Saving and Investment in the Twenty-First Century: The Great Divergence

The economy of the 21st century in OECD countries and China is characterized by a structural surplus of private savings over private investment due to rising life expectancy and a lack of capital demand. This gap can only be closed by increasing public debt, which is necessary to stabilize a free economic and social order. The book provides a new capital-theoretical perspective on the relationship between desired wealth and investment and offers empirical data on private wealth in the OECD plus China area.

Format: Hardback
Length: 344 pages
Publication date: 07 August 2021
Publisher: Springer

The economy of the 21st century in the OECD countries and in China is characterized by a remarkable phenomenon: the structural surplus of private savings in relation to private investment. This is true even in a situation of prosperity and extremely low interest rates. On the one hand, this excess saving can be attributed to individuals' growing inclination to save due to rising life expectancy, driven by the desire to accumulate sufficient assets for retirement. On the other hand, the demand for capital is not increasing at the same rate, resulting in a gap between the private desire for wealth and private investment. To bridge this gap, increasing public debt becomes necessary.

This open-access book offers a fresh, capital-theoretical perspective on the macroeconomic relationship between desired wealth and investment. It presents new empirical data on private wealth and its composition in the OECD plus China area. The authors argue that a free economic and social order can only be stabilized if the wealth aspirations of individuals are met under conditions of price stability. This requires substantial net public debt. A new way of thinking about the economy as a whole is necessary, and this book provides an in-depth theoretical and empirical analysis to demonstrate this new perspective. It describes the current challenges facing economic policy and will appeal to economists and students of economics who are interested in macroeconomic theory and its economic policy implications.

An impressive and convincing theoretical dive into the fundamentals behind secular stagnation, with profound implications for actual debt policy. Public debt may be needed to improve welfare.

Weight: 700g
Dimension: 161 x 241 x 30 (mm)
ISBN-13: 9783030750305
Edition number: 2021 ed.