The GFC (Global Financial Crisis) in 2008 permanently reduced the OECD (Organisation for Economic Co-operation and Development) trend growth rate. Normally, after a deep recession, there is a rebound back to the previous trend line and growth continues along that trend line. But this didn't happen after 2008. Even taking the trend from the low point, trend growth has been just 1.8% per annum, compared with 2.8% from 1980 to 2007. Excluding the Covid crash, trend growth was 2.2%.
And I think there is a high likelihood of deep recession in 2023, as Central Banks tighten to fight inflation, reducing trend growth even more.
Make no mistake: the GFC occurred because banking regulation was loosened. One of the tenets of Neo-liberalism is that banks can regulate themselves, that they can be trusted to be sensible. The GFC conclusively proved that this is false. The fall in growth in developed countries has been a key factor in the rise of semi-fascist populist movements in the US, the UK and Europe. And that fall in growth is due to an economic/social/political philosophy which promised higher growth and "trickle down" and instead has delivered lower growth, worse inequality, and grave danger to our democracies.
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