September 14, 2015
Paul Krugman rightly criticizes the proponents of austerity for claiming Spain as a success story. As Krugman points out, its economy is growing, but it has a long way to go to make up the ground lost in its downturn.
He makes this point in a graph showing log GDP, but this picture is actually too generous. We should care about GDP per capita, and here the story is even worse.
Spain’s per capita GDP is still more than 7 percent below its peak in 2007. In fact the current level is roughly the same as in 2003, translating into 11 years of zero growth in per capita GDP. By comparison in 1940, 11 years after the onset of the Great Depression, per capita disposable income was 7 percent higher than its level in 1929.
So with its austerity agenda Spain is doing considerably worse than the United States in its recovery from the Great Depression. Apparently, this now counts at success among the honchos in the euro zone.
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