Secular Stagnation and Wealth Inequality: Antecedents and Lessons

About 10 years ago, the big topics that had economists all atwitter included the “secular stagnation” hypothesis put forward by Lawrence Summers and the rising-inequality hypothesis put forward by Thomas Piketty. Put the two theories together, and you have forecasts for a slow-growth, high-inequality future. The Review of Political Economy (38:3) has put together an eight-paper symposium on the topic: “What Have We Learned from Summers and Piketty Ten Years On?” There’s lots of thought-provoking stuff here, but I found myself especially drawn to an article by Steven Pressman, “Secular Stagnation After Piketty and Keynes” (pp. 961-979). Pressman points out that the themes of secular stagnation and wealth inequality have been linked for a long time. The basic idea is that the wealthy have a lot of money that is being saved, rather than spent, and this lack of spending makes the economy grow more slowly. Phrased this way, there is an obvious two-birds-with-one-stone policy choice to fix…