1. bookVolume 7 (2018): Issue 1 (January 2018)
Journal Details
License
Format
Journal
eISSN
2336-9205
First Published
11 Mar 2014
Publication timeframe
3 times per year
Languages
English
access type Open Access

Technological Progress, Globalization, and Secular Stagnation

Published Online: 23 Jan 2018
Volume & Issue: Volume 7 (2018) - Issue 1 (January 2018)
Page range: 59 - 100
Received: 03 May 2017
Accepted: 01 Sep 2017
Journal Details
License
Format
Journal
eISSN
2336-9205
First Published
11 Mar 2014
Publication timeframe
3 times per year
Languages
English
Abstract

After the 2008 crisis, despite economic recovery that started in 2009, the world economy has experienced a downward shift of its growth path and a consequent decline. As shown at the beginning of this paper, this shift and growth rate stagnation are totally attributable to the economic dynamics in developed economies, the USA and the EU. Explanations of this phenomenon can be divided into two large groups: explanations that belong to the demand side and those that belong to the supply side. The aim of this paper is to give a critical survey of the most important explanations for the ongoing growth stagnation in developed countries and consequently in the entire world economy. This ongoing prolonged stagnation can only be explained by looking at both, the demand and supply sides of the explanation, and particularly by taking a closer look at the interaction between aggregate demand and aggregate supply. In other words, secular stagnation manifests itself as a problem of the limitation of long run growth of aggregate demand. However, in order to explain the causes of those demand limitations, we have to undertake a careful analysis of the supply side dynamics, especially the dynamics of innovations, which bring us to circular and cumulative causation. In order to explain the numerous consequences of this stagnation and to solve some important puzzles, like the productivity paradox for example, a special emphasis is given to the analysis of deindustrialization and the consequent strange reoccurrence of a dual economy within most developed countries during the period of the IT revolution and hyper-globalization. It will also be shown that this new dual economy presents serious limitations for further technological advancement and economic development, quite contrary to the old dualism which contributed to an acceleration of economic growth.

Keywords

1. Blanchard, Oliver and Summers, Laurence (1986). “Hysteresis and the European Unemployment Problem”, NBER Macroeconomic Annual, Vol. 1, MIT Press, 15-90.Search in Google Scholar

2. Borio, Claudio (2017). “Secular Stagnation or Financial Cycle Drag?”. National Association for Business Economics, 33rd Economic Policy Conference 5-7 March 2017, Washington DC.10.1057/s11369-017-0035-3Search in Google Scholar

3. Chandler, Alfred (1977). The Visible Hand: The Managerial Revolution in American Business, Cambridge: Harvard University Press, 1977.Search in Google Scholar

4. Coase, Ronald (1937). “The Nature of the Firm,” Economica, 4, pp. 386-405.10.1111/j.1468-0335.1937.tb00002.xOpen DOISearch in Google Scholar

5. Craft, Nicholas (2014). “Secular stagnation: US hypochondria, European disease?”, in Teulings, C. and Baldwin, R. (Editors) Secular Stagnation: Facts, Causes, and Cures, A VoxEU.org eBook, CEPR Press, 2014.Search in Google Scholar

6. Cobb, C. W. and Douglas, P. H. (1928). “A Theory of Production.” American Economic Association, Supplement. pp. 139‑167.Search in Google Scholar

7. Eden, Maya and Gaggl, Paul (2014). “The Substitution of ICT capital for Routine Labour: Transitional Dynamics and Long Run Implications”, (mimeo).10.2139/ssrn.2432313Search in Google Scholar

8. Eden, Maya and Gaggl, Paul (2016). “On the Welfare Implications of Automation”, UNC Charlotte Economics Working Papers Series, 2016-011.Search in Google Scholar

9. Eggertsson, G. B. and Mehrotra, N. R. (2014). “A Model of Secular Stagnation”, NBER Working Papers, No 20574.10.3386/w20574Search in Google Scholar

10. Eggertsson, G. B., Mehrotra, N. R., Singh, S. R., and Summers, L. H. (2015). “A Contagious Malady? Open Economy Dimensions of Secular Stagnation”, (mimeo).10.3386/w22299Search in Google Scholar

11. Eggertsson, G. B., Mehrotra, N. R., and Summers, L. H. (2016). “Secular Stagnation in the Open Economy”, American Economic Review, Papers and Proceeding, May 2016.10.3386/w22172Search in Google Scholar

12. Fei, John and Ranis, Gustav (1964). Development of the Labour Surplus Economy: Theory and Policy. Homewood, IL: Richard A. Irwin, Inc.Search in Google Scholar

13. Glaeser, Edvard (2014). “Secular Joblessness”, in Teulings, C. and Baldwin, R. (Editors) Secular Stagnation: Facts, Causes, and Cures, A VoxEU.org eBook, CEPR Press, 2014.Search in Google Scholar

14. Gordon, Robert (2012), “Is US Economic Growth Over? Faltering Innovation Confronts the Six Headwinds”, NBER Working Paper No. 18315.Search in Google Scholar

