Why ‘secular stagnation’ matters

By EBRD  Press Office

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Why ‘secular stagnation’ matters

New episode of the EBRD podcast available for download

The latest episode of the Pocket Economics podcast looks at the concept of secular stagnation,  the condition of low or no growth in a market economy.

The term was first coined at the end of the Great Depression in the 1930s. However, more recently we have heard new warnings that secular stagnation threatens the world economy.

But what exactly is secular stagnation and what causes it? Our guest Sergei Guriev, the EBRD’s Chief Economist, argues that “it is one of the major issues global economies are facing today.”

There are three different explanations of the phenomenon: one that secular stagnation is caused by problems on the demand side, a second by problems on the supply side and a third suggests that we just do not know how to measure secular stagnation, Mr Guriev tells Jonathan Charles, EBRD Managing Director, Communications.

“Since the financial crisis of 2008, we’ve seen advanced economies growing slower than expected,” he says.

Discussion of secular stagnation generally focuses on advanced economies but emerging markets and some of Western Europe’s close trade partners also suffer from it.

The lack of growth and competition is a big issue for modern economies, Mr Guriev says. Multilateral institutions, such as the EBRD, can play a crucial role in overcoming secular stagnation, by “investing in the private sector and in long-term productivity, such as in infrastructure projects.”

He also stresses the importance of inclusion. In an inclusive society, where “wealth is not only concentrated in a few people and the middle class is powerful and happy to consume, you have much more demand for new goods and services.”

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