## What to Do about Growth

_IMF Blog, February 28, 2017_

## Source details

**Canonical URL:** [What to Do about Growth](https://www.imf.org/en/blogs/articles/2017/02/28/what-to-do-about-growth)

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## Bibliographic details
- Published: February 28, 2017

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### Overview and context
- Publication date: February 28, 2017
- Central concern: Deep unease about rising inequality and stagnating living standards in advanced economies following the global financial crisis of 2008.
- Political consequence: The 2016 political upheaval reflected these economic anxieties, with rising populism and a return to nationalist, inward-looking policies that threaten the postwar economic order.
- Key framing question: Should advanced economies resign themselves to secular stagnation or can the right policies revive productivity and lasting economic growth?

### Causes of slow productivity and growth
- Declining productivity growth identified as the main reason for slow growth and falling incomes; evidence of this decline existed before the 2008 crisis (Nicholas Crafts, University of Warwick).
- IMF economists Gustavo Adler and Romain Duval identify roots of slower productivity in the global financial crisis: tight credit undermined firms’ productivity and the economy’s ability to redirect capital.
- Demographics: Ronald Lee (University of California, Berkeley) and Andrew Mason (University of Hawaii, Manoa) argue that:
  - Slower population growth will almost certainly mean slower national income and GDP growth.
  - The effect on individuals (per capita income and consumption) will depend on economic policies.

### Measurement and perspectives
- Measurement issue: Diane Coyle (University of Manchester) discusses pros and cons of using GDP to measure economic welfare—implying the importance of measuring the right outcomes before prescribing policy.

### Global heterogeneity and implications
- Two-thirds of the world’s population live in developing and emerging market economies, where:
  - Younger populations and still-vibrant productivity are driving higher economic growth at home and in the global economy.
- Policy implication: Advanced economies face different structural challenges than many developing and emerging market economies.

### Policy considerations and warnings
- Trade: Global trade has been a leading force behind productivity growth; barriers against trade would hurt all economies, large and small.
- Policy approach recommended:
  - Avoid overreaching or simplistic answers.
  - Probe each economy’s specific challenges and design policies accordingly.
- Political economy: Policy choices must address redistribution and fairness concerns without shutting down trade—the challenge is to calm public fears while preserving growth-enabling openness.
- Call to action: Berkeley economist Bradford DeLong argues, “Only if we do something about it, is it likely that in nine years we will no longer be talking about secular stagnation.”

### Institutional note
- About IMFBlog:
  - IMFBlog is a forum for views of IMF staff and officials on pressing economic and policy issues.
  - The IMF is an organization of 191 countries, based in Washington D.C., working to foster global monetary cooperation and financial stability.
  - Views expressed are those of the author(s) and do not necessarily represent the views of the IMF and its Executive Board.

*Source: What to Do about Growth, February 28, 2017.*

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## References

- [declining productivity growth](http://www.imf.org/external/pubs/ft/fandd/2017/03/crafts.htm)
- [F&D](http://www.imf.org/external/pubs/ft/fandd/2017/03/index.htm)
- [roots in the global financial crisis](http://www.imf.org/external/pubs/ft/fandd/2017/03/adler.htm)
- [slower population growth](http://www.imf.org/external/pubs/ft/fandd/2017/03/lee.htm)
- [pros and cons of GDP to measure economic welfare](http://www.imf.org/external/pubs/ft/fandd/2017/03/coyle.htm)
- [developing and emerging market economies](http://www.imf.org/external/pubs/ft/fandd/2017/03/straight.htm)
- [secular stagnation](http://www.imf.org/external/pubs/ft/fandd/2017/03/points.htm)

_Source: https://www.imf.org/en/blogs/articles/2017/02/28/what-to-do-about-growth_