Abstract
This paper analyzes the causes of the slow recovery of the US economy since the financial crisis and Great Recession of 2008-9. Fallen house values and excessive household debts continue to depress consumer spending, while corporations are failing to invest in spite of record profits. The increasingly unequal distribution of income limits demand, while long-term structural transformations continue to erode employment creation. An expansionary monetary policy has been incapable of sparking a more robust recovery and fiscal policy has been shifted to an austerity stance. In this context, Brazil and other emerging market nations cannot count on the United States to continue to be the leading source of global demand as it was in previous decades.
Highlights
This paper was originally presented at a conference focused on how Brazil could double its per capita income in 15 years
The United States (US) economy is suffering from two related problems of slow growth: first, a sluggish short-term recovery from the 2008-9 recession and the financial crisis that provoked it; and second, a secular growth slowdown that dates back to about 2000-1
These twin problems have emerged from a combination of the increasing inequality in the distribution of income, the collapse of a model of growth founded upon rising household debt, long-term structural changes in the composition of US industries, and an inadequate macro policy response including counterproductive fiscal austerity
Summary
This paper was originally presented at a conference focused on how Brazil could double its per capita income in 15 years. The US economy suffers from a number of underlying problems centered on a growing gap between real wages and labor productivity that has contributed to widening inequality, accompanied by long-term changes in the structure and composition of its industries that have broken the formerly strong linkage between output and employment These problems were temporarily overcome by a debt-financed boom in consumer spending and housing construction during the economic expansion of 2003-7. The fourth section analyzes the underlying causes of the growth slowdown in the US economy, including rising inequality in the distribution of income, the exhaustion of the debt-led model of household expenditures, and longterm structural changes in the composition of US industries. The concluding section discusses the lessons of the US case for economy theory and the implications of the analysis for the rest of the global economy, especially emerging market nations such as Brazil
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
