Should We Fear Secular Stagnation?

How can we avoid falling into the trap of weak growth? Such is the subject of the secular stagnation assumption, which describes the forces that stunted growth in industrial economies following the Great Contraction. These forces created a situation resembling the one outlined by classic economists in the 19^th century: slowing productivity gains and demographic transitions that reduce growth potential; rising inequality, people increasingly savings, and sluggish investment explaining the continued output gap and persistent mass unemployment and/or job insecurity; inefficient and unconventional monetary policies and doubts regarding the sustainability of public debt despite historically low real interest rates; financial instability risks and difficulties in post-crisis deleveraging at a time of very low inflation and easy access to liquidity.

The issue of secular stagnation is also about identifying ways out of the trap in terms of global supply and demand:

• How do we ensure the most effective integration of the digital revolution into production systems and business networks?
• What form would a public investment shock take and what effects would it have (R&D, infrastructures, green technologies, training, etc.)?
• Would it be appropriate to raise inflation targets and reinstate countercyclical fiscal policies?
• Which structural reforms would help generate new activity while protecting those who lose out from globalisation and transitions already underway?