Western Europe Hasn't Been Doing that Great

Macroeconomists have been noting for about 20 years that something may be wrong with the economies of Western Europe. And not just with the peripheral countries, but with the big four (Germany, France, the UK and Italy). 

John Cochrane (and here) recently posted about this on his blog.† The post entitled "The puzzle [sic] of Europe" is the one we looked at in class.

I doubt the issue is new to him. So I think he's just using his bully pulpit to bring it to the attention of others. Anyway, here's the money quote:

The average European is about a third or more worse off than the average American, and it's getting worse.

What the heck happened? It could happen here too. Maybe it already has, just not as bad.[emphasis original]

This should be profoundly unsettling for economists. Everyone thinks free trade is a good thing. The European union, one big integrated market, was supposed to ignite growth. It did not. The grand failure of the world's biggest free trade zone really is a striking fact [emphasis is mine] to gnaw on.

I am not sure to what extent the Biden administration will turn out like the Obama administration. But, I can tell you that from 2009-17 there was a lot of talk in blue states of emulating the European model. To a macroeconomist ... this sounded like crazy talk.

There's more: 

These are huge numbers. The worst estimates of climate change are 7% of GDP in 2100.

That number may come as a surprise to you. Lots of people say climate change is an existential threat. Macroeconomists say ... gee  ... we actually measure this stuff, and we come up with a much smaller number.

Anyway, taking that as a given, the decline of western Europe over the last 1-2 generations is economically larger than climate change is going to be, and by a lot.

Do note that he excludes Germany from his analysis. Probably because the German numbers look bad in the 90's for a wholly different reason: the absorption of the backwards East Germany by West Germany.

† Personal opinion: John Cochrane is on my medium-list for a Nobel Prize in the next 20 years. You don't have to like his views or research results, but he is definitely someone who should be on your radar screen. Also, he writes op-ed pieces for the legacy media quite often, which you should probably read when you spot them.