Beyond the Business Cycle: The Need for a Technology-Based Growth Strategy
Gregory C. Tassey
Facing the worst economic slowdown since the Great Depression, efforts to reestablish acceptable growth rates for the U.S. economy are relying almost entirely on short-term stabilization policies. However, the massive monetary and fiscal stimulus applied since 2008 has had only a modest impact on economic growth. In the presence of a structurally sound economy, such policies are designed to expand demand and thereby, through the multiplier effect, provide incentives for investment that can drive sustainable positive rates of growth. However, these macrostabilization policies can do relatively little to overcome accumulated underinvestment in economic assets that create the needed larger multipliers. This underinvestment has led to declining U.S. competitiveness in global markets and subsequent slower rates of growtha pattern that was underway well before the Great Recession. The prolonged current slowdown is a manifestation of these structural problems. Yet, they are barely discussed. Thirty-five years of U.S. trade deficits for manufactured products can neither be explained by business cycles, currency shifts, or trade barriers, nor by alleged suboptimal use of monetary and short-term fiscal policies. High rates of productivity growth are the policy solution, which can be accomplished only over time from sustained investment in intellectual, physical, human, organizational, and technical infrastructure capital. Implementing this imperative requires a public-private asset growth model emphasizing investment in technology. The correct growth model actually involves a fiscal policy, but it is both long-term and an integral part of a national bottoms up growth strategy. This approach is distinctly different from the Keynesian and neoclassical philosophies that are not capable of dealing with the underinvestment trends currently compromising the U.S. competitive position in global markets.