Shocks, Crises, and False Alarms

CHAPTER 5 Between Defeatist and Hubristic Growth Narratives

Economic growth is not only about the cyclical fluctuations and risks analyzed in chapters 3 and 4. The economy’s underlying capacity for growth across cycles, or trend growth, also matters to business leaders and investors. And though each can influence the other, trend growth matters more in the long run because it powerfully impacts the path of prosperity. At 1% growth, it would take the US economy about 70 years to double in size. At 2%, just 35 years. At 4%, only 18.

Hence, when executives devise long-term strategies, and investors finance them, they must have a view on attainable long-term growth. But there is little consensus. In fact, there are competing narratives that ...