The Crown Capital Management Global Journalism International Relations Blog: Is economic stagnation the new normal?

The concept of "secular stagnation" — that the economy may be facing a protracted period of low growth and high unemployment — has been seeping back into economic and policy discourse. Once relegated to the margins of heterodox economic theory, the idea of stagnation as a likely ongoing direction for the economy, in fact, is now virtually mainstream, expounded by such well-known figures as Lawrence Summers and Paul Krugman.

Stagnation, however, is not a new problem. Careful examination of the U.S. economy over the last century suggests that stagnation may not be the exception but just possibly the rule of modern economic performance — a rule that was mainly broken only by the stimulus effects of massive military expenditures at three crucial junctures.

Major economic floundering in the first quarter of the 20th century was relieved by the boost World War I gave to the economy, and the tremendous economic collapse in the second quarter was ended by World War II's huge increase in military spending. In the third quarter, the Korean War, the Cold War and the Vietnam War added major stimulus at key times.

Moreover, several of the indirect consequences of World War II — including wartime savings, the compression of wages, the strengthening of unions, the GI Bill that educated millions of veterans, and the reconstruction of Europe, together with the fact that major competitors had been temporarily destroyed by war — all contributed to the third quarter's great economic boom.

The modern trend, despite Iraq, Afghanistan and other smaller-scale wars, is also clear. Defense expenditures declined decade by decade from a Korean War high of 13.8% of the economy in 1953 to 3.7% in the 2000s, with steadily reduced economic impact. The financial bubbles in the late 1980s, 1990s and early 2000s produced only partial and highly unstable upswings that masked the underlying decline.

The notion that stagnation is far more important than is commonly understood has been bolstered by Thomas Piketty's landmark book "Capital in the Twenty-First Century," which also emphasizes just how unusual the era of the Depression and two world wars was. Piketty's analysis suggests that the high growth rates of the post-World War II period were, by and large, an aberration. "Many people think that growth ought to be at least 3 or 4 percent a year," he wrote. "Both history and logic show this to be illusory."

Viewed in this light, the latest long-range projections from the Organization for Economic Cooperation and Development, the Paris-based intergovernmental group for advanced economies, make for sobering reading. In a new report, "Policy Challenges for the Next 50 Years," the OECD warns that economic growth in the world's advanced industrial economies — including Europe, North America and Japan — will likely slow even further from historic levels over the next half-century, while inequality will rocket to new heights and climate change will take an increasingly damaging toll on world GDP.

According to the projections, the OECD member nations' annual average contribution to global GDP growth will steadily fall from 1.19% this decade to 0.54% between 2050 and 2060. Meanwhile, inequality in these countries may rise as much as 30% or more.

The OECD projections are, if anything, optimistic, since they assume that Europe and the United States each will absorb in the neighborhood of 50 million new immigrants over this period — an assumption that may run contrary to the restrictive politics of immigration playing out on both sides of the Atlantic.

The economic remedy for stagnation is relatively straightforward — in theory: Faltering demand could be offset by large-scale government spending on infrastructure, education and other much-needed investments. In practice, however, it is painfully clear that large-scale Keynesian policies of this kind are no longer politically viable.

The implications of the emerging possibility of a sustained period of stagnation are profound. Through the repeated economic downturns of recent U.S. history — 11 since 1945 alone — the expectation of eventual sustained recovery has been the critical assumption underpinning both politics and policy. An era of stagnation would undermine the economic basis of traditional political hope of both left and right. It would mean ongoing high unemployment, ongoing deficits, ongoing struggles to fund public programs and, in all probability, ongoing and intensified political deadlock and wrangling as unemployment continues, deficits increase and a profound battle over narrowing economic possibilities sets in.

If stagnation is the new normal, we will likely be forced to reassess the fundamental assumptions of politics and the economy and to ultimately get serious about restructuring our faltering economic system in more far-reaching ways than most Americans have contemplated.

The Crown Capital Management Global Journalism International Relations Blog - A Strong Economy Depends On Climate Action

Forty years ago, scientists at the University of California uncovered a global threat. From deodorants to refrigerators, chemicals in our everyday lives were destroying our ozone layer — Earth’s natural shield against the sun’s cancer-causing radiation.

Our fight to save the ozone layer became a defining moment in American leadership. It was American science that uncovered the problem and American industry that innovated the solution. And now the ozone layer is healing. Our people are safer, and our economy is stronger.

Today, we face the threat of global climate change. The pollution and the problem might be different, but the principle is the same. Once again, the world needs the United States to lead. That’s why last year, President Obama laid out a Climate Action Plan to cut the carbon pollution fueling climate change, build a more resilient nation and lead the global climate fight. And he’s at the United Nations Climate Summit in New York this week to reinforce that commitment.

I’m proud to join the president in delivering a clear message: A world-leading economy depends on a healthy environment and a safe climate. We don’t act despite the economy; we act because of it.

We’ve made tremendous progress this year — from deploying record levels of clean energy, to partnering with the private sector to advance low-carbon technologies. And this past June, the Environmental Protection Agency proposed a Clean Power Plan to cut carbon pollution from our largest source, power plants.

Climate change supercharges risks to our health and economy, and it’s taxpayers and businesses that pay the price. Fortunately, we can turn our climate challenge into an opportunity to modernize our power sector, lay the foundation for a low-carbon economy, and fuel growth for decades to come. The EPA’s historic fuel efficiency standards for cars and trucks are a perfect example of what’s possible. They’re cutting carbon pollution, saving families money at the pump, and fueling a resurgent auto industry that’s added more than 250,000 jobs since 2009. The number of cars coming off American assembly lines made by American workers just reached its highest level in 12 years.

