After the war the European economy was humming along, with growth rates of 5 percent or more. Now Germany’s forecast to grow by just 0.1 percent. Allowing for population growth and inflation and it’s an economy in decline. Steve says part of the problem is the assumption that rising government debt is bad for the economy – the old neoclassical belief that if the government spends, it crowds out the private sector. They’ve been testing that theory in Europe for a while now, and it isn’t working for them. Yet, politicians have convinced enough people of the principle such that populist right-wing governments are taking more political control across the continent. All the while, Europe has lost its innovation, and its manufacturing capability is in decline. Hence, Phil asks, how can it get its mojo back?
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