International economist and Nobel laureate Professor Joseph Stiglitz told a CEDA economic forum in Sydney that "successful and sustained global economic growth requires creating a learning society".
Speaking at CEDA's International lectern event, Professor Stiglitz examined the ongoing implications to global economies resulting from a weaker economy, lower labour force participation, and low or negative wage growth.
The US economy is very weak, with the small to medium-size business (SME) sector constrained due to constrained lending.
"SME lending today is about 20 per cent below what it was before the crisis," Professor Stiglitz said.
Weakness in the SME sector has contributed to the lowest labour force participation in decades.
While GDP has been rising since 2009, the benefits are only going to the wealthiest 10 per cent of the population.
"The weakness in the labour market is reflected very strongly in wages," Professor Stiglitz said.
"The median income in the United States is lower than it was a quarter of a century ago… it's not because productivity hasn't gone up… there has been a very large increase in productivity… but average hourly earnings has gone down."
According to Professor Stiglitz, while the economy is officially recovering, the United States isn't catching up to where it would have been had the Global Financial Crisis not occurred.
The situation in Europe is even worse after coming out of a double-dip recession. Most countries in Europe have a GDP per capita that is lower than what it was in 2008.
"Several countries are in depression," Professor Stiglitz told the forum.
The fundamental problem facing the global economy is lack of global aggregate demand. This requires structural transformation. Professor Stiglitz pointed out that just as we moved from an agricultural society to a manufacturing society, we now need to transform from a manufacturing to a service-based economy.
"This won't happen on its own," Professor Stiglitz said, "there needs to be a recalibrating of economic policy to support shared growth and sustainability."
According to Professor Stiglitz, successful and sustained growth requires a learning society. There needs to be systematic interventions by the government to facilitate the creation of a learning economy.