The global recovery from the Great Recession of 2009 has just entered its eighth year and shows few signs of fading. That should be cause for celebration. But this recovery has been an underwhelming one. Throughout this period, the global economy has grown at an average annual pace of just 2.5 percent—a record low when compared with economic rebounds that took place in the decades after World War II. Rather than rejoicing, then, many experts are now anxiously searching for a way to push the world economy out of its low-growth trap. Some economists and investors have placed their hopes on populists such as U.S. President Donald Trump, figuring that if they can make their countries’ economies grow quickly again, the rest of the world might follow along.
Given how long the global economy has been in the doldrums, however, it’s worth asking whether the forces slowing growth are merely temporary. Although economists and business leaders complain that a 2.5 percent global growth rate is painfully slow, prior to the 1800s, the world’s economy never grew that fast for long; in fact, it never topped one percent for a sustained period. Even after the Industrial Revolution began in the late eighteenth century, the average global growth rate rarely exceeded 2.5 percent. It was only with the massive baby boom following World War II that the global economy grew at an average pace close to four percent for several decades. That period was an anomaly, however—and should be recognized as such.
The causes of the current slowdown can be summed up as the Three Ds: depopulation, deleveraging, and deglobalization. Between the end of World War II and the financial crisis of 2008, the global economy was supercharged by explosive population growth, a debt boom that fueled investment and boosted productivity, and an astonishing increase in cross-border flows of goods, money, and people. Today, all three trends have begun to sharply decelerate: families are having fewer children than they did in the and countries are engaging in less cross-border trade.
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