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Handbook of Economic Stagnation

1st Edition - April 24, 2022

Editors: Randall Wray, Flavia Dantas

Paperback ISBN:

9 7 8 - 0 - 1 2 - 8 1 5 8 9 8 - 2

eBook ISBN:

9 7 8 - 0 - 1 2 - 8 1 6 2 7 0 - 5

Handbook of Economic Stagnation takes a broad view, including contributions from orthodox and heterodox economists who examine situations in countries and worldwide regions,… Read more

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Handbook of Economic Stagnation takes a broad view, including contributions from orthodox and heterodox economists who examine situations in countries and worldwide regions, including Japan and the Euro area. To be sure, stagnation is periodically relieved by short economic bursts usually brought on by unsustainable asset price bubbles. Once the bubbles burst, stagnation returns. This book's fresh, comprehensive approach to the topic makes it the premier source for anyone affected by these cycles.

Cover image
Title page
Table of Contents
Copyright
Contributors
Introduction: Handbook on economic stagnation
Overview of the contributions to this volume
Part A. Secular stagnation: theory, causes, and evidence
Chapter One. Stagnation policy: a Steindlian perspective
Introduction
A Steindlian model of distribution and growth
The channels of stagnation policy and implications for its reversal
Conclusions
Chapter Two. Growth and stagnation in mature and dual economies
Introduction
Mature economies, functional finance, and secular stagnation
Dual economies and structural transformation
Two cases: Japan and Brazil
Chapter Three. The secular stagnation of productivity growth
The ‘slow-moving turtle’
Potential output growth and productivity growth
Total-factor-productivity (TFP) growth: solow variations
Bringing demand in from the cold
Wage growth as a determinant of productivity growth
Conclusion: weak demand growth pulls down potential output growth
Chapter Four. Stagnation and social structures of accumulation
Introduction
Social structure of accumulation theory and stagnation
History of SSAs in the United States
The neoliberal SSA and stagnation in the U.S.
Data analysis
Concluding comments
Chapter Five. Financialization and stagnation—a macroeconomic regime perspective
Introduction
The concept of macroeconomic regimes under financialization
The regimes before the crisis
Changes in the regimes in the course of and after the crisis
Challenges: imbalances, instability, and stagnation
Conclusions
Chapter Six. Hyman Minsky meets secular stagnation
The microfoundations of Minsky's theory of investment
From microeconomic investment to macroeconomic instability
Seeds of a Minsky crisis in the household sector
Weak recovery, rising inequality, and secular stagnation
Conclusion
Chapter Seven. Demand, distribution, productivity, structural change, and (secular?) stagnation
Introduction
Neoclassical explanations of secular stagnation
Demand effects
Income distribution
Endogenous technical change
Monopoly capital and financialization
Instead of conclusion: stagnation, is it secular?
Chapter Eight. Economic stagnation in the Euro Area
Preface
Secular growth slowdown in the Euro Area: evidence
A short digression: the slowdown of private consumption growth is linked to the slowdown of growth of fixed capital formation
Falling wage shares: not quite a “natural development”
A somewhat longer digression: supply side developments unlikely to have underlain stagnating output growth
The noxious of restrictive EU fiscal policy rules and the common monetary policy
Real effective exchange rate of Germany's EA partners: from relative appreciation to relative depreciation
The limits of “internal devaluation”
Suppression of fiscal deficits critically contributing to stagnant EA output growth
The future remains uncertain
Part B. Secular stagnation in the global south
Chapter Nine. Inequality, stagnation, financialization, and the Global South
Introduction
Inequality, stagnation, and financialization
Spillovers to the Global South
External vulnerabilities of EMEs
Resource transfers
Conclusions
Chapter Ten. Does the liberal policy regime condemn Latin America to quasi-stagnation?
Introduction
First, nonconsolidated industrial development
Second, growth with foreign savings
Third, anchor to control inflation
Fourth, high level interest rate
Fifth, neutralization of the Dutch disease
Sixth, capital controls
Seventh, industrial policy
Eighth, public savings
Conclusion
Chapter Eleven. Mexico: unequal integration and “stabilizing stagnation”
Dedication
Introduction
The growth slowdown in Mexico
Alternative explanations for Mexico's slow growth
Conclusions
Chapter Twelve. The stagnation of the Mexican economy is here to stay
Macroeconomic policies for maintaining “stability” are detrimental to endogenous conditions for growth
Stability of the exchange rate does not allow for flexibility of economic policies to foster growth
The government's policy for stabilizing the exchange rate, and for lowering inflation, the fiscal deficit, and the amount of debt has brought about economic stagnation that will end in recession and crisis
The fiscal and taxation policy
The government will not succeed in reducing the amount of debt by reducing public spending
Trade agreements have not been favorable toward economic growth
Income inequality is harmful to economic growth
Public investment is falling, and there is insufficient internal and external demand for growth
There is no countercyclical fiscal policy
Lower economic growth potential is detrimental to job creation, salaries, and the public wellbeing
Deceleration of the world economy
The fragility of the economy when it depends upon capital inflows
The Mexican economy has neither productive conditions, nor the economic-policy management needed to deal with external shocks
The impossibility of continuing with the predominating neoliberal policy
The need to operate with a flexible exchange rate
Mexico needs a fiscal deficit that favors the productive sector to adjust the external deficit and drive the dynamics of the economy
Chapter Thirteen. The Brazilian economic recession and stagnation and an Agenda to ensure macroeconomic stability and social development
Introduction
Chronicle of a crisis foretold
An Agenda for the Brazilian economy
Conclusion
Part C. The return of big government and economic prospects after the pandemic
Chapter Fourteen. The role of big government: an introduction
The Domar problem and secular stagnation since 1910!
Conclusion
Chapter Fifteen. Secular stagnation: as good as it gets?
Introduction
Secular stagnation and labor productivity growth
Growth decomposition: productivity as a residual
The role played by stagnation of wages
Labor markets—the demand side
Evidence from the experience of prime age workers
The way forward
Chapter Sixteen. Secular stagnation and the age of ultra-low interest rates
Interest rates over the past century
Secular stagnation and interest rates
Implications
Chapter Seventeen. Monetary policy after the subprime crisis: a Post-Keynesian critique
Introduction
Unconventional monetary policy after the crisis
Mainstream theory reconsideration of monetary policy after the GFC
A Post-Keynesian alternative on the role of the Central Bank
Concluding remarks
Chapter Eighteen. Biden's build back better proposal and the future of secular stagnation
Introduction
Building back better: the plan(s)
Should we raise taxes to pay for spending? An alternative view of taxation
Will the spending be inflationary if not paid for?
Conclusion
Index

