Austerity Ruined Europe, and Now It’s Back
The United States is experiencing an investment boom, owing to industrial policies that grant enormous subsidies – including to European firms – for investing in America, largely in green tech. Europe, meanwhile, is responding with a return to the austerity policies that caused it to fall behind the US in the first place.
ATHENS – In 2008 Europeans earned, in aggregate, 10% more than Americans. By 2022, Americans were earning 26% more than Europeans. This week, the Wall Street Journal confirmed that Europeans are becoming poorer not just collectively but also privately. This shocking reversal of fortune was caused by the unprecedented level of austerity European governments inflicted upon their economies following the 2008 global financial crisis.
Austerity is not only bad for vulnerable people in need of state support during tough times; it also stifles investment. In any economy, collective expenditure equals collective income. By substantially reducing public expenditure at a time when private expenditure was falling, European governments hastened the rate at which total income diminished.
Is it any wonder that Europe’s businesses refused to invest in the capacity to produce stuff that consumers would not have the money to buy? That’s how post-2008 austerity slayed continent-wide investment and put Europe on a path of secular decline.
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