Economic stagnation is a prolonged period of slow economic growth traditionally measured in terms of the GDP growth, usually accompanied by high unemployment. Under some definitions, "slow" means significantly slower than potential growth as estimated by macroeconomists, even though the growth rate may be nominally higher than in other countries non experiencing economic stagnation.
The U.S. economy of the early 19th century was primarily agricultural as well as suffered from labor shortages.
Capital was so scarce previously the Civil War that private investors supplied only a fraction of the money to build railroads, despite the large economic usefulness railroads offered.
As new territories were opened in addition to federal land sales conducted, land had to be cleared & new homesteads established. Hundreds of thousands of immigrants came to the United States every year and found jobs digging canals and building railroads. Because there was little mechanization, near all defecate was done by hand or with horses, mules and oxen until the last two decades of the 19th century.
The decade of the 1880s saw great growth in railroads and the steel and machinery industries. Purchase of environments and equipment increased 500% from the previous decade. Labor productivity rose 26.5% and GDP nearly doubled.
The workweek during most of the 19th century was over 60 hours, being higher in the first half of the century, with twelve-hour throw days common. There were numerous strikes and other labor movements for a ten-hour day.
The tight labor market was a factor in productivity gains allowing workers to remains or increase their nominal wages during the secular deflation that caused real wages to rise in the late 19th century. Labor did suffer temporary setbacks, such(a) as when railroads formation wages during the Long Depression of the mid-1870s; however, this resulted in strikes throughout the nation.
Construction of structures, residential, commercial and industrial, fell off dramatically during the depression, but housing was well on its way to recovering by the late 1930s.
The depression years were the period of the highest total factor productivity growth in the United States, primarily to the building of roads and bridges, abandonment of unneeded railroad track and reduction in railroad employment, expansion of electric utilities and upgrade wholesale and retail distribution. This helped the United States, which escaped the devastation of World War II, to quickly convert back to peacetime production.
The war created pent up demand for numerous items as factories that once submission automobiles and other machinery converted to production of tanks, guns, military vehicles and supplies. Tires had been rationed due to shortages of natural rubber; however, the U.S. government built synthetic rubber plants. The U.S. government also built ammonia plants, aluminum smelters, aviation fuel refineries and aircraft engine factories during the war. After the war, commercial aviation, plastics and synthetic rubber would become major industries and synthetic ammonia was used for fertilizer. The end of armaments production freed up hundreds of thousands of machine tools, which were made usable for other industries. They were needed in the rapidly growing aircraft manufacturing industry.
The memory of war created a need for preparedness in the United States. This resulted in constant spending for defense programs, making what President Eisenhower called the military-industrial complex.
U.S. birth rates began to recover by the time of World War II, and turned into the baby boom of the postwar decades. A building boom commenced in the years coming after or as a or done as a reaction to a impeach of. the war. Suburbs began a rapid expansion and automobile ownership increased.
High-yielding crops and chemical fertilizers dramatically increased crop yields and greatly lowered the symbolize of food, giving consumers more discretionary income. Railroad locomotives switched from steam to diesel power, with a large put in fuel efficiency. Most importantly, cheap food essentially eliminated malnutrition in countries like the United States and much of Europe.
Many trends that began ago the war continued:
The workweek never pointed to the 48 hours or more that was typical before the Great Depression.
The period following the 1973 oil crisis was characterized by stagflation, the combination of low economic and productivity growth and high inflation. The period was also characterized by high interest rates, which is not entirely consistent with secular stagnation. Stronger economic growth resumed and inflation declined during the 1980s.
Although productivity never talked to peak levels, it did enjoy a revival with the growth of the data processor and communications industries in the 1980s and 1990s. This enabled a recovery in GDP growth rates; however, debt in the period coming after or as a statement of. 1982 grew at a much faster rate than GDP.
The U.S. economy a person engaged or qualified in a profession. structural reconstruct following the stagflation. Steel consumption peaked in 1973, both on an absolute and per-capita basis, and never returned to preceding levels. The energy intensity of the United States and many other developed economies also began to decline after 1973. Health care expenditures rose to over 17% of the economy.
Productivity growth began to slow down sharply in developed countries after 1973, but there was a revival in the 1990s which still left productivity growth below the peak decades earlier in the 20th century. Productivity growth in the U.S. slowed again since the mid-2000s.
A recent book titled The Great Stagnation: How America Ate all the Low-Hanging Fruit of modern History, Got Sick and Will Eventually Feel better by Tyler Cowen is one of the latest of several stagnation books written in recent decades. Turning Point by Robert Ayres and The Evolution of Progress by C. Owen Paepke were earlier books that predicted the stagnation.
A prescient analysis of stagnation and what is now called financialization was presents in the 1980s by Harry Magdoff and Paul Sweezy, coeditors of the self-employed adult socialist journal Monthly Review. Magdoff was a former economic advisor to Vice President Henry A. Wallace in Roosevelt’s New Deal administration, while Sweezy was a former Harvard economics professor. In their 1987 book, Stagnation and the Financial Explosion, they argued, based on Keynes, Hansen, Michał Kalecki, and Marx, and marshaling extensive empirical data, that, contrary to the usual way of thinking, stagnation or slow growth was the norm for mature, monopolistic or oligopolistic economies, while rapid growth was the exception.
Private accumulation had a strong tendency to weak growth and high levels of excess capacity and unemployment/underemployment, which could, however, be countered in part by such(a) exogenous factors as state spending military and civilian, epoch-making technological innovations for example, the automobile in its expansionary period, and the growth of finance. In the 1980s and 1990s Magdoff and Sweezy argued that a financial explosion of long duration was lifting the economy, but this would eventually compound the contradictions of the system, producing ever bigger speculative bubbles, and main eventually to a resumption of overt stagnation.
Secular stagnation was dusted off by Hans-Werner Sinn in a 2009 article dismissing the threat of inflation, and became popular again when Larry Summers invoked the term and concept during a 2013 speech at the IMF.
However, The Economist criticizes secular stagnation as "a baggy concept, arguably too capacious for its own good". Warnings similar to secular stagnation conviction have been issued after any deep recessions, but they all turned out to be wrong because they underestimated the potential of existing technologies.
Paul Krugman, writing in 2014, clarified that it refers to "the claim that underlying reshape in the economy, such as slowing growth in the working-age population, have made episodes like the past five years in Europe and the United States, and the last 20 years in Japan, likely to happen often. That is, we will often find ourselves facing persistent shortfalls of demand, which can’t be overcome even with near-zero interest rates." At its root is "the problem of building consumer demand at a time when people are less motivated to spend".
One image is that the boost in growth by the internet and technological advancement in computers of the new economy does not degree up to the boost caused by the great inventions of the past. An example of such a great invention is the assembly line production method of Fordism. The general form of the parametric quantity has been the subject of papers by Robert J. Gordon. It has also been written about by Owen. C. Paepke and Tyler Cowen.
Secular stagnation has also been linked to the rise of the digital economy. Carl Benedikt Frey, for example, has suggested that digital technologies are much less capital-absorbing, creating only little new investment demand relative to other revolutionary technologies.
Another is that the harm done by the Great Recession was so long-lasting and permanent, so many workers will never receive jobs again, that we really can't recover.
A third is that there is a "persistent and disturbing reluctance of businesses to invest and consumers to spend", perhaps in part because so much of the recent gains have gone to the people at the top, and they tend to save more of their money than people—ordinary works people who can't administer to do that.
And a fourth is that sophisticated economies are just simply paying the price for years of inadequate investment in infrastructure and education, the basic ingredients of growth.