Productivity Growth, Investment, and Secular Stagnation

In many advanced economies, the economic recovery from the financial crisis has been sluggish. In light of these developments, it has been argued by various economists that economic growth per capita has already been on a downward trend since the 1980s. Studies suggest that this is largely due to low productivity growth. While factors of production such as labor and capital are being used more productively than ever, growth has been slow in the past years by historical standards. In parallel to this low productivity growth, corporate investment in many countries has been subdued, especially since the financial crisis. In light of recent developments, low growth rates for gross domestic product, investment, and productivity are often predicted for the years ahead. This has prompted some economists to speak of a possible period of secular—i.e., long-lasting—stagnation. A detailed discussion has emerged among scientists and policy advisors about the possible causes of weak economic growth and the appropriate policy measures to prevent secular stagnation from happening. Better incentives for higher private investment, increased public investment, and promoting education are often mentioned as suitable policy measures to stimulate economic growth.