15. Gordon, Robert (2014a). “The turtle’s progress: Secular stagnation meets the headwinds”, in Teulings, C. and Baldwin, R. (Editors) Secular Stagnation: Facts, Causes, and Cures, A VoxEU.org eBook, CEPR Press, 2014.Search in Google Scholar

16. Gordon, Robert (2014b). “The Demise of U.S. Economic Growth: Restatement, Rebuttal, and Reflections”, NBER Working Paper No. 19895.10.3386/w19895Search in Google Scholar

17. Gordon, Robert (2014c). “US Economic Growth is Over: The Short Run Meets the Long Run”. Growth, Convergence and Income Distribution: The Road from the Brisbane G-20 Summit, Brookings, Think Tank 20, November 2014.Search in Google Scholar

18. Gordon, Robert (2015). “Secular Stagnation: A Supply-Side View”, American Economic Review: Papers & Proceedings, 105(5): 54-59.10.1257/aer.p20151102Search in Google Scholar

19. Hansen, Alvin (1938). “Economic Progress and Declining Population Growth”, American Economic Review, Vol. XXIX, No 1, Part I.Search in Google Scholar

20. Komlos, John (2016a). “Has Creative Destruction Become More Destructive?”, NBER Working Paper, No 20379.10.1515/bejeap-2016-0179Search in Google Scholar

21. Komlos, John (2016b). “Growth of Income and Welfare in the U.S, 1979- 2011”, NBER Working Paper, No 22211.10.3386/w22211Search in Google Scholar

22. Kornai, Janos (1993). Transformational Recession: a General Phenomenon Examined through the Example of Hungary’s Development, Economie Appliqué, Fall 1993, 46(2): 181-227.Search in Google Scholar

23. Kornai, Janos (1994). Transformational Recession: The Main Causes, Journal of Comparative Economics, No 19, pp. 39-63.10.1006/jcec.1994.1062Open DOISearch in Google Scholar

24. Koo, Richard (2003): Balance sheet recession: Japan’s struggle with uncharted economics and its global implications, John Wiley & Sons, Singapore.Search in Google Scholar

25. Koo, Richard (2014). “Balance sheet recession is the reason for secular stagnation”, in Teulings, C. and Baldwin, R. (Editors) Secular Stagnation: Facts, Causes, and Cures, A VoxEU.org eBook, CEPR Press, 2014.Search in Google Scholar

26. Krusell, P., Ohanian, L. E., Rios-Rull, J. V., Violente, G. L. (1997) “Capital- Skill Complementarity and Inequality: A Macroeconomic Analysis”, Federal Reserve Bank of Minneapolis, Research Department Staff Report, No 236, p. 67.Search in Google Scholar

27. Lamoreaux, Naomi; Raff, Daniel and Temin, Peter (2002). Beyond Markets and Hierarchies: Toward a New Synthesis of American Business History”. NBER Working Papers No 9029, Cambridge, Massachusetts.10.3386/w9029Search in Google Scholar

28. Lazonick, William (2016). “Innovative Enterprise or Sweatshop Economics? In Search of Foundations of Economic Analysis”. The Institute for New Economic Thinking, Working Paper 25.10.1080/05775132.2016.1147297Search in Google Scholar

29. Lewis, Arthur (1954). “Economic development with unlimited supplies of labour.” The Manchester School 22 (2): 139-191.10.1111/j.1467-9957.1954.tb00021.xOpen DOISearch in Google Scholar

30. Mansfield, Edward (1965). “Rates of Return from Industrial Research and Development.” The American Economic Review. p.310‑323.Search in Google Scholar

31. Mansfield, Edward (1968a). Industrial Research and Technological Innovation. New York: Search in Google Scholar

32. Mansfield, Edward (1968b). Economics of Technological Change. New York: W.W.Norton & Co inc.Search in Google Scholar

33. Mansfield, Edward at. al (1971). Research and Innovation in the Modern Corporation. New York: Norton.10.1007/978-1-349-01639-6Search in Google Scholar

34. Mansfield, Edward at all (1977). The Production and Application of New Industrial Technology. New York: W.W. Norton and company.Search in Google Scholar

35. Mansfield, Edward at al (1982). Technology Transfer, Productivity, and Economic Policy. New York, London : W.W.Norton and co.Search in Google Scholar

36. Mansfield, Edward (1984). “R & D and Innovation: Some Empirical Findings.” In Griliches (ed) R&D, Patents, and Productivity. Chicago: N B E R , Chicago University Press.Search in Google Scholar

37. Milanovic, Branko (2016). Global Inequality - A new Approach for the Age of Globalization; The Belknap Press of Harvard University Press; Cambridge - Massachusetts, London - England.Search in Google Scholar

38. Mokyr, Joel (2014). “Secular Stagnation? Not in Your Life”, in Teulings, C. and Baldwin, R. (Editors) Secular Stagnation: Facts, Causes, and Cures, A VoxEU.org eBook, CEPR Press, 2014.Search in Google Scholar

39. Piketty, Thomas (2014). Capital in 21st Century, The Belknap Press of Harvard University Press, Cambridge, Massachusetts, London, England.Search in Google Scholar

