Summary
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Welfare State Expansion: European countries, known for having the largest welfare states within the OECD, are experiencing a decline in economic dynamism as their welfare systems grow.
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Economic Growth Decline: There is a noted decrease in Europe’s economic growth, productivity, and innovation, attributed to excessive public spending on welfare.
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Productivity and Innovation: Despite efforts to boost productivity and innovation, Europe lags behind the US and China, particularly in the digital sector. Leaders like Christine Lagarde of the ECB have acknowledged this lag.
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Reform Proposals: Mario Draghi’s report suggests reforms and investments to enhance productivity while maintaining the welfare state, an approach criticized by Austrian economists for being unsustainable.
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Government Intervention: Proposed solutions involve more centralization and government intervention rather than increasing economic freedom, which critics argue doesn’t address the core issues of resource allocation and incentives.
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Public Spending: The welfare state in Europe is significantly large, with public social spending in many countries like France, Finland, Denmark, Belgium, and Italy close to 30% of GDP, far exceeding the OECD average.
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Efficiency Concerns: Despite high spending, the European welfare model is seen as inefficient, not significantly reducing poverty or promoting economic growth.
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Political and Economic Implications: The article suggests that without substantial changes to allow for more market freedom and entrepreneurship, Europe’s economic situation might worsen, potentially leading to a welfare state collapse.
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Philosophical Critique: The narrative critiques the European approach from an Austrian economics perspective, highlighting the tension between economic growth and welfare state expansion.
Article
European countries are the largest welfare states in the OECD and among the highest in the World. At the same time, Europe’s economic dynamism has faded out and European leaders are getting increasingly worried about it. According to Christine Lagarde, the ECB President, Europe’s generous social model is at risk unless the region fixes a persistent decline in growth. In a recent report, Mario Draghi strongly calls for reforms and investments to reinforce productivity growth, while keeping untouched the continent’s oversized welfare state. For Austrian school economists, this sounds like having your cake and eating it too, because the issues of economic growth and income redistribution are intrinsically linked.
Europe’s problem with anaemic growth
Lagarde acknowledges that Europe trails behind the US in terms of productivity growth. Faced with rapid advance in innovation, the EU remained stuck in the “middle technology trap”, while the US and China are spearheading the digital revolution. Europe is falling behind in emerging technologies such as microchips, AI, and electric vehicles and only four of the world’s top 50 tech companies are European.
Draghi’s report on “The future of European competitiveness” reveals that economic growth has been lower in the EU than in the US over the past two decades. The EU – US unfavourable gap in terms of GDP at constant prices has doubled from about 15% in 2002 to 30% in 2023. Around 70% of the gap has been driven by lower productivity in the EU (Graph 1). Moreover, Europe’s growth prospects are not good. The continent enjoys relatively high trade openness, but is now facing strong competition from Chinese exporters and potential high tariffs from the US. On top, EU companies are burdened by high energy costs and European countries will probably need to spend significantly more for defence, adding to already high public spending.
Graph 1: EU vs US labour productivity 
The solutions proposed by Draghi to boost productivity growth and innovation have little to do with increasing economic freedom. They are primarily aiming at centralizing and reinforcing government intervention and keep in place the massive welfare state.
Draghi calls for a new industrial strategy for Europe which should be coordinated at EU level. It may help overcome the current division of policies and financing sources among countries. But it cannot solve the more fundamental issue of inefficient allocation of resources and bad incentives that industrial policies bring about. In a similar way, decarbonisation and new clean technologies cannot reduce the current high energy costs without an economic cost. Current production facilities based on fossil fuels are cheaper and their replacement would increase the cost of doing business. […]
— Read More: mises.org
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Two Storms, One Harvest
Every food crisis in living memory has been a one-shock event. The 2008 price spike was a commodity bubble. The 2020 shortages were a logistics failure. The 2022 grain scare was a war on one exporter’s ports. Each time, the system bent, adjusted, and recovered, and each time the experts assured us afterward that global markets are simply too big and too diversified to fail.
What nobody in Washington seems eager to discuss is that 2026 is shaping up to be something the modern food system has never actually faced. Two independent shocks, one climatic and one geopolitical, are converging on the same harvest cycle at the same time. Not sequentially. Simultaneously.
Start with the weather. The Pacific Ocean is currently building toward what forecasters now openly call a record event. NOAA’s Climate Prediction Center puts the odds of at least a strong El Niño near 88 percent, with roughly two in three odds it reaches “very strong” status, the tier reserved for perhaps three or four events in the entire satellite era. Every major global model now projects a median peak in Super El Niño territory, and most of them project it exceeding the 2015-16 event, which until now held the modern record. Sea surface anomalies were already brushing the super threshold in mid-July, months before these events normally peak. The atmosphere has already shifted into El Niño mode, and the event is forecast to crest in late fall and early winter.
