European Journal of Economics and Economic Policies: Intervention

Secular stagnation or stagnation policy? A post-Steindlian view*

Eckhard Hein *

Keywords: secular stagnation, stagnation policy, distribution and growth, Steindl

Abstract

The current debate on secular stagnation is suffering from some vagueness and several other shortcomings. The same is true for the economic policy implications. Therefore, I provide an alternative view on stagnation tendencies based on Josef Steindl's contributions. In particular Steindl's (1952) book can be viewed as a pioneering work in the area of stagnation in modern capitalism. I hold that this work is not prone to the problems detected in the current debate on secular stagnation: it does not rely on the dubious notion of an equilibrium real interest rate as the equilibrating force of saving and investment at full employment levels, in principle, with the adjustment process currently blocked by the unfeasibility of a very low or even negative equilibrium rate. On the contrary, Steindl's contribution is based on the notion that modern capitalist economies are facing aggregate demand constraints, and that saving adjusts to investment through changes in capacity utilisation and income growth in the long run. It allows for potential growth to become endogenous to actual demand-driven growth. And it seriously considers the role of institutions, power relationships and economic policies for long-run growth – and for stagnation.

Author Notes

Shortened and revised version of a paper presented at the 19th FMM conference in Berlin in October 2015. For a more extensive version see Hein (2016). I am grateful to Jan Priewe for helpful comments and to Luisa Bunescu for editing assistance. Remaining errors are mine, of course.

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