Green shoots!

Europe is at this point doing worse, at least as measured by industrial production, and probably in terms of overall output than it did in the Great Depression.

The usual response is that things were different then, because Europe was rearming. Is this trying the lack of manufacturing debate, even though we are shutting down a major shipyard in Portsmouth.

There is nothing special that makes military spending a better stimulus than other kinds of spending actually the reverse, because spending on useful stuff can enhance the economy’s long-run potential as well as giving it a short-term boost. So when you attribute European recovery in the 30s to military spending, you’re saying that what the economy needed back then was expansionary fiscal policy and it needed it so badly that even destructive spending had a positive effect.

This time around, the good news is that we have peace. The bad news is that Europe’s leaders, lacking the incentive to build up their armies, have listened to prophets of austerity, and cut spending when it should have been going up. And the result is a depression that is well on track to be worse than the 1930s.