Robert J. Samuelson: Economics lacks the vocabulary to explains what is happening
In a recent lecture, former Treasury Secretary Lawrence Summers evoked secular stagnation — a "chronic and systemic" economic sluggishness, he said. Krugman, Martin Wolf, the Financial Times' chief economic commentator, and others also embrace the theme. There is an "investment dearth," Wolf recently wrote. Low interest rates suggest that there are "more savings searching for productive investments than there [are] productive investments."
Why? Unlike Hansen, today's stagnationists haven't identified causes. The problem might not be a dearth of investments so much as a surplus of risk aversion. For that, candidates abound: the traumatic impact of the Great Recession on confidence; a backlash against globalization, reducing cross-border investments by multinational firms; uncertain government policies; aging societies burdened by diminishing innovation and costly welfare states.
Whatever the cause, we are in unfamiliar territory. Some years ago, I coined the clunky phrase "affluent deprivation" to describe our condition. By any historical measure, we are — and will remain — a rich society. Hence, the affluence. But we may feel poorer, "deprived," because the economy no longer satisfies broad private and public wants, including an expectation of economic stability.
Getting the right words to match reality is hard. Secular stagnation is a warning. In the 1930s, it seemed a plausible theory backed by ample evidence. After World War II, it was destroyed by events: a population explosion (the "baby boom"), a new frontier (suburbia), and new technologies (television, jet travel, computers). There was no stagnation. Just the opposite.
Robert J. Samuelson is a Washington Post columnist.