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Economic Stagnation Postponed

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  • Geert Reuten

Abstract

The significant increase since the early 1980s in the share of income accruing to capital (rather than labor), in both the United States and the European Union, created the potential for economic stagnation. Stagnation was postponed, however, by the development of the banking sector in these countries, notably in the increasing amounts of credit granted to wage earners. To the extent that such lending will be curtailed in the aftermath of the recent financial-economic crisis, stagnation looms. Within the confines of capitalism, this dilemma can be overcome only by making a significant shift in the macroeconomic pattern of income distribution to realign consumption with income. While particular banks and banking policies are usually blamed for the crisis and indeed played an important role, the roots of the crisis are located at a deeper level. The implication is that the economic problems we face will be much more difficult to overcome than the usual analyses suggest.

Suggested Citation

  • Geert Reuten, 2011. "Economic Stagnation Postponed," International Journal of Political Economy, Taylor & Francis Journals, vol. 40(3), pages 50-58.
    • Handle: RePEc:mes:ijpoec:v:40:y:2011:i:3:p:50-58
    DOI: 10.2753/IJP0891-1916400304
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