Getting past 'new normal' slow economic growth

Washington

MOST economists nowadays are pessimistic about the world economy's growth prospects. The World Bank has, yet again, downgraded its medium-term projections, and economists the world over are warning that we are facing a "new normal" of slower growth. Where there is less consensus - or so it seems - is in accounting for this weakness.

Almost three years ago, former US treasury secretary Larry Summers revived Alvin Hansen's "secular stagnation" hypothesis, emphasising demand-side constraints. By contrast, in Robert Gordon's engaging and erudite book The Rise and Fall of American Growth, the focus is on long-term supply-side factors - in particular, the nature of innovation. Thomas Piketty, in his best-selling tome Capital in the Twenty-First Century, describes the rise of inequality that is resulting from low GDP growth. Joseph E Stiglitz's book Re-Writing the Rules of the American Economy: An Agenda for Growth and Shared Prosperity blames political choices for both slowing growth and rising inequality.