Economies are like corks. They have inbuilt upward momentum driven by productivity and population growth. That momentum can be reversed for 18 months or two years in a typical recession when investment and consumption have run ahead of themselves, and of necessity fall back. But like a cork the economy will eventually bounce back to the surface – where it would have been had the recession not happened.
An economy left alone would indeed do that. An economy that has too much interference in it will not: there wasn\’t much bobbing in the Ottoman or Zimbabwean economies. That is, bad policy can stop this happening while in an absence of policy whether good or bad we do indeed get the cork bouncing back up.
And it is current bad policy that is causing the slow economic growth. One little story from the front lines of the global scandium trade. There\’s several waste streams that you can extract Sc from. I\’m working on a couple myself, as regular readers will know. There are Chinese companies working on the same waste streams….although the Chinese, not European ones. Excellent, that\’s fine, competition n\’all.
The Chinese can have the idea, build the factory and be in production in the time it takes me to get an environmental licence to proceed here in the EU. No, I don\’t recommend Chinese levels of pollution. But I do wish that people would understand that such regulation has a cost: that cost being, obviously, slower economic growth.
One (and note, only one) of the reasons for slow European and US economic growth is simply the encrustation of regulations that make growth slower. It\’s not solely (or even mainly, in my view) a macroeconomic problem. It\’s a micro one, one that will only be solved by micro means.
My solution would be quite simple in fact. No, don\’t abolish the regulations. Just make the bureaucracy pay for the applicant\’s complete application costs (including all engineering studies, appeals, lawyers, consultants and report writers) out of said bureaucracy\’s budget. That would get their thumbs out.