These confounding circumstances have led many economists to rally behind the concept of so-called “secular stagnation.” As a diagnosis, secular stagnation is simple: It’s the idea that the economic problems the U.S. continues to face aren’t a product of the “business cycle,” the ebb and flow of boom times and recession (hence the “secular” part), but may well be permanent drags on the modern economy. “It’s a kind of long term and sustained slow-down in economic growth,” says Larry Summers, who served as Bill Clinton’s treasury secretary and is widely credited with dusting off the concept of secular stagnation and bringing it into the mainstream.
The phrase was originally coined in a 1938 address by economist Alvin Hansen to the American Economic Association. Grappling with the sluggish recovery that followed the Great Depression, Hansen predicted that slower population growth and a lower speed of technological progress would combine to thwart full employment, wage increases, and general economic expansion. In both cases, Hansen’s reasoning was the same: without new people entering the work force and new inventions coming onto the market, there would be less investment in new goods, employees and services. Without investment, fewer businesses would open or expand, growth would slow, and more workers would be unable to find jobs.
Hansen painted an eerily familiar picture: “This is the essence of secular stagnation,” he explained, “sick recoveries which die in their infancy and depressions which feed on themselves and leave a hard and seemingly immovable core of unemployment.” He could have been describing 1938 or 2016.