Uncertainty and Europe’s Macroeconomic Failure

by Fabio Masini and Albertina Nania

According to an alarming article published in The Economist in October 2023: “the EU economy is now 65% the size of America’s in dollar terms, down from 90% just ten years ago” although “productivity has grown faster in Western Europe than in America.” Apparently, productivity cannot be blamed for this widening gap: a study made in 2023 by Bruegel’s senior fellow Zsolt Darvas, based on IMF World Outlook data, found that “the EU has outperformed the US on per-capita output growth.”

Why then such a gap? […]

Some authors have further suggested that failure should be attributed to the paramount intellectual influence of the neoliberal thought on European policymaking, imposed by the political and cultural hegemony of German Ordoliberalism, that intergovernmental institutions and decision-making mechanisms helped emerge as the leading ideology. According to this line of thought, instead of providing shelter from the appetites of policymakers – as repeatedly suggested by Hayek’s supporters – given its procyclical and gaps-preserving bias, this allegedly weakened the European economy as a global actor. All these features certainly exerted some influence on the effectiveness of Europe’s economic governance.

Read the rest, and this is from the Spring 2025 issue (3.1).

Dr Masini and I first collaborated on a special issue in Cosmos + Taxis about Hayekian foreign policy. You can that whole issue out here. I am grateful for his continued support over the years.