A specter is haunting Europe: secular stagnation. The term, coined in 1938 by economist Alvin Hansen, was reactivated by Lawrence Summers, former Treasury Secretary of the United States. Felice Roberto Pizzuti used the term in the “Social Status Report 2017.” This is the 12th edition, published by Editrice La Sapienza University and presented Monday at the Faculty of Economics in Rome. It describes the consequences of the “second great recession” of 2007- 2008.
The return to growth, claimed by major global financial institutions and governments, has not seemed to produce significant progress in terms of wage increases and productivity, while employment growth is achieved through the proliferation of temporary work, which hides the anomaly of a “growth without fixed employment.”
“Secular stagnation” is a useful expression for describing the imbalance resulting from excess savings compared to the sharp decline in investment that pushes down the real interest rate.
Today, partly because of the “liquidity trap” generated by monetary easing policies (“Quantitative Easing”) undertaken by central banks (and by the European Central Bank in Europe) and the use of restrictive fiscal policy, demand is discouraged.