The near-global stagnation witnessed in 2014 is man-made. It is the result of politics and policies in several major economies -- politics and policies that choked off demand. In the absence of demand, investment and jobs will fail to materialize. It is that simple.
Nowhere is this clearer than in the Eurozone, which has officially adopted a policy of austerity -- cuts in government spending that augment weaknesses in private spending. The Eurozone's structure is partly to blame for impeding adjustment to the shock generated by the crisis; in the absence of a banking union, it was no surprise that money fled the hardest hit countries, weakening their financial systems and constraining lending and investment.
In Japan, one of the three "arrows" of Prime Minister Shinzo Abe's program for economic revival was launched in the wrong direction. The fall in GDP that followed the increase in the consumption tax in April provided further evidence in support of Keynesian economics -- as if there was not enough already.
...For the past six years, the West has believed that monetary policy can save the day. The crisis led to huge budget deficits and rising debt, and the need for de-leveraging, the thinking goes, means that fiscal policy must be shunted aside.
The problem is that low interest rates will not motivate firms to invest if there is no demand for their products. Nor will low rates inspire individuals to borrow to consume if they are anxious about their future (which they should be). What monetary policy can do is create asset-price bubbles. It might even prop up the price of government bonds in Europe, thereby forestalling a sovereign-debt crisis. But it is important to be clear: the likelihood that loose monetary policies will restore global prosperity is nil.
The big problem facing the world in 2015 is not economic. We know how to escape our current malaise. The problem is our stupid politics.
In other words, just like that other great economic plague, inequality, is the bastard child of our political elite, so too is the global stagnation besetting every nation's economy. It's the waste product of neoliberal ideology in practice. If only a change of government would free Canada of that curse.