Secular stagnation and progressive economic policy alternatives

By Özlem Onaran

PKES Working Paper 1609

May 2016

This paper summarizes two main findings in the Post-Keynesian literature regarding the linkages between financialization, income distribution, accumulation and productivity. Firstly, at the core of secular stagnation lies the missing link between profits and investment. Secondly, rising inequality and financialization have been the main reasons for this missing link and hence the major brakes against capital accumulation and growth. The paper concludes with alternative progressive policies based on a coordinated policy mix of equality-led development and public investment.

Keywords: wage share, inequality, wage-led growth, financialization, secular stagnation, public investment

JEL classification: E12 E22 E25