Secular stagnation or stagnation policy? Steindl after Summers

Eckhard Hein

PSL Quarterly Review, 2016, vol. 69, issue 276, 3-47

Abstract: The current debate on secular stagnation is suffering from some vagueness and several shortcomings. The same is true for the economic policy implications. Therefore, we provide an alternative view on stagnation tendencies based on Josef Steindl’s contributions. In particular Steindl’s (1952) book can be viewed as a pioneering work in the area of stagnation in modern capitalism. We hold that this work is not prone to the problems detected in the current debate on secular stagnation: It does not rely on the dubious notion of an equilibrium real interest rate as the equilibrating force of saving and investment at full employment levels, in principle, with the adjustment process currently blocked by the unfeasibility of a very low or even negative equilibrium rate. On the contrary, it is based on the notion that modern capitalist economies are facing aggregate demand constraints, and that saving adjusts to investment through income growth and changes in capacity utilisation in the long run. It allows for potential growth to become endogenous to actual demand driven growth. And it seriously considers the role of institutions and power relationships for long-run growth – and for stagnation.

Keywords: secular stagnation; stagnation policy; distribution and growth; Steindl (search for similar items in EconPapers)
JEL-codes: B22 E11 E12 E65 O11 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (47)

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Working Paper: Secular Stagnation or Stagnation Policy? Steindl after Summers (2015)
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