January 19, 2020

Why Are We So Afraid of "Slow Growth?"

“Global markets were seized by fear last week that trade wars were slowing growth in Germany, China and the United States. But the story here is bigger than President Trump and his tariffs.

The postwar miracle is over. Since the financial crisis of 2008, the world economy has been struggling against four headwinds: deglobalization of trade, depopulation as labor forces shrink, declining productivity and a debt burden as high now as it was right before the crisis.

No major economy is growing as fast as it was before 2008. Not one is growing faster than 10 percent, the rate experienced by the Asian “miracle economies” before the crisis. In almost every country, the national discussion focuses on what must be done to revive growth and ignores the fact that the slowdown is driven by forces beyond any one government’s control. Instead of dooming ourselves to serial disappointment and fruitless stimulus campaigns, we need to redefine economic success and failure.

Germany is one of at least five major economies on the verge of a recession, which is typically defined as two consecutive quarters of negative growth. But the real issue is whether that definition still makes sense in a country with a shrinking labor force like Germany’s.”

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