A Post-Growth World?
05 February 2013
Although projections by the IMF and others have been persistently optimistic, each setback has been treated as a temporary deviation, associated with its own unique cause: the Greek bailout, the tragic tsunami in Japan, the spike in volatility following Standard & Poor’s downgrade of US debt, and so on. The return to 4.5% world growth has merely been pushed back – in the latest forecasts to 2015.
Faith in renewed growth is an ill-advised policy strategy. At its core, the global economic crisis is a growth crisis. Financial institutions and markets assumed productivity would continue to grow at the pace of the late 1990’s, which fostered an asset-price boom that conveyed an illusion of well-being; those not directly involved in the financial bubble were coopted through buoyant international trade. European growth, with its heavy dependence on trade, received a special boost, as did emerging markets.
Once the Great Recession began, this process operated in reverse, unwinding the excesses. But policymakers continued to benchmark recovery prospects to pre-crisis growth performance.
When reality proved otherwise, the return of the past was not abandoned, but merely postponed. Continuing to assume the resumption of pre-crisis growth was necessary to justify postponing hard decisions.