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Palley, Thomas I.
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IMK Policy Brief No. Oktober 2008
The Bush - Cheney years have been marked by extremely poor economic performance, reflected in a business cycle expansion that is by many measures the weakest since World War II. Moreover, not only has the expansion been weak, it also looks to be ending with a severe financial crisis and the possibility of a prolonged economic slump. Putting a bottom to the slump will be the next president's most immediate task. That task will not be easy. However, there is a deeper question about how to restore sustainable growth that generates shared prosperity. That question implicitly asks whether the Bush administration's economic failure was due to specific policy failures, or whether it was due to exhaustion of the economic growth paradigm that has framed policy over the last 30 years? The paper argues that the economic paradigm that has shaped economic policy for the past thirty years is flawed and exhausted. It has never been able to produce growth with shared prosperity, and now its capacity to produce growth with inequality is also exhausted. However, political resistance to changing the paradigm may still be too strong, and intellectual awareness of alternative possibilities not sufficiently developed. The implication is the U.S. could face an extended period of economic stagnation and political discontent.
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Research Report

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