That same story of energy progress is being written across America. Since President Obama took office, the U.S. uses three times more wind power and 10 times more solar power,  which means thousands of jobs. The EPA’s Clean Power Plan follows that trend. We need thousands more American workers in construction, transmission, engineering and more to make cleaner power a reality.

Since our proposal lets states choose the low-carbon path that makes sense for them, we’re sending a powerful signal to the market that pulls investment capital off the shelf and into our clean energy economy. We’ve already received great feedback on our proposal, with more than 750,000 comments from health groups, industry groups, faith groups, parents and more. We want every good idea we can get, so we extended the public comment period through Dec. 1.

Our plan pushes progress already underway in companies, city halls and state capitals nationwide. A new report from the Carbon Disclosure Project shows that major companies like Delta, Google and Disney tack on an internal carbon price to their business decisions, because investors see the cost of carbon pollution and the value of cutting it.

It’s true that climate change needs a global solution. We can’t act for other nations, but when the United States of America leads, other nations follow. We set the pace. We invest, build and sell solutions that other nations need.

Action to reduce pollution doesn’t dull our competitive edge — it sharpens it. Years ago, American chemical companies like DuPont and Honeywell innovated safer chemicals to replace the ones destroying the ozone layer and sold those solutions to the rest of the world. Over the last four decades, the EPA has cut air pollution by 70 percent, while the U.S. economy has tripled in size.

The economy has never been a reason to fear action — it’s a reason to take it. A new study by the New Climate Economy Project finds that cutting carbon pollution could actually mean faster economic growth. Another recent study shows  even states that are still skeptical, like Arkansas, Louisiana, Oklahoma and Texas, would actually see an annual net economic benefit of up to about $16 billion dollars.

American leadership shines brightly because we don’t sacrifice our values to move forward. We don’t bend to the false warnings of those who lack faith in American ingenuity. Today, we have more cars, more people, more jobs, more businesses and less pollution. That’s how we define progress.

When we act on climate, we seize an opportunity to retool and resurge with new technologies, new industries and new jobs. We owe it to our kids not just to act, but to lead. When we do, we’ll leave them a cleaner, safer and opportunity-rich world for generations to come.

The Crown Capital Management Global Journalism International Relations Blog: Preparing to Lead in the Digital Economy

Op-ed: The New Polytechnic: Preparing to Lead in the Digital Economy

Think about what is going on right now, all around you. There are satellites above us collecting data on air movements, sensors below us collecting data on ground movements, and cameras all around us collecting data on our movements. Medical devices are measuring heartbeats, and communication devices are receiving and sending tweets, emails, text messages, and GPS signals.

Data is being generated by each of us, about each of us, and collected all around each of us. It is the new natural resource of the 21st century. As with all valuable resources, it is important how we generate it, how we mine it, how we manage it, how we preserve it, and how we connect it.

This extraordinarily rapid expansion in the creation, availability, and interconnectivity of data from multiple sources, and the ever more powerful analytical and computational capacity that is generating new information from this deluge of data, is causing a significant transformation globally in the way we make discoveries, make decisions, make products, make connections and, ultimately, make progress. It is altering all aspects of curriculum and research at universities such as Rensselaer Polytechnic Institute.

The ability to aggregate, integrate, validate, structure, and fully use the burgeoning mass of information available will define success in this data-driven future – including for universities.

A new way of working and learning is required – what I have called the “New Polytechnic” – collaborating across disciplines and sectors and regions to harness the power of these tools and technologies to address the key intersecting challenges and opportunities of our time: in energy security, health, food, water, and national security, as well as the linked challenges of climate change and allocation of scarce resources so critical to our future.

In the “New Polytechnic,” universities must collaborate more effectively with businesses and governments to link the capabilities of advanced information technologies, communications, and networking – to the life sciences, and the physical, materials, environmental, social, cognitive, and computational sciences.

We also must prepare the next generation to succeed and lead in this new world. Students need to acquire new skills for this digitally interconnected environment, including the ability to “translate” between and among disciplines and sectors. They must learn to operate effectively and ethically in virtual communities, immersive environments, and in blended worlds.

At Rensselaer Polytechnic Institute, we are transforming ourselves to develop and use these new tools and technologies so that our faculty and students can apply them to answer the great global challenges.

We are incorporating data literacy across the curriculum, and throughout our research. We are using digitally created immersive environments and multiplayer games, and artificially intelligent characters to teach and to learn.

We launched The Rensselaer Institute for Data Exploration and Applications – or The Rensselaer IDEA – bringing together talents and strengths in web science, high-performance computing, cognitive computing, data science and predictive analytics, and immersive technologies – and linking them to applications at the interface of engineering and the physical, life, and social sciences.

In addition, we now have the most powerful university-based supercomputer at a private American academic institution; IBM’s Watson computer has enrolled at Rensselaer to expand its cognitive computing skills; a Rensselaer professor is leading the U.S. in a global effort – the Research Data Alliance – to enable scientists to access, combine, and preserve research data; and we have partnered with Mount Sinai’s Icahn School of Medicine to push the boundaries of data-driven health research.

Interlinking all of these components and more, we are taking an interdisciplinary approach that will impact research and teaching in powerful new ways. We are educating our students – the next generation of discoverers, innovators, and entrepreneurs – to make a difference in this context. We are modeling the future.

The great universities of the 21st century will remain the physical crossroads where creative people interact across the disciplines and great ideas emerge from these connections. However, in this new digital era, the interconnections will be more global, the pace more rapid, the scale more complex, and the opportunities to change the world more immediate.