Secular stagnation? The Future Challenge for Economic Policy

Five years after the financial collapse, unemployment remains very high in much of the western world. Essentially every major country, with the partial exception of Japan, has tended to leave recovery to private markets and eschewed major fiscal policy initiatives. But increasingly analysts are asking whether this faith in private markets is justified.

Larry Summers has argued that we are experiencing "secular stagnation." In this conversation at the Institute's "Human After All" conference with Canadian M.P. and best-selling author Chrystia Freeland, the former U.S. Treasury Secretary and Director of the National Economic Council discusses his ideas on how to restore higher levels of growth and prosperity around the world.




It saddens me greatly that the institute would have summers as a speaker. I thought these types of folks were the one's the institute wanted to separate themselves from. One of our biggest problems is we keep bringing back these types. It's par of the problem in economics and summers represents the worst of the worst.

I have been wondering if the institute has been bending a bit too far seeking some acceptance from the establishment. I'd rather know what benzimer, or keen have to say. Not the guy who caused this mess in the first place. At what point does a person's failures cause him to be not regarded as someone worth hearing from again.

Wasn't the episode at jackson hole with rajan enough to have decided this guy should be put to pasture as any kind of authority.


So what is the relationship of the secular stagnation and the paradox of thrift?

Val Samonis


I agree with what was said above but if you open for change you need to listen to everybody. You can't close your mind and have a chat just with your best mates.


Martin wolf wrote a great editorial in the ft today on banking reform.
The problem as I see it with those pushing the secular stagnation meme (summers/ Krugman) is that they seem to be mainly concerned with preserving the status quo and not thinking outside of the box. i,e. preserving the current structure of the financial system and monetary policies that have created (as unintended consequences) the very thing they are speaking about now. i.e. endless real negative interest rates, creating inequality, advantage for the wealthy/ banks. etc.

I suspect many of Martin's ideas would in fact fix the problems (stagnation)talked about as beneficial unintended consequences. Unlike the current system which produces destructive unintended consequences. But based on Summers history such reforms would hurt the very groups summers seems to have a significant history of attempting to protect. Meaning his set of policy prescriptions aren't so much about doing the greatest good, but making sure certain special interest groups receive the greatest benefit from his policies.

If summers has a special skill it's taking lobby mumbo jumbo and converting into an economic theory which benefits us all. Meaning he has good language manipulation skills that allows legislators to pass policy they never should have.

I read almost every article on the site, watch most videos. I refuse to listen to summers out of simple moral principle. some pundits have said part of the problem with economics is that it has strayed from certain moral foundations. Well, the summers issue is a moral one. It's the wrong morals. Not everyone is worth listening too. Someone who has caused so much damage, and so much pain doesn't deserve his time in the sun anymore. Some feel (myself included) that if our criminal justice system functioned better he wouldn't be a free man, or at least he'd be penalized and considered accountable in some manner for the harm he's done.

Andrew Haldane has given some great talks about the damage done in the crisis. What % should he be personally liable for. I bet if our system worked that way, some bad policy would never get passed!!


Oh, I am by far not the only pundit who has realized what summers is really pushing:
Why Half-Measures Only Preserve the Existing Order
Economic Stagnation and the Stagnation of Economics

"But by keeping policy proposals within the realm of mainstream (capitalist) economics these New Keynesians consign themselves to being repairists for the political economy that produced the conditions so in need of repair.Given the current distribution of income any increase in economic growth, even setting aside its costs in terms of aggregating environmental calamity, would go overwhelmingly to the existing plutocracy. By concerning themselves with the broad ‘economy’ while ignoring both internal and external dynamics the apparent goal of secular stagnation theorists is to create more of the same economic circumstance. Given current social and environmental conditions as well as their trajectories, the last thing that most citizens of the West need is more of the same"


Close the "Tax Havens " :The domestic economic policy alone does not solve the problem of the growth of a country, we must act simultaneously at the international level.


Culture - Ethics - Information: underestimated critical factors for "competitive " development

Culture - Ethics - Information: underestimated critical factors for competitive development

Francesco TOTINO *

The situation

In the Economic policy measures , especially in the last years, it has been given a lot of emphasis to some impediments that block both the development policies and the employment . Among the referred obstacles appears: adverse international economic situation , safety , inefficient infrastructure, quality of public administration , labor flexibility , fair tax policy . Against this situation , trying to emulate the successes achieved in other Western countries , the measures put in place by some other Governments, have been focused primarily on quantitative measures, underestimating the capacity to react to these measures of the social system respect that one of other Western countries.