This is not about “climate change.” It’s about the standard cycles of weather, and the cycle we’re currently in is one that has likely devastated societies in the past. We’re better prepared as a society today, but not all Americans are equally prepared.
Serious households have started doing the quiet math on their own. Grocery bills tell part of the story, and the forecast maps tell the rest, which is why long-term food storage has moved from fringe hobby to mainstream line item in the family budget, with established suppliers like Heaven’s Harvest seeing demand from people who five years ago would have rolled their eyes at the idea. That instinct is not paranoia. It is pattern recognition, and the pattern is worth walking through carefully.
Editor’s Note: Heaven’s Harvest IS a sponsor, but the warnings of this article are real and would be written even if we didn’t have a survival food sponsor. With that said, those who take advantage of what they offer can use promo code “Patriot” for 15% off.
The Fertilizer Clock Is Already Running
While the Pacific warms, the second shock has been unfolding in the Strait of Hormuz. The conflict with Iran turned the world’s most important energy chokepoint into a contested waterway, and the consequences reach far beyond the gas pump. Roughly a third of global fertilizer trade moves through Hormuz, and the disruption sent urea prices up 86 percent year over year by March, with a 53 percent jump in a single month.
The World Bank projects energy prices rising about 24 percent in 2026 and fertilizer about 31 percent. By its own accounting, fertilizer prices ran 35 percent higher in the first five months of this year than the same period last year.
Here is the mechanism the nightly news will not explain. Fertilizer is not a grocery item. It is a time-delayed input. The nitrogen a farmer in Iowa or Punjab could not afford to apply this spring does not show up as a problem this spring. It shows up as a thinner harvest six to twelve months later.
The World Bank’s own food security brief concedes that the effects of reduced applications earlier this season “are likely to become visible only later in harvest outcomes.” Translate that from institutional language into plain English and it means this. The damage is already done, it is already in the ground, and we are simply waiting for it to arrive on the shelf.
Now check the calendar. Six to twelve months from the spring planting season lands us squarely in late 2026 and early 2027. Which is precisely when the strongest El Niño in the instrumental record is forecast to peak, bringing its signature droughts to Southeast Asia, Australia, southern Africa, northern Brazil, and South Asia, the very regions that grow the world’s rice, sugar, and oilseeds.
The World Bank warns openly that a strong El Niño “could disrupt multiple crop belts simultaneously” on top of the conflict-driven input costs. Their baseline projection assumes the Middle East disruptions ease by autumn. What in the last two years of Middle East history suggests that assumption is safe?
The System Has No Slack Left
The comfortable answer is that global markets always adjust. But adjustment requires slack, and the slack is gone. Global cereal production is expected to decline from last year’s records even before El Niño does its work. The UN World Food Programme, hardly a den of right-wing preppers, is calling this the most significant disruption to its supply chains since Covid and the invasion of Ukraine, and its supply chain director put the stakes bluntly.
Today’s supply chain challenges are tomorrow’s hunger crisis.
There is also a political dimension that markets cannot price. When food gets scarce, governments do not behave like economists. They behave like politicians. Export bans, hoarding mandates, and panic buying at the national level turned the modest rice shortfall of 2008 into a global crisis, and analysts are already warning that import-dependent nations are the first dominoes.
The 2015-16 Super El Niño, a far weaker event than what is now forecast, threw tens of millions into food stress across Africa and Asia. This one is projected to be stronger, and it arrives with fertilizer already rationed by price and shipping lanes already contested by missiles.
What Joseph Knew
Scripture does not treat preparation for lean years as faithlessness. It treats it as wisdom delivered in advance to those willing to act on it.
Behold, there come seven years of great plenty throughout all the land of Egypt: And there shall arise after them seven years of famine; and all the plenty shall be forgotten in the land of Egypt.
Joseph did not respond to that warning with a hashtag or a committee. He stored grain during the years of abundance, and when the famine came, Egypt stood while its neighbors begged. The lesson is not that famine is certain. It is that the time to prepare is precisely when preparation still looks optional.
Nobody who filled a pantry in a year of plenty has ever regretted it, and nobody standing in an empty aisle has ever been glad he waited for certainty.
None of this calls for panic, and panic is the enemy of sound judgment anyway. It calls for the same unglamorous prudence our grandparents considered ordinary. Keep some cash margin, know your local growers, and put real food in deep storage while it is cheap and available, because the entire arc of this story is that cheap and available is a closing window.
Families looking for a straightforward place to start can visit Heaven’s Harvest and use promo code Patriot for 15 percent off long-term storable food. The forecasts may yet soften, the strait may yet reopen, and we should pray they do. But hope is a fine thing to hold and a foolish thing to eat.
