The crisis, long term depression and new markets

Abstract

This paper argues that it remains unclear whether sufficient new markets can develop to restore vigorous growth to the advanced economies. Using the example of the USA, it reviews how bubbles sustained growth prior to 2007. It then considers the likelihood of new sources of growth emerging as a longer term solution to the current crisis, dependent on the transformation of ICTs, the green economy, bio-tech and healthcare. It offers a skeptical assessment of each of these possibilities and suggests that in addition to Keynesian explanations of fluctuations which focus on the way that allowing 'animal spirits' of investors creates instability research is also needed on whether private markets have the capacity to sustain longer development without a substantial process of restructuring and government intervention.