New normal will be slower growth with falling prices: Lord Meghnad Desai

Says high growth rates of 1992-2007 are not likely to return anytime soon

As economic crisis in the developed economies continues, the best that is on offer is a slow recovery; the high growth rates of 1992-2007 are not likely to return anytime soon, says a new book.

"The new normal will be slower growth, though perhaps with falling rather than rising prices," the book, "Hubris: Why Economists Failed To Predict The Crisis And How To Avoid The Next One" by Lord Meghnad Desai says.

Desai, emeritus professor of economics, London School of Economics, is member of the House of Lords of British Parliament.

"We already have worries about the declining rate of inflation and growth stagnation in the eurozone area. Growth in China is slowing down. It is unlikely that the economies that have recovered, such as the US and UK, will get back to the old growth rate of 1992-2007," the book says.

Tracing the crisis, Desai says that by mid-2007, two events had taken place, in quick succession, which indicated that the global economy was changing direction. The first occurred in the autumn of 2006 when the US housing bubble burst; this was followed by the collapse on the Shanghai stock market in February 2007.

Just as in World War I, when belligerent nations expected the troops to be home within four months, many economists took the view that the crisis was temporary and self-correcting. Others said that while the crisis was serious, we had the means to solve the problem.

The Great Recession, however, has been the deepest since the Great Depression of the 1930s. The effects of the recession continue to be felt five years on. Although the global economy has now started to show signs of a recovery, it will be many years before economic indicators return to precises levels, the book says.