Dynamic Stagnation: Institutional Change as a Reflex of Declining Economic Growth

Developed economies tend to face declining growth rates and stagnation. While stagnation would be rather associated with saturation and institutional stability, the is evidence for increasing dynamics and pressures for the marketization and econ-omization of social spheres (e.g. the restructuring higher education systems according to market principles or the retrenchment of welfare systems). This constellation of institutional change (economization) and stagnation is causally linked and labeled as dynamic stagnation. It is explained by modeling the paradoxical operating mode of a capitalist economy (growth paradox): declining effective demand constitutes an inherent stagnation tendency (growth brake), but only growth allows avoiding increasing inequalities (growth imperative). Institutional change towards the marketization of social spheres previously organized outside the market is a reflex of attempts to maintain capitalism during low growth rates and stagnation. This type of institutional change then is less a product of economic growth, but of insufficient growth (dynamic stagnation).

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