AFTER US investment bank Lehman Brothers collapsed in 2008, triggering the worst global financial crisis since the Great Depression, a broad consensus about what had caused the crisis seemed to emerge. A bloated and dysfunctional financial system had misallocated capital and, rather than managing risk, had actually created it. Financial deregulation together with easy money had contributed to excessive risk-taking. Monetary policy would be ineffective in reviving the economy, even if still-easier money might prevent the financial system’s total collapse. Thus, greater reliance on fiscal policy — increased government spending — would be necessary.

Five years later, no one in Europe or the US can claim prosperity has returned. In many European Union (EU) countries, gross domestic product remains lower, or insignificantly above, pre-recession levels. Almost 27-million Europeans are unemployed. Similarly, 22-million Americans who would like a full-time job cannot find one. Labour-force participation in the US has fallen to levels not seen since women began entering the labour market in large numbers. Most Americans’ income and wealth are below their levels of long before the crisis. Indeed, a typical full-time male worker’s income is lower than it has been in more than 40 years.

Yes, we have done some things to improve financial markets. There have been some increases in capital requirements, but far short of what is needed. Some of the risky derivatives have been put on exchanges, increasing their transparency and reducing systemic risk, but large volumes continue to be traded in murky over-the-counter markets, which means we have little knowledge about some of our largest financial institutions’ risk exposure.

Likewise, some of the predatory and discriminatory lending and abusive credit-card practices have been curbed, but equally exploitive practices continue. The working poor still are too often exploited by usurious payday loans. Market-dominant banks still extract hefty fees on debit-and credit-card transactions from merchants, who are forced to pay a multiple of what a truly competitive market would bear. These are, quite simply, taxes, with the revenues enriching private coffers rather than serving public purposes.

Other problems have not been addressed and some have worsened. The US mortgage market remains on life support. The financial system has become even more concentrated, worsening the problem of banks that are not only too big, too interconnected, and too correlated to fail, but that are also too big to manage and be held accountable.

The credit rating agencies have been held accountable in two private suits. But here, too, what they have paid is but a fraction of the losses their actions caused. More important, the underlying problem — a perverse incentive system whereby they are paid by the firms that they rate — has yet to change.

Bankers boast of having paid back in full the government bail-out funds they received when the crisis erupted. But they never seem to mention that anyone who got huge government loans with near-zero interest rates could have made billions simply by lending that money back to the government. Nor do they mention the costs imposed on the rest of the economy — a cumulative output loss in Europe and the US of more than $5-trillion. Meanwhile, those who argued that monetary policy would not suffice turned out to have been right. We were all Keynesians — but all too briefly. Fiscal stimulus was replaced by austerity, with adverse effects on economic performance.

Some in Europe are pleased that the economy may have bottomed out. With a return to output growth, the recession is officially over. But, in any meaningful sense, an economy in which most people’s incomes are below their pre-2008 levels is still in recession. And an economy in which 25% of workers are unemployed is still in depression. Austerity has failed, and there is no prospect of a return to full employment anytime soon.

The financial system may be more stable than it was five years ago, but that is a low bar. Those in the government and the financial sector who congratulate themselves on banks’ return to profitability and mild regulatory improvements should focus on what still needs to be done. The glass is, at most, only a quarter full; for most people, it is three-quarters empty.

• Stiglitz is a Nobel laureate in economics and a professor at Columbia University.

© Project Syndicate, 2013