Krugman makes his case most easily for the US, arguing that abrupt cuts in public spending, particularly by state governments, worsened a fall in demand. Indeed, C. Randall Henning, on California’s lessons for the eurozone, reminds the EU that Washington offers the states no bailout if they go broke. Henning is right too that Europe needs a pact to support its banks. It beggars belief that Brussels waited for the Spanish banking crisis to consider this, four years after Iceland spectacularly showed that taxpayers of a tiny country cannot insure the customers of huge banks which happen to be headquartered there.
But America is often a poor laboratory for the world. Krugman’s prescriptions transfer awkwardly. He does acknowledge the eurozone’s special predicament. But he says too little about China and the case that the west’s real problem is the failure to make things the world wants. While he agrees that, in the US, “something will have to give” in the face of gigantic obligations on pensions and healthcare, a promise to make cuts later is a tough test of credibility. He is too blithe about the reaction of bond markets to such a promise from countries other than the US. True, trading floors are littered with the bodies of those who have prophesied that Japan’s huge debts would bring crisis, but few Europeans would want to test the markets that far. Osborne has more cause for caution than Barack Obama.
Krugman aside, if you have the appetite for other great debates, look at the arguments of John Coates—that the effect of hormones on our brains undermines the notion of rationality. A neuroscientist, an economist and a philosopher each take issue with his case, but such arguments are reshaping views of how markets work. Mark Henderson offers a passionate defence of rationality—and a ten-step guide to the science that everyone should know. Katharina Kehl explains how to join the German Pirates. And if you are craving summer’s pleasures, there is our pick of outdoor theatre and opera—and a tour of the galleries, on the off chance that the sun fails to shine.