Why the Great Malaise of the World Economy Continues in 2016

The year 2015 was a hard one all around. Brazil fell into recession. China's economy experienced its first serious bumps after almost four decades of breakneck growth. The eurozone managed to avoid a meltdown over Greece, but its near-stagnation has continued, contributing to what surely will be viewed as a lost decade. For the United States, 2015 was supposed to be the year that finally closed the book on the Great Recession that began back in 2008; instead, the U.S. recovery has been middling.Indeed, https://www.project-syndicate.org/columnist/christine-lagarde" target="_hplink - Christine Lagarde - , managing director of the International Monetary Fund, has http://www.ft.com/intl/cms/s/0/d5151102-dec4-11e4-b9ec-00144feab7de.html#axzz3wIbdXN9N" target="_hplink - declared - the current state of the global economy the "new mediocre." Others, harking back to the profound pessimism after the end of World War II, fear that the global economy could slip into depression, or at least into prolonged stagnation.That means overcoming deficit fetishism. It makes sense for countries like the U.S. and Germany that can borrow at negative real long-term interest rates to borrow to make the investments that are needed. Likewise, in most other countries, rates of return on public investment far exceed the cost of funds. For those countries whose borrowing is constrained, there is a way out, based on the long-established principle of the balanced-budget multiplier: An increase in government spending matched by increased taxes stimulates the economy. Unfortunately, many countries, including France, are engaged in balanced-budget contractions.Optimists say 2016 will be better than 2015. That may turn out to be true, but only imperceptibly so. Unless we address the problem of insufficient global aggregate demand, the Great Malaise will continue.A man walks past an electric board displaying stock prices at a brokerage house in Beijing, China, Wednesday, July 8, 2015. China's central bank has promised more credit to finance stock trading in the latest move aimed at stopping a plunge in stock prices that has prompted hundreds of companies to suspend trading in their shares. (AP Photo/Andy Wong) http://economictimes.indiatimes.com/news/economy - http://economictimes.indiatimes.com/news/economy -