Will We Survive Slow Growth?

The lead package of the March/April 2016 issue of Foreign Affairs, available on ForeignAffairs.com tomorrow, deals with the slow-growth world. To complement the individual articles, we decided to ask a broad pool of experts for their take. As with previous surveys, we approached dozens of authorities with deep specialized expertise relevant to the question at hand, together with a few leading generalists in the field. Participants were asked to state whether they agreed or disagreed with a proposition and to rate their confidence level in their opinion; the answers from those who responded are below:

Most of the world’s major economies are facing a sustained period of slow-to-no economic growth—and there’s nothing that governments can do about it.

Results:

Full Responses:

JEREMY ADELMAN is Henry Charles Lea Professor of History and Director of the Global History Lab at Princeton University.    
Disagree, Confidence Level 7

TYSON BARKER served as Senior Advisor to the Assistant Secretary of State for European and Eurasian Affairs at the State Department in 2014 and 2015.
Strongly Disagree, Confidence Level 7         
I'm a Europe guy, so let me focus there. Europe in particular has the potential to unlock pockets of growth, innovation, and untapped productivity. It's easy to get caught on Europe's anemic demography rather than focus on structural reforms, venture capital culture and investment, and innovation incentives. Rather than slow growth, we're looking at a period of uneven growth. Look at the Irish and Spanish economies today. As The Economist said in January, it looks like “PIIGS can fly after all.”

In the BRICS countries and Turkey, there was bound to be a reckoning from the money swishing around as a result of quantitative easing. But never underestimate the power of the “catch-up” game. Believing that Brazil, for instance, will have .1 percent growth in perpetuity is foolish. Policymakers will respond (and are responding) to new realities. I have (some) faith.

DEREK C. M. VAN BEVER is Senior Lecturer of Business Administration at the Harvard Business School and Director of the school’s Forum for Growth and Innovation.
Strongly Disagree, Confidence Level 10       
It is easy to overstate government's role in stimulating long-term growth—tax and monetary policies have a weaker effect on innovation than is widely believed—but the impact of government funding of basic research and development is hard to overstate. And of course the type and level of government funding that have led to some of the great breakthroughs of the past century (packet-switched data, the Internet, the Apollo mission) are, sadly, a thing of the past.

To that end: It's amusing these days to hear Google talk about how they are attempting so-called moon shots in their basic research efforts. As one wag noted, anyone who thinks that Google is attempting anything like a moon shot wasn't involved in the Apollo program. The level of public and private sector cooperation, interfirm coordination, resource commitment, and ambition that resulted in Apollo and its many down-the-line commercial outcomes is notable today for its complete absence. Stimulating those kinds of “superplatform” innovations is a highly worthy role of government in stimulating growth.

ALAN S. BLINDER is Gordon S. Rentschler Memorial Professor of Economics and Public Affairs at Princeton University. He served as Vice Chair of the U.S. Federal Reserve from 1994 to 1996.
Disagree, Confidence Level 8
Slow growth from the demand side can, in many cases, be ameliorated. Slow growth from the supply side is much harder to manage, but not impossible.

ERIK BRYNJOLFSSON is the Schussel Family Professor at the MIT Sloan School of Management, Director of MIT’s Initiative on the Digital Economy, and a co-author of The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies.         
Strongly Disagree, Confidence Level 8         
I disagree with both parts of the question. Although we face demographic headwinds, such as an aging work force, most growth comes from technological progress, and recent developments in IT and biotech are very encouraging, even if some of them (for example, free digital goods and services, better health care) may not show up in our official GDP statistics. More important, there are a host of actions governments (and businesses and individuals) can take to increase growth. Those include reinventing education, boosting entrepreneurship, investing in research and infrastructure, reforming the tax code, and many other well-understood policies.

RICHARD N. COOPER is Maurits C. Boas Professor of International Economics at Harvard University.         
Strongly Disagree, Confidence Level 10       
The proper answer varies from country to country, but some countries, particularly but not only in western Europe, could do a lot to improve growth, using both fiscal and structural policies.

JEFF FAUX is the principal Founder of the Economic Policy Institute and was its first President, from 1986 to 2002.
Disagree, Confidence Level 8
Yes, slow growth is coming.
No, there are things governments could do.
No, governments will not do them.

JEFFREY FRANKEL is James W. Harpel Professor of Capital Formation and Growth at Harvard University's John F. Kennedy School of Government. 
Disagree, Confidence Level 6
It is very likely that we have entered a period in which the major economies grow more slowly than they did in the 1950s to 1990s (and in which the emerging market countries are slowing down, too). The slowdown is to some extent inevitable. But countries can still adopt better or worse policies, to help achieve better or worse economic performance.

CARLA A. HILLS is Co-Chair of the Council on Foreign Relations and Chair and CEO of Hills & Company. From 1989 to 1993, she served as U.S. Trade Representative.
Disagree, Confidence Level 10       
If the United States were to simplify its tax system and adopt a budget that began to deal with the longer-term projected deficit, it would stimulate small and medium-sized enterprises, which create a majority of jobs and contribute to growth. If China were to rely more on market forces and remove restrictions on foreign direct investment, particularly in services, it would generate growth and jobs. If the largest economies were to take steps to open their markets and begin to harmonize their regulations, it would unleash additional stimuli. These things probably won't happen, at least in the near term, and none constitutes a silver bullet. But it is wrong to say “There is nothing the governments can do” to deal with slow economic growth.

