Stagnation

Stagnation refers to a period during which growth or development slows markedly or stops. In economic contexts it describes sustained low or zero growth in real output and employment, while in other fields it can describe little change in population, productivity, or technological progress. The term is often used to contrast with cycles of expansion and with rapid growth, and it implies more than a temporary downturn.

In macroeconomics, stagnation is often contrasted with business cycles of expansion. The term secular stagnation, first proposed by Alvin Hansen in 1938 and revived in recent decades, describes a persistent shortfall of demand relative to potential output, producing persistently low growth, low inflation, and subdued interest rates.

Stagnation can occur in demographic terms when population growth slows or reverses, or in productivity when output per hour stalls. It may reflect factors such as aging populations, weak investment, technological maturity, or restrictive institutions and policies.

Causes include insufficient aggregate demand, demographic headwinds, slower productivity growth, high debt burdens, uneven income distribution, global competition, and policy uncertainty. Structural changes, financial fragility, or environmental constraints can reinforce a stagnation trend.

Impacts include higher unemployment persistence, underutilized capital, lower living standards growth, and potential political or social strain as expectations for improvement fade.

Policy responses commonly discussed are a mix of monetary stimulus, fiscal stimulus, structural reforms, investment in infrastructure and education, innovation and technology policy, and immigration or workforce development measures to raise potential output.

Measurement of stagnation relies on indicators such as GDP growth rates, productivity, labor force participation, and potential output estimates; debates exist over what constitutes stagnation, its duration, and the appropriate policy response.