In Wealth of Nations, Adam Smith described a ‘stationary state’ as the condition of a formerly wealthy country that had ceased to grow. As a reason, Smith singled out its socially regressive character – wages for the majority of people being miserably low and the ability of the corrupt and monopolistic elite to exploit the system of law and administration to their advantage.

  The rosy picture of the West proclaimed by Francis Fukuyama in 1989 doesn’t look rosy anymore; the slowdown of the West is deleveraging: the painful process of debt reduction.

  The deleveraging argument is that households and banks are struggling to reduce their debts, having gambled foolishly on ever-rising property prices.

  But, as people have sought to spend less and save more, aggregate demand has slumped. And to prevent this process from generating debt deflation, governments and central banks have stepped in with fiscal and....