But even these numbers do not tell the full story of how bad things are, because GDP is not a good measure of success. Far more relevant is what is happening to household incomes. Median real income in the US is below its level in 1989, a quarter-century ago; median income for full-time male workers is lower now than it was more than 40 years ago.



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Some, like the economist Robert Gordon, have suggested that we should adjust to a new reality in which long-term productivity growth will be significantly below what it has been over the past century. Given economists' miserable record — reflected in the run-up to the crisis — for even three-year predictions, no one should have much confidence in a crystal ball that forecasts decades into the future. But this much seems clear: Unless government policies change, we are in for a long period of disappointment.



Markets are not self-correcting. The underlying fundamental problems that I outlined earlier could get worse — and many are. Inequality leads to weak demand; widening inequality weakens demand even more; and, in most countries, including the U.S., the crisis has only worsened inequality.



The trade surpluses of northern Europe have increased, even as China's have moderated. Most important, markets have never been very good at achieving structural transformations quickly on their own; the transition from agriculture to manufacturing, for example, was anything but smooth; on the contrary, it was accompanied by significant social dislocation and the Great Depression.



This time is no different, but in some ways it could be worse: the sectors that should be growing, reflecting the needs and desires of citizens, are services like education and health, which traditionally have been publicly financed, and for good reason. But, rather than government facilitating the transition, austerity is inhibiting it.



(Read more: Jobs report too 'weird' to just blame the weather)

Malaise is better than a recession, and a recession is better than a depression. But the difficulties that we are facing now are not the result of the inexorable laws of economics, to which we simply must adjust, as we would to a natural disaster, like an earthquake or tsunami. They are not even a kind of penance that we have to pay for past sins — though, to be sure, the neoliberal policies that have prevailed for the past three decades have much to do with our current predicament.



Instead, our current difficulties are the result of flawed policies. There are alternatives. But we will not find them in the self-satisfied complacency of the elites, whose incomes and stock portfolios are once again soaring. Only some people, it seems, must adjust to a permanently lower standard of living. Unfortunately, those people happen to be most people.



— By Joseph E. Stiglitz

Joseph E. Stiglitz, a Nobel laureate in economics, is professor at Columbia University. His most recent book is "The Price of Inequality: How Today's Divided Society Endangers Our Future."



Copyright: Project Syndicate, 2014