Europe is in a recession. France is in recession. Greece has been in recession for six years. Cyprus has been in recession for three years. Germany just barely pulled out this month. Spain has 27% unemployment.
It’s getting worse in Europe. Yet this is where Keynesianism is supposed to work best. There are welfare states. This is where the welfare state was invented: Germany in the 1880s.
The fact that Europe cannot get out of recession points to the failure of Keynesian economic analysis. European national governments run deficits. It does not help.
If Keynesianism does not work in Europe, what is the practical defense of this system of analysis? If European economic planning cannot restore prosperity, where is it supposed to work?
Central planning failed in the Soviet bloc. That experiment died in 1991. So, that left Keynesianism as the fall-back position of those who proclaim state regulation as the source of both stability and growth. But now there is stability and contraction. Who wanted that?
This does not lead Keynesians to abandon their position and adopt Austrian economics. They hold their views for ideological reasons: faith in state planning. They used to invoke economic growth to prove their case. They cannot do this any longer in Europe.
Young adults’ faith in their economic future is fading in southern Europe. That means faith in Keynesianism is fading. Region by region, the religion of Keynesianism is losing core support. Skepticism is moving north. France is in recession. Young people are burning cars, a way to protest. The rate so far this year is close to 50,000 burnings. This does not point to rising optimism in France.
Keynesians run the show. The show is increasingly negative. Keynesians cannot blame anyone else, the way they could in 1936. They are holding the bag.