Basically it was said, " in the USA, Holland, England , or in some areas of these countries , the stress of some economic variables , in a hypothetical "conventional" development econometric model, have led to results in terms of growth and has allowed to improve the competitiveness of the system ... So ... let's do it ..! "

Some Governments did it ..or tried to do it ... . but the results did not come and for some countries .. even today the situation , unfortunately, is not better than that one of five years ago.

Indeed .. in front of a positive increase in the number of small businesses and thus in front of an employment in small businesses sector, for aexample.. our country Italy, suffered a decrease in employment in large companies, an increase in the social conflict and a significant decrease of the competitiveness in international rankings . A deterioration , the last, very serious in our economy as it incorporates a structural and not cyclical deterioration which will impact on the future of our country. The same situation happen in other weak countries of Eurozone ... and .. imagine in other weak countries !!!

Think that the competitiveness of enterprises and social development in a country or in a particular "weak" Area , can be implemented only through the emulation of successful economic policies implemented in other countries, is not only true, but it hides oversimplified and outdated economic thinking.

The phenomena of particular European or American regions economic policy success, which certainly constitute an unequivocal reality to look at, to learn about and be inspired , we must not forget that in these places has been possible thanks to a civil confrontation among the parts, thanks to a civil social context , thanks to a " cultural infrastructure " of IDEAS and MENTALITY ' , thanks to an intense policy of developing Human Resources , thanks to a strong attention to' Ethics in Business and in Politics.

These "qualitative " factors that has been built in these places out from grueling political mediations, out of a systemic inattention and tolerance of lawlessness and injustice environment, like any other factor of production , have been constitute a fundamental Asset ,, let's say a "Treasure " of inestimable importance for regional development and local business competitiveness , especially in the long period .

Cultural Infrastructure , Ethics and Information are the new strategic factors of development

Today it's therefore required , if you do not want to persevere in the failure of "conventional" economic policy measures , to develop and support a new model of economic development that takes into account in its simulations also new variables such as " Cultural infrastructure" , Ethics and other qualitative factors ... the weight of these "social" variable have gained a more and more importance and considerable value respect the most popular economic variables such as " taxation ", " wage flexibility " and so on.

This is mainly becouse the accelleration in the last years of an incredible Worldwide sophistication of the Economic development process.

Do overshadowing these variables (ie, consider the factor " cultural infrastructure " and the Ethics, as only words to brush up in opportunistic speeches of circumstance or as values to try to give depth to a political party program ) and therefore not support their huge function generating mechanism of development, in a modern design statement , not only will lead to attempts to invalidate economic policy (and thus wasting resources and time ), but will lead to a further deterioration of another fundamental crucial component of development : the expectation of economic operators and the credibility of the country.

Politics responsibilities

A crucial role in this game must be played by Politics, by Politicians and then by the Government, the government parties and all political parties in general, which should start to give an example. The "traditional" parties can not fail to notice the credibility gap they have created around them, both at national and international level , for reasons related to the problem of justice, of corruption that since the fall of ideologies seem to constitute a fisiological condition to get vote .. The Political Parties seems not capable any more to select ruling class especially at intermediate level becouse the need to favourite clientelism and corporative interest . The parties and therefore Politics are dependent too much from the vote system and from corporative interests that are not any more helpful to the satisfation of general interest of the countries and of the worldwide economy .

Negative expectations , doubts , and this loss of credibility and trust in the political institutional apparatuses are now a strong weight deterring factors for the development as they not only undermine the possibility of emersion of all qualitative economic components of the " cultural infrastructure, but also cut business relations with more efficient components of the social system, with international partners , and in fact encourage the emersion and entrenchment in the social system of all the other qualitatively negative components ( dishonesty, corruption, corporatism, not professionalism, improvisation , subculture etc. .. etc. .. ) , closing the single countries in a negative vicious circle of pauperization.

These considerations, which affected public opinion and newspapers and television on and off and only during some election campaign , assume today a greater value as greater is the level of the modernization and communication of the country to which they refer becouse also the higher level of influence that (either directly or indirectly foreign investors ) lead also and above all on our productive system and enterprises.

For these reasons, the combination Ethics and Politics can no longer be considered only as an object of electoral campaingn debate , but it should be seriously considered as a "fundamental" and strategy factor to include in a model of economic development .

Basically the Politics today must be made more seriously than in the past because it is not only the political decision (ie the one that determines the address of the strategic choices made by the government in different sectors) but it is mostly the Ethics embodied by political class and by the government that make the difference to gain positive effects on the long term economic development .

Francesco Totino

Rome, April 7, 2003


Why are you expressing your opinion but you are afraid to identify yourself? Do you expect reprisal for your views?

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