Backsliding in global economic growth looks inevitable

AUTHOR and playwright George Bernard Shaw once said that "if you took all the economists in the world and laid them end to end they still would not reach a conclusion". This seems evident from the lack of consensus on what has caused the prolonged slowdown in global growth.

The deceleration in economic growth rates has been going on since the 2008-9 global financial crisis and the Great Recession that followed. This is extraordinary since the world's key central banks, led by the Fed, launched massive monetary easing exercises to prevent another Great Depression. Absent that, the situation would have been much worse given that some of the world's biggest banks and other financial institutions were on the brink of collapse. But if monetary easing saved the international financial system, it has yet to rescue the global economy. Boom and bust cycles come and go but busts are normally followed, if not by another boom then by (greater or smaller) economic recovery. But this particular downturn looks set to last for a decade at least.

What is alarming is that not just advanced economies (with the possible exception of an unsteadily recovering US) are in trouble but also emerging economies. Russia and Brazil are in recession while China's declared growth of 6-7 per cent may be only half that in reality. Is this simply a reaction to the 2008 shock, a slowdown in world trade, rising protectionism, a backlash against globalisation, declining productivity, weak consumption and investment or a failure of "animal spirits"? Or are advanced economies ageing to the point where they are incapable of robust growth?