Granted, this "mystery moderation" (U.S. - good recovery or not?) deserves contrast with the state of the world economy. In spite of the setbacks of the Great Recession, nations in aggregate have still experienced the most substantial gains of all, in the last fifteen years. Scott Sumner recently agreed with several commenters that this indeed was the case.
And yet, something about our mystery moderation doesn't feel right. Why are so many of the old skirmishes heating up again - that is - the usual fights as to winners and losers? Marcus Nunes voiced this concern perfectly in a recent blog post:
It's interesting to observe that when opportunities to "move forward" are blocked by the policies that gave us the "Great Recession", and that now are responsible for keeping the economy depressed, the debate on inequality flourishes. In that sense it's a fallback or second-best debate. Once you're 'stuck in the mud', the only option you have is to fight over relative positions.Lately I've observed old arguments being rekindled not just over inequality, but also open borders and related immigration issues. More recently, familiar arguments regarding race reparations and gender have joined the fray. Some of those "knock down drag out" discussions at Marginal Revolution for instance, leave me shaking my head in dismay. If recent economic gains are that substantial, then why have so many battles seemingly behind us, returned to the fore? Or, if something substantial needs to happen, why are so many policy makers telling us it's not possible to do anything to improve growth outcomes?
Too many people are still not economically connected, who also do not have adequate means to connect socially as a result. This means a sizable segment of the population which does not have the capacity to organize or otherwise tend to their lives. And even education can become a dead end at some point, if people do not have a way to make it about what they are actually doing.
And yet, the problem with these second best debates is not really about group X or group Y. It's about an elite which systematically downplays the importance of skills capacity and knowledge use, in terms of spending capacity and monetary representation. Perhaps this set of affairs would not be so problematic, if society hadn't spent the last century telling everyone that an education was what they needed, in order to live a good life.
However, the battles which get the most attention today revolve around relative position, which only serves to drown out the battles over economic access. But it is where economic access does not exist, that has skewed the playing field in the areas which are so fiercely disputed. And monetary policy still closes the door, before such access gets a chance. Only witness today's long term unemployed, who aptly represent the output gap someone "forgot" to close.
One reason higher growth is needed now, is to address the imbalance in services equilibrium. That imbalance was generated by setting services valuations so as to limit access to them, throughout populations. The fact this was done, is partly responsible for the fact that monetary authorities have now become reluctant to represent time use in aggregate. Just the same, they have to come back to doing so eventually, if monetary stability is to be achieved.
Monetary stability revolves around the time which people spend in economic activity and contribute to it, both as producer or consumer of product. What's more, as banks should have discovered this time, it's not a balance which can be achieved from consumption alone. Total spending capacity is the most reliable constant. For while asset valuations may temporarily drift from nominal income capacity - especially with the machinations of finance and credit - they cannot do so for long. This is also why a price level target would fail, because eventually it would drift too far from the time anchor in aggregate spending capacity.
Therefore I suggest this is not really a new moderation at all, and that it won't be until the aggregate time capacity of all citizens has actual representation. When central bankers are willing to consider the economic circumstance of actual citizens instead of just governments and financiers, we might not have to constantly descend into the same fill in the blank categories of social injustice. After all, solutions are particularly hard to come by, in second best debates.