The End of Normal

The years after the Great Crisis of 2008 have brought slow growth, high unemployment, falling home values, chronic deficits and a worsening disaster in Europe. Public argument has settled into a contest between two camps, austerity and stimulus, which James K. Galbraith treats as false solutions.

His target is a shared assumption. Most analysts take the growth of the early 1950s through 2000, broken only by the troubled 1970s, as the normal state of an economy. On that view the crisis is an interruption caused by bad policy or bad people, and fixing the cause brings full recovery.

Galbraith rejects this reading. In his account, easy growth was already over by the 1970s. The two decades after that delivered uneven growth and rising inequality within and between countries. In the 2000s even that faded, despite tax cuts, war spending and financial deregulation meant to keep the economy moving.

Stimulus and automatic stabilization put a floor under the collapse, but he holds that they cannot restore high growth and full employment. Four factors stand in the way: costlier real resources, the futility of military power, the labor-saving effects of digital technology, and the breakdown of law and ethics in finance.

The book is an argument in economic analysis, and it ends on a practical question: what modest policies and institutions can protect a good life when instability is the new normal.