40. Rachel, Lukasz and Smith, Thomas D. (2015). “Secular drivers of the global real interest rate”, Staff Working Papers No 571, Bank of England, December 2015.10.2139/ssrn.2702441Search in Google Scholar

41. Ranis, Gustav and Fei, John (1961). A Theory of Economic Development. The American Economic Review, 50. 533-565.Search in Google Scholar

42. Rifkin, Jeremy (1995). The End of Work: The Decline of the Global Labour Force and the Dawn of the Post-Market Era, G. P. Putnam’s Sons New York.Search in Google Scholar

43. Rifkin, Jeremy (2014). The Zero Marginal Cost Society - The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism. Pelgrave, Macmillan, 2014.Search in Google Scholar

44. Rodrik, Dany (2011). The Globalization Paradox - Democracy and the Future of World Economy. W. W. Norton and Company, New York, 2011.10.1355/ae28-3kSearch in Google Scholar

45. Rogoff, Kenneth (2015). “Debt Super-Cycle, not Secular Stagnation”, article on VoxEU.org, 25 September, www.voxeu.org/article/debt-supercycle-notsecular-stagnation.Search in Google Scholar

46. Schumpeter, Joseph (1947). Theory of Economic Development;Search in Google Scholar

47. Simon, Herbert (1947). Administrative Behaviour: A Study of Decision Making Process in Administrative Organizations; Macmillan, USA, 1947, p. 259.Search in Google Scholar

48. Solow, Robert (1956). “A Contribution to the Theory of Economic Growth”, Quarterly Journal of Economics 70(1), pp. 65-94.10.2307/1884513Search in Google Scholar

49. Solow, Robert (1957). “Technical Change and the Aggregate Production Function”, Review of Economic and Statistics 39, pp. 312-20.10.2307/1926047Search in Google Scholar

50. Solow, Robert (1959a). “Investment and Economic Growth: Some Coments”. Productivity Meassurement Review, pp. 62-68.Search in Google Scholar

51. Solow, Robert (1959b). “Investment and Technical Progress”. In Mathematical Methods in the Social Sciences. (Arrow, J. K., Karlin, S., Suppes, P.), Stanford: Stanford University Press.Search in Google Scholar

52. Solow, Robert (1962a). “Substitution and Fixed Proportion in the Theory of Capital”. Review of Economic Studies, pp. 207-219.10.2307/2295955Open DOISearch in Google Scholar

53. Solow, Robert (1962b). “Technical Progress, Capital Formation, and Economic Growth”. The American Economic Review, pp. 76-87.Search in Google Scholar

54. Solow, Robert (1987). “We’d Better Watch Out”. New York Times, 12 July 1987 (Book Reviews, Stephen Cohen and John Zysman: The Myth of Post Industrial Economy). P. 36.Search in Google Scholar

55. Stiglitz, Joseph (2012). The Price of Inequality: How Today’s Divided Society Endangers Our Future, W. W. Norton.Search in Google Scholar

56. Storm, Servaas (2017). „The New Normal: Demand, Secular Stagnation and the Vanishing Middle-Class”. The Institute for New Economic Thinking, Working Papers 55.Search in Google Scholar

57. Summers, Laurence (2013). “IMF Economic Forum: Policy Responses to Crises”, speech at the IMF Fourteenth Annual Research Conference, Washington, DC, 9 November.Search in Google Scholar

58. Summers, Laurence (2014a). “Reflections on the ‘New Secular Stagnation Hypothesis’”, in Teulings, C. and Baldwin, R. (Editors) Secular Stagnation: Facts, Causes, and Cures, A VoxEU.org eBook, CEPR Press, 2014.Search in Google Scholar

59. Summers, Laurence (2014b). “U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound”, Business Economics, Vol. 49, No. 2.10.1057/be.2014.13Search in Google Scholar

60. Summers, Laurence (2015). “Demand Side Secular Stagnation”, American Economic Review: Papers & Proceedings, 105(5): 60-65.10.1257/aer.p20151103Search in Google Scholar

61. Summers, Laurence (2016), “The Age of Secular stagnation: What It Is and What to Do About It”, Foreign Affairs, February 2016.Search in Google Scholar

62. Teulings, C. and Baldwin, R. (Editors) Secular Stagnation: Facts, Causes, and Cures, A VoxEU.org eBook, CEPR Press, 2014.Search in Google Scholar

63. Temin, Peter (2015). “The American Dual Economy: Race, Globalization, and the Politics of Exclusion”. The Institute for New Economic Thinking, Working Papers 26.10.2139/ssrn.2692634Search in Google Scholar

64. Thwaites, Gregory (2015). “Why are interest rates so low? Secular stagnation and relative price of investment goods.” Staff Working Papers No 561, Bank of England, November 2015, p. 73.10.2139/ssrn.2687998Search in Google Scholar

65. Varoufakis, Yanis (2015). Global Minotaur, Zed Books Ltd, p. 280.Search in Google Scholar

66. Williamson, Oliver (1985). The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting, Free Press, New York, 1985.Search in Google Scholar

Recommended articles from Trend MD

Plan your remote conference with Sciendo