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 recently went through the sharpest downturn since the Great Depression. Indeed, during the first year of the downturn, the collapse in US (as well as world) industrial production closely tracked that seen in the first year of the Great Depression. The economy recovered by 2015, returning to full employment, but the pace of recovery was slow. For the first time since the 1930s, government spending was cut back even while unemployment was still high. Many issues still remain and a renewed downturn is quite possible, particularly as European authorities have never properly addressed the underlying factors that led to the crisis in the Eurozone economies, and it is not clear when they will.
At some point there will be another downturn. No economic expansion has ever lasted forever. When there is, there is an especially large danger that the government will then be constrained from doing what is needed precisely because of the confused discussion among many politicians (particularly on the right) on what is needed for a recovery.
Despite the importance of the economic challenges now being faced, the public economic discourse has been particularly disappointing and disturbing. This has been perhaps most clearly seen in the recent campaigns for the presidential nomination (both in 2012 and more especially in 2016), particularly on the Republican side. Programs were proposed which simply did not add up. Over-the-top rhetoric was common, and political opponents were demonized rather than debated.
The US faces major economic problems, and this blog will seek to understand what they are. As one can tell from the above, my bias is from what is now considered a liberal or progressive perspective. Solutions do exist, 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 some solution, 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 dealing 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