"From the end of World
War II to the brief interlude of prosperity after the cold war, politicians
could console themselves with the thought that rapid economic growth would
eventually rescue them from short-term fiscal transgressions. The miracle of
rising living standards encouraged rich countries increasingly to live beyond
their means, happy in the belief that healthy returns on their real estate and
investment portfolios would let them pay off debts, educate their children and
pay for their medical care and retirement. This was, it seemed, the postwar
generations’ collective destiny.
But the numbers no longer add up. Even before the Great Recession, rich
countries were seeing their tax revenues weaken, social expenditures rise,
government debts accumulate and creditors fret thanks to lower economic growth
rates.
We are reaching end times for Western affluence. Between 2000 and 2007, ahead
of the Great Recession, the United States economy grew at a meager average of
about 2.4 percent a year — a full percentage point below the 3.4 percent
average of the 1980s and 1990s. From 2007 to 2012, annual growth amounted to
just 0.8 percent. In Europe, as is well known, the situation is even worse.
Both sides of the North Atlantic have already succumbed to a Japan-style “lost
decade.”"
