Denning refers to Stieglitz’s article in Vanity Fair which states that US economy is going through a fundamental shift in the nature of the economy.
Why no recovery? The idea of the bailouts and the stimulus was that these measures would return the economy to where it had been before the crisis.
The striking part of Stiglitz’s argument is to say that this is indeed what has happened. The economy has gotten back to its former state. The problem, says Stiglitz, is that the former state of the economy was much worse than anyone realized. Getting back to where we were means getting back to a state of sickness, not to health.
Denning then argues that Stieglitz is wrong when saying that US is in process of being transformed into a service economy, when it is in fact a creative economy that lies in the future.
In the present situation I think US would benefit most from realizing that it really is a major phase transition and not just some problems in the economical machinery which can be fixed by a quick fix. The question of what kind of economy the industrialized world might be more complicated than what both Stieglitz and Denning is assuming, but I don’t believe it is the key question for any US government at this stage. If they first change mindset from maintenance mode into a transformation mode, then they can discuss the deeper issues where the economy really is heading.