GARY CLYDE HUFBAUER is Reginald Jones Senior Fellow at the Peterson Institute for International Economics.    
Strongly Disagree, Confidence Level 10       
The world has trillions of dollars of unmet infrastructure needs. Meeting these needs would boost employment today and growth tomorrow. With interest rates at their lowest level in recorded history, financing new infrastructure should not be a problem. The problem is paralysis of government at all levels—city, state, country, and international institutions.

ROBERT N. KAPLAN is President and CEO of the Inter-American Foundation.
Agree, Confidence Level 8    
Of greater concern is that slow-growing economies provide fewer opportunities for the poor and excluded, and "trickle-down" dries up.

R. DANIEL KELEMEN is Professor of Political Science and Law and Jean Monnet Chair in European Union Politics at Rutgers University. 
Strongly Disagree, Confidence Level 8         
The answer to that question depends on how you choose to define “slow” growth, but the notion that there is nothing governments can do about their growth prospects is wrong in any case. It is true that some major economies, such as Brazil and Russia, are in bad shape and that there is a serious risk of a major downturn in the Chinese economy. But the United States continues to recover steadily, and after years of stagnation, the eurozone economies, as a whole, are growing again. In all these cases, there are always steps governments can take to boost growth—namely, making public investments and undertaking structural reforms designed to boost productivity.

ANNE O. KRUEGER is Senior Research Professor of International Economics at the School for Advanced International Studies, Johns Hopkins University.
Disagree, Confidence Level 8
Many governments are simply unwilling to undertake the necessary structural reforms. There is also a question as to the time horizon you have in mind: One year? Five years?

JAMES M. LINDSAY is Senior Vice President, Director of Studies, and Maurice R. Greenberg Chair at the Council on Foreign Relations.
Disagree, Confidence Level 10  

ROBERT LITAN is a Nonresident Senior Fellow at the Brookings Institution, Of Counsel to Korein Tillery, and the author of Trillion Dollar Economists: How Economists and Their Ideas Have Transformed Business.
Strongly Agree, Confidence Level 8  
Two things could rescue us from a slow-growth future: major entitlement-related budget reforms that would bring long-term deficits under control and a resurgence in entrepreneurship, especially among millennials moving into their mid- to late 30s, the prime age when successful entrepreneurs most frequently launch businesses.

ANDREW MCAFEE is Principal Research Scientist at the MIT Sloan School of Management and Co-Founder of MIT’s Initiative on the Digital Economy. He is a co-author of The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies.
Disagree, Confidence Level 7
I disagree because of the idea that there’s nothing governments can do. Governments that make wise infrastructure investments and adopt pro-innovation, pro-entrepreneurship, incumbent-neutral policies have an excellent chance of being rewarded with growth.

BRYAN CHIDUBEM MEZUE is a member of the Forum for Growth and Innovation, a Harvard Business School think tank developing and refining theory around disruptive innovation.
Strongly Disagree, Confidence Level 10       
There is one unconventional yet powerful path available. Governments should turn to their overlooked resources—the youth, the elderly, the low-skilled—and explore technologies and innovations that bring them into the economic fold.

ATHANASIOS ORPHANIDES is Professor of the Practice of Global Economics and Management at the MIT Sloan School of Management. From 2007 to 2012, he served as Governor of the Central Bank of Cyprus, and from 2008 to 2012, he was a member of the Governing Council of the European Central Bank.
Disagree, Confidence Level 10         
Government policies are important factors in encouraging innovation, entrepreneurship, and productivity improvements, which promote growth. In too many cases, government policies discourage investment and the growth process.

SUSAN C. SCHWAB served as U.S. Trade Representative from June 2006 to January 2009.
Agree, Confidence Level 7    
Depends on your definition of “slow” and “sustained period.” A four percent growth rate for China or India is considered “slow” but would be very nice for any major developed economy (United States, European Union). Commodity-dependent and export-dependent economies in particular face slow rates of growth for the next several years.

RUCHIR SHARMA is head of Emerging Markets and Global Macro at Morgan Stanley Investment Management and the author of the forthcoming book The Rise and Fall of Nations: Forces of Change in the Post-Crisis World. 
Agree, Confidence Level 8    

ROBERT J. SHILLER is Sterling Professor of Economics at Yale University.
Neutral, Confidence Level 6  
The theory of secular stagnation started with the recession of 1937, when people discovered that recovery from the Depression was not so clear. Of course, the same theory would reappear with the 2007 crisis and take new impetus from any sign of a recession now. I don't think there is any solid evidence for the theory, except that the world economy has been weak. I think that secular stagnation is a story that is worth studying in itself. To some extent, it could be a self-fulfilling prophecy.

NOAH SMITH is an Assistant Professor of Finance at Stony Brook University.
Neutral, Confidence Level 5  
The question is too strongly worded and too categorical. China will slow. Resource exporters will slow. But industrialized countries and countries such as India and Indonesia may or may not slow, and much may depend on policy.

MARK THOMA, macroeconomist and econometrician, is a Professor of Economics at the Department of Economics of the University of Oregon.   
Disagree, Confidence Level 8
I agree that many countries face the prospect of slow growth but disagree that governments are powerless to do anything about it.

MARTIN WOLF is Chief Economics Commentator for the Financial Times.
Disagree, Confidence Level 8
It depends, of course, on what one means by “slow” and by “nothing.”

My view is that growth is not going to be dramatically slow in most countries, at least by recent standards, and that governments can do something about it, even if not as much as one might like.