Markets, Productivity, and Happiness in a Historical Perspective

Secular Stagnation: Alvin Hansen hypothesis and today’s patterns of industrial transformation

Gualerzi Davide, Univerita' di Padova

Secular Stagnation: Alvin Hansen hypothesis and today’s patterns of industrial transformation Davide Gualerzi, University of Padova, Italy. The discussion of secular stagnation, prompted by Lawrence Summers comments at the 2013 IMF conference in honor of Stanley Fisher, has been muted by the economic emergency caused by the COVID 19 pandemics. The reemergence of what Backhouse and Boianovsky (2016) have called a “heresy” in macroeconomics marked a change of perspective on the 2008-2009 financial crisis. The problems underneath are soon to return to the fore once the health emergency is overcome, or at least tamed, further complicated by a changing geopolitical scenario. We make no attempt here to deal with the classical debate on stagnation tendencies going back to the contrast between Ricardo and Malthus over the possibility of “general gluts” and the various theories of under-consumption (Bleaney, 1976), nor we consider to the post-war contributions by Baran and Sweezy (1966), and Joseph Steindl (1952). We focus instead on the recent debate and the possibility that technology-driven industrial transformation, much against the dominant views, can contribute to a renewed tendency to long-term stagnation. Backhouse and Boianovsky point out that Alvin Hansen introduced the notion of secular stagnation in 1938. The term was frequently used until the 1950s combined with an important debate on the causes of stagnation. It then lost relevance with periodical returns of interest. It never completely disappeared and was back into the economic debate in 2012-2015. Summers does mention Hansen although with little elaboration on the original argument. Or rather, he does so redefining the problem within what has become known as the new secular stagnation hypothesis, with its emphasis on the rate of interest. Hansen secular stagnation hypothesis is based on the weakening of the motives of private investment and thus of strong investment-driven expansion. Hansen’s focus is on technical change and new industries. That resonates in face of the current patterns of industrial transformation. We need to look at the ongoing development of ICTs within the larger question of the structural lack of aggregate demand. The Internet has “developed” the market of higher-order needs such as access and interactivity in a unique way. But ICTs have increasingly become the enabling tool for a restructuring of the industries serving these needs. Precisely this pervasive transformation needs to be examined with respect to the renewal of stagnation tendencies. Note that this transformation is reinforced by the Covid-19 pandemics and is likely to reach new levels in the years to come.

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Keywords: Secular stagnation, Alvin Hansen, ICTs, industrial restructuring

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