In the shadow of the euro crisis and America's fiscal woes, it is easy to ignore the global economy's long-term problems. But, while we focus on immediate concerns, they continue to fester, and we overlook them at our peril.
The most serious is global warming. Some suggest that, given the economic slowdown, we should put global warming on the backburner. On the contrary, retrofitting the global economy for climate change would help restore aggregate demand and growth.
At the same time, the pace of technological progress and globalisation necessitates rapid structural changes in both developed and developing countries. Such changes can be traumatic, and markets often do not handle them well.
Today's problems arise partly from the need to move from manufacturing to services. New firms must be created, and modern financial markets are better at speculation and exploitation than they are at providing funds for new enterprises.
Moreover, making the transition requires investments in human capital that individuals often cannot afford. Among the services that people want are health and education, two sectors in which government naturally plays an important role.
Before the 2008 crisis, there was much talk of global imbalances, and the need for the trade-surplus countries, like Germany and China, to increase their consumption. That issue has not gone away.
Finally, there is a worldwide crisis in inequality. The problem is not only that the top income groups are getting a larger share of the economic pie, but also that those in the middle are not sharing in the growth, while poverty is increasing.
An economic and political system that does not deliver for most citizens is one that is not sustainable in the long run. Eventually, faith in democracy and the market economy will erode, and the legitimacy of existing arrangements will be called into question.
The good news is that the gap between the emerging and advanced countries has narrowed greatly in the past three decades. Nonetheless, hundreds of millions of people remain in poverty.
The market will not, on its own, solve any of these problems; we need governments to take a more active role.
As we struggle with today's crises, we should be asking whether we are responding in ways that exacerbate our long-term problems. The irony is that, with insufficient aggregate demand the major source of weakness today, there is an alternative: invest in our future, in ways that help us address the problems of global warming, inequality and poverty, and the necessity of structural change.
Joseph E. Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University. Copyright: Project Syndicate