A theory of stagnation
China woes add force to secular stagnation debate
THE past two weeks have been turbulent for the world's markets. But they have been buoyant for proponents of the theory that the global economy is stuck in a semi-permanent rut.
The so-called "secular stagnation" hypothesis was first advanced by economist Alvin Hansen in the late 1930s, and revived by Larry Summers in a different form two years ago. The former US treasury secretary argued that growth potential in advanced nations has been sliding for decades.
Ageing populations, globalisation and automation have come together to depress wages, especially for the less skilled. Demand for new investment is therefore deficient when compared with societies' desire for savings. As a result the "natural" rate of interest these economies can bear has been declining, and might even have turned negative.
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Companies & Markets
Pfizer lifts 2024 profit view on cost cuts, higher Covid vaccine demand
Shell exits China power market businesses
DuPont beats profit estimates, raises full-year forecasts
Binance founder Zhao Changpeng gets four months in prison
Apple set for big sales decline as investors await AI in iPhones
Microsoft, Brookfield to partner on renewable energy projects