When economists and analysts discuss the state of U.S. economic growth, they often use the 2008 financial crisis as the benchmark of what would be a return to "normal." James Galbraith, economist and author of, “The End of Normal,” uses a different standard.
While Galbraith agrees that the years since the crisis have seen slower growth, low employment and a struggling housing market, he believes easy growth actually ended in the 1970s, and the U.S. economy has seen uneven growth and rising inequality since.
There is, however, a way to get back to “normal,” says Galbraith. In his book he lays out what he believes to be the four factors that are impeding the economy. Amongst them are the rising costs of resources, overuse of military power, the digital revolution (and the job loss associated with automation) and the lack of regulation in the financial sector.
Given all of these factors, says Galbraith, we shouldn’t be wondering why the economy isn’t recovering quickly, but should instead be asking why things haven’t gotten worse.
“There are two major factors,” he says. “One of them is the relatively low cost of natural gas, which is the result of the fracking boom… and the other is the strength of the institutions that we created in the 20th century that held up purchasing power as well as they did.” Galbraith points to social security, Medicare, Medicaid, unemployment insurance and deposit insurance as examples. “That fabric was under a lot of pressure, but it basically held and it prevented a great part of the population from going over into the abyss,” he says.
An economic fix?
Galbraith believes that the past years have served to underscore the importance of the social programs that the U.S. has. He also believes that we need to preserve and strengthen them going forward.
“When you’re in a situation where the baseline is for less growth, you can’t rely on growth to protect people in the bottom half of society; you have to rely on your capacity to do that by other means,” he says.
A major reason Galbraith wrote his book, he says, is that “we should not have a debate on false premises about the conditions that we’re in or on the basis of false objectives.” The idea that the budget of the federal government should be approaching balance, he says, is one of these false ideas.
“The reality is, it’s not going to happen; it can’t happen and it wouldn’t be a good thing if it did happen,” he says. “We need to rethink these things in light of the circumstances that we actually live in.”