Randall Wray

L. Randall Wray is a professor of Economics at Bard College and Senior Scholar at the Levy Economics Institute. Wray taught at the University of Missouri–Kansas City from 1999 to 2016 and at the University of Denver from 1987 to 1999, and has been a visiting professor at the Universities of Paris and Rome (La Sapienza), as well as holding a variety of visiting positions in China, the Czech Republic, Brazil, Mexico, and Italy. From 1994 to 1995 he was a Fulbright Scholar at the University of Bologna, and he has recently completed a Fulbright Specialist Grant at the Tallinn University of Technology in Estonia. He has had a number of funded research grants from the Ford Foundation, from the Asian Development Bank, and from the Institute for New Economic Thinking. He holds a BA from the University of the Pacific and an MA and a Ph.D. from Washington University, where he was a student of Minsky. His recent publications include: A Great Leap Forward: Heterodox Economic Policy for the 21st Century; Macroeconomics; “MMT and Two Paths to Big Deficits”, Challenge; “Cranks and heretics: the importance of an analytical framework” Cambridge Journal of Economics; Why Minsky Matters: An Introduction to the Work of a Maverick Economist; and Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems. His books have been published in many languages, including Chinese, Spanish, Portuguese, Ukrainian, and Japanese.

Affiliations and expertise

Levy Economics Institute of Bard College, USA

Flavia Dantas

Flavia Dantas is an Associate Professor at SUNY Cortland, where she teaches courses in alternative economic theory, political economy and social thought, macroeconomics, money, and mathematical economics. She received her Ph.D. from the University of Missouri-Kansas City in 2013. Her current work focuses on economic stagnation, employment policy, and financial globalization. Recently she has been working with Randall Wray to examine labor market trends in the USA; extensions of this work will critically assess what many have called a new era of “secular stagnation”.

Affiliations and expertise

Economics Department, State University of New York, Cortland, USA