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I sometimes field questions from people asking if we don’t have enough economic output and growth, and the social focus should shift to other topics. My usual answer is that there are a lot of lower-income people, not only in the United States but especially around the world, would strongly disagree that we have enough. (For exmaple, about one-tenth of all people in the world, about 800 million people, have a standard of living below what the World Bank has defined as a poverty line of $3/day in consmption.) But even for higher-income countries, economic growth offers flexibility and autonomy, while a lack of growth makes all social choices zero-sum–that is, the only way for one group to benefit, or for priorities to shift, is for another group or set of priorities to experience a loss. Moreover, if one country decides to stand still, while the rest of the world moves ahead, what looks today like a comfortable standard of living will come to look substandard a few decades later.

Luis Garicano, Bengt Holmström and Nicolas Petit offer a perspective along these lines in “The Constitution of Innovation: A New European Renaissance” (November 10, 2025). They point out that for several decades after World War II, output per person in what is now the “euro-zone” (countries that use the euro as their currency) was rising relative to the US level, but for the last several decades the ratio has been falling..

Over a sustained period of time, the consequences of this kind of growth shortfall are nothing less than a social transformation. Garicano, Holmström and Petit write:

The European Union does not need a new treaty or powers. It just needs a single-minded focus on one goal: economic prosperity. This prosperity is necessary for its own sake and for all the other things we want Europe to be: a bulwark against Russian tyranny, a generous supporter in lifting the world out of poverty, and a champion against climate change. …

The neglect of that purpose has been overwhelming. The European Union currently pursues a long list of goals, including (as given by the Commissioner titles): promoting the ‘European way of life,’ ‘health and animal welfare’, ‘environment, water resilience and a competitive circular economy’, ‘intergenerational fairness, youth, culture and sport’ or ‘social rights and skills, quality jobs and preparedness’. Meanwhile, the internal market has become so fragmented that, according to recent IMF analysis, internal trade barriers are equivalent to a 44 percent tariff on goods and 110 percent on services. And, as Mario Draghi famously pointed out, no European company worth over €100 billion was set up from scratch in the last 50 years; the continent that birthed the industrial revolution has wrecked its own ability to catch the digital one.

These are not accidents of history; they are consequences of our choices. In recent decades, the Union and its Member States have confused regulation with progress and bureaucracy with integration.

If the European Union keeps stagnating, our countries will not be able to maintain the things its citizens take for granted: unemployment benefits, free healthcare, lifelong pensions, and affordable education. Growth is necessary to pay for existing commitments, and fulfill the recent deluge of new ones. Stagnation is going to make the European welfare state a utopia of the past.

Garicano, Holmström and Petit offer a list of practical recommendations for the EU, including a renewed effort to reduce the explicit and implicit trade barriers between EU countries, to reduce the growing debt burden, and more. Here, I want to focus on the broader question of prioritizing growth. On this point, the authors refer back to The American Challenge, a book by Jean-Jacques Servan Schreiber and translated into in English in 1968. I will quote him at longer length than the report does:

[R]apid and lasting economic growth is the point of departure for any policy, domestic or foreign. Obviously it is not an end in itself. Like any creed obsessively dedicated to its own methods … the religion of growth leads to the neglect of men and their needs. It is equally certain that the degree of autonomy, prosperity, and social justice–and these three are linked together–that a society aspires to, depends upon its growth rate. A society enjoying rapid growth is free to define its own form of civilization because it can establish its order of priorities. A stagnant society cannot really exercise the right of self-determination.

In an expanding society, the political debate is framed in these terms: `Should we join the space race or step up aid to the underdeveloped countries of the “third world”? Beautify our cities or exploit the sea floor? Develop nuclear energy or build more automobiles?’ In a stagnant society, acquired attitudes and above all, restraints from the outside determine policy.

The corollary of growth is change. To grow richer, as they have done, although all too slowly, for the past twenty years, the Europeans have had to wrench themselve loose with great difficulty from many habits that were dear to them. There can be no progress without surrendering acquired privileges, without discarding outdated machinery, ideas, and skills. This unsettling change is quite different from a general upheaval. It is neither a succession of storms and lulls, nor a staccato revolution, but a continuous adjustment.

It is worth noting that Servan Schreiber was writing these words when, by historical standards, European growth turned out to be proceeding pretty well. He is also writing before the real birth of the information technology revolution, including the internet and artificial intelligence. But my sense is that the tone of his warning applies to the United States as well as to the European Union.

In the US, the common policy prescriptions for prosperity involves steps like tax cuts, or taxing billionaires, or giving tariff protection to US firms, or using antitrust tools to attack US firms. Efforts to build infrastructure that would support longer-term growth devolve into other priorities: job programs, gender or racial equality, supporting unions, environmental protection, and more. A pattern emerges of rising debt, a sense that incomes aren’t keeping up with key costs like housing, health care, and eduction, and an emphasis on zero-sum social and political outcomes: that is, how one side should lose or be blocked so the other side can win. In constrast, the recipe for economic growth is simple enough: workers with strong levels of skills and education, ongoing research and development, and investment in physical capital, all interacting in an economic and institutional environment that rewards hard work, innovation, and continuous adjustment.

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