The aim of this blog is to help readers understand what is happening in the economy, why it is happening, and what might be done about it.
The US economy has gone through a series of crises in recent decades. The collapse in 2008 was the sharpest downturn since the Great Depression – until the collapse in 2020 when hasty and desperate lockdowns were required following months of then President Trump asserting “we have it totally under control” (in January), and “One day – it’s like a miracle – it will disappear” (in February).
It is not yet clear how much structural damage has been done to the economy due to the collapse in 2020, but it is likely to have been significant. And it will be important not to repeat the mistakes that followed after the 2008/09 recession. Obama was able to get Congress to approve the initial stimulus package in early 2009, and this coupled with aggressive Fed actions succeeded in ending the freefall, stabilize the situation, and then start a recovery. But the new Congress elected in 2010, with a Republican majority, then forced through austerity measures. For the first time since the 1930s, government spending was cut back even while unemployment was still high. The result was a slow pace of recovery, with unemployment not falling below 5% until 2016.
It will be important not to repeat this error in the coming years. And there are numerous other economic challenges as well, including from climate change, stagnant wages and associated income inequality, soaring health care costs, a slow pace of productivity growth, and more. But despite the importance of these and other economic challenges, the public discourse has been particularly disappointing and disturbing.
This blog will seek to contribute to an understanding of these challenges and how they might be addressed. As one can tell from the above, my bias is from what is now considered a liberal perspective. There are solutions, but there is a need to understand first the facts and second the causes. Sometimes the solutions are not implemented due to a failure of imagination. But probably more often they are not implemented due to vested interests, where the reform needed, while good for most of the population, will be costly for some who benefit from a dysfunctional system. It is hoped that this blog will contribute to an understanding of where this is.
In 2010 I retired from a career spent mostly in the World Bank Group. My last position was as Chief Economist and Director of the Economics and Policy Group of the Multilateral Investment Guarantee Agency (MIGA). MIGA is a separate agency within the World Bank Group that provides political risk insurance for private investments in member countries. My group was responsible for assessing the risks of such guarantees, including the environmental and social risks in addition to the risk to MIGA. Prior to that, I was in the Chief Economist’s Office of the International Finance Corporation (IFC), the agency within the World Bank Group that provides loans and equity investments to private firms in member countries. And prior to IFC, I was in the World Bank proper, in a series of positions working with countries in Latin America, Central Europe, and East Asia.
Prior to joining the World Bank, I taught in the Department of Political Economy at The Johns Hopkins University. I have a Ph.D. In Economics from Stanford, studied for two terms at Cambridge University (on Keynes, with his student Lord Richard Kahn as my tutor), and have a Bachelor of Arts in Economics from Princeton.
Frank J. Lysy