trends. Yet, the data shown in Figures 1 and 2 in this paper and several of the most recent empirical studies (for example, Kiefer and Rada 2015;Stockhammer and Wildauer 2015;Barrales and von Arnim 2017) verify that, since roughly the late 1990s, we have witnessed an unprecedented secular decline in the wage share in the US and various other countries coupled with weaker performance in terms of any measure of utilization or growth -a combination often referred to as 'secular stagnation' (Blecker 2016;Hein 2016). Thus, it may well be that the potentially wage-led nature of demand in the long run (at least for some causes of distributional shifts) will only become observable after we are able to obtain some historical hindsight on the present era, in which wage shares have sunk to unusually low levels on a sustained basis.…”

“…It is entirely possible that, in a typical business cycle, profits drive investment both up in the recovery and down in the recession, but a sustained higher profit share of income will not lead to higher investment or growth in the longer term -as we have seen, for example, in the sluggish US recovery since the Great Recession of 2008-2009(Blecker 2016. As a result, a significant long-term fall in the wage share could potentially depress utilization and growth in the longer term, even if rising profits may be associated with typical short-run cyclical recoveries.…”

The Emerald Handbook of Modern Information Management

“…While some may argue that this anemic or weak growth is related to the severity of the Great Recession, others believe that the problem started earlier, around 2000 (Blecker, 2016;Brooks, 2017;Irwin, 2016). This problem has been dubbed secular stagnation which is defined as "long-term tendency toward chronically slow average growth" (Blecker, 2016) that afflicts advanced countries because of declining investment opportunities (Mankiw, 2016). Brooks (2017) highlights the strain that weak growth has caused by resulting in lesser opportunities and lesser optimism.…”

“…One main factor according to Blecker (2016) for this secular stagnation is rising inequality brought in by falling wages which affects consumption, a major component of GDP ( Figure 5). Although inequality was a concern even before the Great Recession, consumption was bolstered by rising household debt in the 1990s and early 2000s (Blecker, 2016). This could no longer be sustained after the Great Recession.…”

Financialisation and tendencies towards stagnation: the role of macroeconomic regime changes in the course of and after the financial and economic crisis 2007–09

“…In the mainstream version of this debate, as represented by Summers's (2014Summers's ( , 2015 'secular stagnation' hypothesis, distributional and macroeconomic policy or regime issues are ignored or only play a marginal role at best (Hein, 2016). 1 Post-Keynesian approaches, however, have focussed on income distribution, and in particular on the macroeconomic regime and on the stance of macroeconomic policy, when it comes to explaining stagnation tendencies after the crisis (Blecker, 2016;Cynamon and Fazzari, 2015;Hein, 2016;Palley, 2016;van Treeck, 2015).…”