'Bold Reform is the Only Answer to Secular Stagnation'

Larry Summers:

Bold reform is the only answer to secular stagnation, by Lawrence H. Summers: The economy continues to operate way below any estimate of its potential made before the onset of financial crisis in 2007, with a shortfall of gross domestic product relative to previous trend in excess of $1.5tn, or $20,000 per family of four. As disturbing, the average growth rate of the economy of less than 2 per cent since that time has caused output to fall ... further below previous estimates of its potential.

Almost a year ago I invoked the concept of secular stagnation... Secular stagnation in my version ... has emphasised the difficulty of maintaining sufficient demand to permit normal levels of output. ...

To achieve growth of even 2 per cent over the next decade, active support for demand will be necessary but not sufficient. Structural reform is essential to increase the productivity of both workers and capital, and to increase growth in the number of people able and willing to work productively. Infrastructure investment, immigration reform, policies to promote family-friendly work, support for exploitation of energy resources, and business tax reform become ever more important policy imperatives.