Six years on from the nadir of the financial crisis, no Western economy has got close to where it would have been if pre-crisis growth trends had been maintained. Some places, like Britain, have only just restored the size of their economies to 2008 levels. For most workers, prosperity, in terms of income, remains well below 2008 levels in real terms. Many European economies have virtually no growth even now. Is Western recovery just taking a long time, or has a failure to tackle the underlying issues meant that we can only be in a temporary period of reprieve before the next crash?

There are two main narratives about where we are today economically. One is that the 2007-08 financial crisis was of such a scale that it was inevitable that the post-crash recession would be severe and the following recovery unusually feeble. Some argue that the financial debts built up earlier were so huge that it will inevitably take years, perhaps a decade or more, to work them off. This protracted process of ‘deleveraging’ condemns us to a different ‘new normal’ of sluggish growth for an indefinite period. By this view, though, things should heal with sufficient time.

The other story agrees that the financial crisis was a huge disruption, but believes that the crisis itself was a symptom of factors that have not been resolved and are already returning. The proper lessons have yet to be learnt, so confidence about eventual recovery is misplaced. Some of the cures applied after the crisis are merely sticking plasters inflating the next bubbles, which will eventually burst. In particular, government-led ‘easy money’ policies are said to be replicating the bubble conditions leading up to 2007. 

Where does the truth lie between these perspectives? Or are both mistaken? Is it the problem more straightforward: that we still have an unstable, unreformed and poorly regulated banking system that needs to be fixed before ‘normality’ can be restored?

Can we ever reach a consensus about why the financial crisis happened in the first place in order to be able to stop another one? If we get the diagnosis wrong, then the treatment applied could actually make things worse. Was it bankers’ greed, global imbalances, inadequate productivity, or the excessive expansion of credit that was at the heart of the problem? And are the problems today more on the supply-side or the demand-side of the economy?

Moreover is it right as some fear that the next financial crash could have worse economic consequences? Has the West used up all its policy weapons, without addressing the underlying problems, just to bring about a weak recovery today, and with little left in the locker when turmoil returns?

During the last crisis, China and other emerging markets kept growing, supporting the whole global economy. Now a common view is that these economies have bigger problems of their own – not least a possible credit bubble in China. Could the epicentre of the next crisis be in the East rather than the West? And where could the cavalry come from next time?

Listen to the debate: