There is, however, something dissatisfying about all this. On the one hand, self-described compassionate conservatives understand there is no such thing as morally neutral laws or morally indifferent government policies. At some level (even quite remote), all laws and policies embody some type of moral logic (which is either coherent or incoherent). Thus they cannot help but shape — for better and worse — a society’s moral culture. That’s just one reason among many why the legal treatment of issues like abortion, euthanasia, pornography, and marriage matters, and why they can’t, as some libertarians claim, be simply relegated to the private sphere.

At the same time, it seems to me that many compassionate conservatives don’t fully appreciate the moral, social, and legal urgency of reducing the state’s size and reach, instead of primarily focusing upon streamlining government’s role. The capacity, for example, of even well-intentioned government interventions and apparently benign public-private partnerships to help facilitate dysfunctional families as well as suck the life out of the rich mosaic of free associations and autonomous institutions often conceptually cobbled together under the rubric of civil society has been exhaustively documented. Moreover, as I’ve argued elsewhere, the sheer number of laws and regulations that now govern our lives represents a genuine threat to rule of law, inasmuch as the sheer profusion of laws increases the potential for arbitrary decisions by courts and governments, including by those who don’t want to act arbitrarily.

All these problems suggest that some conservatives need to pay much more attention to the precise limits of government in free societies when it comes to social policy. As it happens, the limits of government are also the number one topic in contemporary economic debates as the United States struggles to avoid being drawn into the social-democratic quagmire which today we call Europe.

No doubt it won’t be possible to resolve all the differences between compassionate conservatives and libertarians on the subject of the limits of state power. Their starting points for intellectual reflection are usually different. But such a discussion might provide some basis for a broader and deeper “non-left” critique of the modern Left’s slavish attachment to big government and the not-so-noble underlying motivations behind all the feelings-talk and empathy-babble for endlessly expanding its reach.

This article originally appeared at National Review.

Obviously we should avoid over-simplification. In Germany and Sweden, for instance, unemployment is declining while economic growth and exports are rising. Not coincidentally, both countries have implemented significant economic reforms over the past ten years. To the audible disappointment of the world’s left-wingers, Sweden is no longer Social Democracy’s poster-child.

Nor can Europe’s present woes be explained in mono-causal terms. Like America, property-bubbles and over-leveraged financial industries played a role in some countries’ meltdowns. But not every European nation presently enduring economic hardship experienced banking crises on the scale experienced by Ireland and Britain.

It will be decades before economists and historians completely diagnose what’s happened to Europe’s economies since 2008. Many, however, will likely conclude that many European countries’ economic culture helped them lurch into seemingly unending crisis.

“Culture” is one of those heavily over-used words. But in sociological and historical terms, “culture” is a way of describing, among other things, the approach to life, the values emphasized, attitudes toward work, the understanding of law, and ultimately the view of science, the arts and religion prevailing in a given society. Over time, these form a type of inheritance that can remain relatively stable in particular historical settings over several generations.

Again, we shouldn’t over-generalize. But we can speak of a West European-style economic culture that differs (at least for the moment) from what might be called “Anglo-American” ways.

Few, for example, would question that the dominant value presently informing Western Europe’s economic cultures is security. Poll after poll illustrates that if West Europeans are asked to choose between more security or more liberty, they overwhelmingly opt for security. That’s understandable, given 20th-century Europe’s history of political and economic instability.

Unfortunately the policies directed toward preventing reoccurrences of 1930s-like mass unemployment and the economic turmoil that fed the extremes of left and right have contributed to notoriously rigid labor markets throughout Europe, not to mention fiscally unsustainable welfare states. These have in turn helped facilitate many European nations’ high unemployment levels, and created deep anxiety among those unable to find full-time work.

Another defining feature of a society’s economic culture is its dominant mode of economic advancement. Broadly speaking, this occurs in two ways in modern economies. The first is through free enterprise and competition within a stable framework of laws, customs, and morality. The second is through closeness to government power.

Much of Europe has opted for the second approach. This manifests itself in what might be called hard or soft corruption. “Hard” corruption can be found, for example, in contemporary Greece — a country where it’s very difficult to get anything done without payoffs to one or more of Greece’s army of civil servants.

In a way, however, “soft” corruption is more insidious, because it avoids the overt unseemliness of accepting bribes. Soft corruption essentially involves cozy relationships between European interest-groups — such as businesses unwilling to compete, or public-sector unions intent on securing permanent employment for their members — and political parties from across the ideological spectrum. The interest-groups provide the cash and votes that help elect politicians. The politicians reciprocate by legislating to protect their supporters.

The fatal flaw of this arrangement is that neither hard nor soft corruption creates wealth. Instead, they shift the incentives away from creating wealth through entrepreneurship and competition. More and more people are thus drawn into playing a dysfunctional game in which the objective is to manipulate state power in order to redistribute wealth towards oneself.

Sooner or later, those genuinely interested in creating wealth in such cultures either give up or simply migrate to more entrepreneurial-friendly settings. Those left playing the redistribution game subsequently find themselves fighting over less and less. Sooner or later, something has to give. Greece has reached that point. Much of Europe is struggling to avoid following it into the abyss.

The irony is that the barriers to change in Europe are not economic. They’re political. And most European politicians understand this all too well. As Luxembourg’s prime minister, Jean-Claude Juncker said in 2007: “We all know what to do, but we don’t know how to get reelected once we have done it.”

Fortunately, no one is a prisoner of their culture, economic or otherwise. European governments could make substantial progress if they chose to accompany austerity measures with pro-growth, pro-entrepreneurship, and anti-crony capitalist policies.

Yes, the price for some might well be electoral defeat. But so be it. If the whole point of politics is to promote the common good rather than one’s self-advancement, then any European political leader with any integrity shouldn’t hesitate to think — and do — the unthinkable.

This article was first published on the website of the The American Spectator on Oct. 4, 2010.

Indeed, off-stage voices from Britain’s increasingly not-so-cultured elites—such as the celebrity atheist Richard Dawkins and others whom the English historian Michael Burleigh recently described as “sundry chasers of limelight” and products of a “self-satisfied provincialism”—were relegated to the sidelines. As David Cameron said, Benedict “challenged the whole country to sit up and think.”

Of course the success of Benedict’s visit doesn’t mean Britain is about to return to its Christian roots. In fact, it’s tempting to say present-day Britain represents one possible—and rather depressing—European future.

In an article welcoming Benedict’s visit to Britain, the UK’s Chief Rabbi Jonathan Sachs observed, “Whether or not you accept the phrase ‘broken society,’ not all is well in contemporary Britain.” The facts cited by Sach were sobering. In 2008, 45 percent of British children were born outside marriage; 3.9 million children are living in poverty; 20 percent of deaths among young people aged from 15 to 24 are suicides; in 2009, 29.4 million antidepressants were dispensed, up 334 percent from 1985.

Such is the fruit of a deeply-secularized, über-utilitarian culture that tolerates Christians until they start questioning the coherence of societies which can’t speak of truth and error, good and evil, save in the feeble jargon of whatever passes for political correctness at a given moment.

But what few commentators have grasped is that Benedict has long foreseen that, for at least another generation, this may well be the reality confronting those European Catholics and other Christians who won’t bend the knee to political correctness or militant secularism. Accordingly, he’s preparing Catholicism for its future in Europe as what Benedict calls a “creative minority.”

The phrase, which Benedict has used for several years, comes from another English historian Arnold Toynbee (1889-1975). Toynbee’s thesis was that civilizations primarily collapsed because of internal decline rather than external assault. “Civilizations,” Toynbee wrote, “die from suicide, not by murder.”

The “creative minorities,” Toynbee held, are those who proactively respond to a civilizational crisis, and whose response allows that civilization to grow. One example was the Catholic Church’s reaction to the Roman Empire’s collapse in the West in the 5^th century A.D. The Church responded by preserving the wisdom and law of Athens, Rome and Jerusalem, while integrating the invading German tribes into a universal religious community. Western civilization was thus saved and enriched.

This is Benedict’s vision of the Catholic Church’s role in contemporary Europe. In fact, it’s probably the only viable strategy. One alternative would be for the Church to ghettoize itself. But while the monastic life has always been a vocation for some Christians, retreat from the world has never been most Christians’ calling, not least because they are called to live in and evangelize the world.

Yet another option, of course, is “liberal Catholicism.” The problem is that liberal Catholicism (which is theologically indistinguishable from liberal Protestantism) has more-or-less collapsed (like liberal Protestantism) throughout the world. For proof, just visit the Netherlands, Belgium, or any of those increasingly-rare Catholic dioceses whose bishop regards the 1960s and 1970s as the highpoint of Western civilization.

Even the Economist (which strangely veers between perceptive insight and embarrassing ignorance when it comes to religious commentary) recently observed that “liberal Catholics” are disappearing. Long ago, the now-beatified John Henry Newman underscored liberal Christianity’s essential incoherence. Liberal Catholicism’s future is that of all forms of liberal Christianity: remorseless decline, an inability to replicate themselves, and their gradual reduction to being cuddly ancillaries of fashionable lefty causes or passive deliverers of state-funded welfare programs.

By contrast, Benedict’s creative minority strategy recognizes, first, that to be an active Catholic in Europe is now, as Cardinal André Vingt-Trois of Paris writes in his Une mission de liberté (2010), a choice rather than a matter of social conformity. This means practicing European Catholics in the future will be active believers because they have chosen and want to live the Church’s teaching. Such people aren’t likely to back off when it comes to debating controversial public questions.

Second, the creative minority approach isn’t just for Catholics. It attracts non-Catholics equally convinced Europe has modern problems that, as Rabbi Sachs comments, “cannot be solved by government spending.”

A prominent example is Metropolitan Hilarion Alfeyev, Chairman of the Orthodox Patriarchate of Moscow’s Department for External Church Relations. A deeply cultured man, who’s completely un-intimidated by either liberal Christians or militant secularists, Hilarion has conspicuously cultivated the Catholic Church in Europe because he believes that, especially under Benedict, it is committed to “defending the traditional values of Christianity,” restoring “a Christian soul to Europe,” and is “engaged in common defence of Christian values against secularism and relativism.” Likewise, prominent European non-believers such as the philosophers Jürgen Habermas and Marcello Pera have affirmed Europe’s essentially Christian pedigree and publically agreed with Benedict that abandoning these roots is Europe’s path to cultural suicide.

Lastly, creative minorities have the power to resonate across time. It’s no coincidence that during his English journey Benedict delivered a major address in Westminster Hall, the site of Sir Thomas More’s show-trial in 1535.

When Thomas More stood almost alone against Henry VIII’s brutal demolition of the Church’s liberty in England, many dismissed his resistance as a forlorn gesture. More, however, turned out to be a one-man creative minority. Five hundred years later, More is regarded by many Catholics and non-Catholics alike as a model for politicians. By contrast, no-one remembers those English bishops who, with the heroic exception of Bishop John Fisher, bowed down before the tyrant-king.

And perhaps that’s the ultimate significance of Benedict’s creative minority. Unlike Western Europe’s self-absorbed chattering classes, Benedict doesn’t think in terms of 24-hour news-cycles. He couldn’t care less about self-publicity or headlines. His creative minority option is about the long-view.

The long-view always wins. That’s something celebrities will never understand.

Unfortunately evidence is emerging that some people have learned nothing. A recent report, for example, commissioned by the Wall Street Journal illustrates that “losses from mortgage fraud—ranging from falsified credit reports to identity theft—rose 17% last year after declining 57% in the two years after its 2006 peak.”

Of course wider adherence to ethical norms against lying and stealing won’t solve every economic problem. There are heavy technical dimensions to many economic dilemmas which require technical solutions. Nor does every policy-error constitute a moral failure.

Nevertheless those making economic decisions are human beings, and our virtues and vices do shape our purchasing, selling and policy choices. Many such virtues could be highlighted, but one needing extra-attention today is humility.

The word “humility” derives from the Latin humilitas. This in turn comes from humus which means earth or soil, but is also related to homō, meaning man. For the Greeks and Romans, the word underscored the idea that humans are not God or gods. Likewise for the Jews and early Christians, humility was about remembering that humans are fallible creatures who come from and return to the earth: ashes to ashes, dust to dust. Some first millennium Christian writers, such as St. John Chrysostom, even described humility as the mother of the virtues, as it prevented vanity from corrupting every other virtue.

So how might a renewed embrace of humility help us to rethink our approach to contemporary economic life?

In the case of consumers, a good dose of humility might well encourage some acceptance that the meaning of life is not simple and is certainly not to be found in how many material things we possess, as important as wealth can be in helping us to live dignified lives. To this extent, greater humility might temper the “I-want-it-all-right-now” mentality that helped generate such high household-debt levels in America and Europe.

Likewise, businesses could benefit from a renewed appreciation of humility. The financial wizard the late Sir John Templeton once wrote that humility was crucial if business was to maintain the open-mindedness that is essential to successful entrepreneurship rather than rest upon their past glories. To this we might add the insight of another prominent entrepreneur, François Michelin, that humility helps business leaders in a market economy remember that the customers are the real masters. More humble business-leaders would also be less-inclined to succumb to the “Masters-of-the-Universe” hubris that helped destroy any number of banks in 2008.

Speaking of hubris, humility also has a role to play in encouraging mainstream economists to accept economics’ limits as a science and acknowledge that not everything about markets can be explained by mathematical models that were supposed to fail only once in a million years. As George Mason University professor of economics Russ Roberts has wisely observed, while “facts and evidence still matter”, economists “should face the evidence that we are no better today at predicting tomorrow than we were yesterday.”

But perhaps those who could do with the biggest bout of humility during recessions are politicians and governments. If the Great Recession has taught us anything, it is that governments should admit many economic problems are beyond their control, and that any claim by politicians to be able to “manage” trillion-dollar economies is arrogant nonsense.

Instead politicians should be modest enough to concede that (1) the seemingly disorderly process of market exchange resolves many challenges that governments cannot; and (2) government overreach invariably causes new problems. Here they would do well to read Adam Smith’s famous warning concerning the “man of system” who “is apt to be very wise in his own conceit, and is so often enamored with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it.”

The fear of the Lord, the Bible says, is the beginning of wisdom. Contrary to received opinion, this verse has nothing to do with frightening people into religious belief. Instead it reminds each of us that we are not the center of the universe and that the sooner we grasp this, the wiser our choices will be. All of us—consumers, business-leaders, and politicians—need to be sufficiently humble to reassess our actions in a time of recession, acknowledge our errors, and then live out the necessary correctives.

To this extent, the virtue of humility may well be a key to understanding our pre-recessionary past and a way of illuminating our path to a better and more economically-prosperous future.

The long-term outlook is even worse. The U.S. Government is now borrowing approximately 41 cents of every dollar it spends. It’s also predicting additional borrowing of $8.5 trillion until 2020. If that eventuates, America’s national debt would exceed 77 percent of its annual economic output.

At some point, most of us become dazed by all these numbers that track America’s upward spiral of debt. This numbness is only exacerbated by the fact that government debt-excesses in most developed countries have been matched and even surpassed by household and financial-sector debt.

In Spain, for instance, household debt rose from 69 percent of disposable income in 2000 to 130 percent in 2008. Britain was worse, with the ratio rising from 105 percent to 160 percent over the same period. Average American household debt increased from $27,000 in 2001 to $44,000 today.

The economic effects of servicing all this debt (let alone paying down the principle) are not hard to grasp. For many households, it means either bankruptcy or severe curtailing of lifestyles so that expectations match people’s actual incomes. For others, it translates into less access to credit, even for those with good credit records or well-conceived business plans that need only sufficient capitalization to succeed. The cost of servicing government debt also reduces the amount of private sector capital available for investment. This means slower growth which further impedes our ability to shrink government deficits.

Then there is the increased possibility that governments will resort to other, less-conventional means of deficit-reduction. As Adam Smith observed long ago in The Wealth of Nations, “when national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid.” Smith went on to explain that “the liberation of the public revenue, if it has ever been brought about all, has always been brought about by a bankruptcy; sometimes by an avowed one, but always by a real one, though frequently by a pretended payment.”

By “pretended payment,” Smith meant governments would seek to escape their debts by inflating the currency. In this way, governments could legally deny creditors what they are due in real terms, while simultaneously avoiding formal bankruptcy.

Of course, whenever a government resorts to inflation to diminish its debts, it has, for all intents and purposes, effectively acknowledged its insolvency. But such actions, as Smith noted, also constitute gross injustices against numerous innocents. Those who have been frugal and industrious suddenly find the value of their savings and capital arbitrarily reduced because of others’ financial irresponsibility. This also reduces the incentives for people to save and invest. For why should anyone bother to do so if they cannot be reasonably sure that the worth of their savings will not be suddenly diluted by government fiat?

Here we begin to see how excessive debt can have deleterious moral effects upon the economic culture. Another such effect is a breakdown in what some call “intergenerational solidarity.”

Increasing numbers of people below the age of 30 are aware that their long-term financial security has been undermined by the excessive personal, corporate, and government debt incurred by previous generations. It’s much harder to honor your father and mother when you think they’ve recklessly squandered your financial future.

A second cultural consequence of excessive debt is an erosion of trust. Just as wealth-creation and sound credit arrangements are ultimately built upon substantial reserves of trust, so too does a widespread inability to repay debts corrode a society’s reservoirs of trust and subsequent wealth-creation capacities.

But perhaps most worryingly, societies that embrace excessive indebtedness as a way of life eventually begin to deceive themselves.

Before the 2008 crash, for example, this manifested itself in banks leveraging their assets at ratios of 40-to-1 on the hubristic basis that “the models never fail.” In a post-crisis world, this self-deception appears in many continental European banks’ refusal to allow a full vetting of their balance sheets, presumably because of the ramifications of revealing just how much bad debt they are holding.

The truth, it’s often said, sets us free. Part of that liberation involves a ruthless self-reckoning and acknowledgment of our errors. The experience is rarely pleasant. The alternative, however, is to continue living the lie that our debt-problems—personal, corporate, government—will somehow go away without substantial changes of attitudes, actions, expectations, and priorities on our part.

And that, surely, is no alternative at all.

A good example of this is a recent Economist article on Catholicism’s hollowing-out in Europe. The piece is worth reading, even if it does get a great deal wrong. The article’s basic thesis is that much of Catholicism in Europe is dying while signs of new life are simultaneously growing in other parts of European Catholicism.

Insofar as it goes, that’s a broadly accurate analysis. It’s complicated, as the Economist notes, by factors such as the resurgence of Catholic activism in countries like Spain to combat a hyper-leftist secularist government’s social agenda, the varying nature of the official links between the state and the Catholic Church in different European countries, and the widespread disgust at the utterly inadequate response of so many European Catholic bishops to the sexual abuse problem.

But what the Economist doesn’t say (though the evidence is there in its own article) is that what we are witnessing is the collapse of “liberal” or “progressivist” Catholicism. The phrase “liberal Catholicism” can mean many things, not least because of the sheer number of often-diametrically opposed positions associated with the word “liberal”. But for our purposes we are talking about the policy of gradual accommodation to secularist expectations, and then, inevitably, subservience to secularism.

This was the approach adopted by mainline Protestantism (which today includes most of Anglicanism in the developed world) in Europe after World War II. And for them, it has proved to be an unmitigated disaster. Catholics account for less than 10 percent of England’s population, for instance, yet they far outnumber Anglicans when it comes to Sunday observance in a country where perhaps 60 percent of the population still calls itself Anglican. Mainline Protestant churches throughout Europe are, to use a medical term, terminal.

In the heady days after Vatican II, however, large numbers of West European Catholic bishops, clergy, theologians and laity really believed that the 1960s progressivist agenda was the future. Unfortunately, like all forms of liberal Christianity, “progressivist” Catholicism carried the seeds of its own destruction. Sociologically-speaking, it’s hard to deny that those forms of Christianity that (a) demand nothing from its adherents in terms of belief beyond an emphasis on tolerance, diversity, and endless dialogue-for-the-sake-of-dialogue; (b) dilute dogma and doctrine to the point of meaninglessness; (c) that become yet another means of self-affirmation in a culture full of self-affirmation; (d) embrace post-1960s sexual morality; (e) essentially anathematize anyone who doesn’t more-or-less adhere to secular left-liberal political, social, and economic positions, eventually self-destruct.

The reason is simple: no-one needs to be a Christian to hold these views. The actual content of orthodox Christianity is, in fact, opposed to all these positions. Hence, no-one should be surprised that most who embrace these views sooner or later eventually marginalize their Christianity to the point of irrelevance to their daily lives or simply drift away altogether. The odds of them raising their children – assuming they actually have any – in the Christian faith are remote at best.

Of course, the documents of Vatican II provided no warrant for Catholics to follow such a path (that’s why the dwindling band of progressivists talks endlessly about “the spirit” of Vatican II). Yet that didn’t deter a good number of West European Catholics from doing so. Today, we are witnessing the fruits of such choices throughout much of Europe. Everywhere the “liberal” agenda was adopted, a collapse in Christian belief and practice has been the result. It is hard to find exceptions to that rule.

Beyond this, however, there are three other important factors the Economist missed in its analysis of European Catholicism.

The first is the impact of urbanization in continental Europe from the 1950s onwards. As the current archbishop of Paris, Cardinal Andre Vingt-Trois, observes in his excellent book, Une mission de liberté (2010), Catholicism was woven into the very fabric of rural France (and other traditionally Catholic rural areas in Europe). With the mass shift of population to urban areas after World War II, that world came to an end, and, with it, a type of mass Catholicism. The Church struggled to adapt to this population shift. Some of its attempts to do so – like the “worker-priest” experiments of the 1950s – were an abject failure and ended with flirtations with the dead-end of Marxism.

The second is the impact of the church-tax in countries such as Germany and Austria. While it permits the Catholic Church in these nations to perform all sorts of social activities on a mass scale, the same tax also diminishes the direct link between Catholics and church activities. Voluntary church activity and direct financial giving in these countries has been supplanted by a host of lay bureaucrats, many of whom sit rather loosely towards Catholic belief and essentially see themselves as deliverers of social services on behalf of the state.

The third data-point is that where Catholic bishops have promoted a “dynamic orthodoxy”, the Church in Western Europe has held its own. A good example of this is the archdiocese of Paris. Yes, that’s right—Paris, the home of the French Revolution. If you visit Notre Dame Cathedral in Paris on a Sunday evening, you will likely find it packed for evening Mass. The congregation typically consists of people of all ages and backgrounds.

Under the leadership of the late Cardinal Jean-Marie Lustiger and his successor Cardinal Vingt-Trois, the archdiocese of Paris has slowly emerged as a success story of post-Vatican II Catholicism. It has many vocations to the priesthood. It also has an active laity that is engaged with the world without being subservient to the expectations of secular culture. This “dynamic orthodoxy” has not involved retreating into a Catholic ghetto or yearning for an imaginary, idyllic 1950s in which a lot of social conformity often masqueraded as authentic belief and practice in much European and American Catholicism. Nor has it meant dumbing-down the faith to make it more “relevant” or “cool.” Instead, it has meant learning, living and teaching the fullness of the Catholic faith in the conditions of secular modernity. Part of the success has involved integrating many of the new Catholic movements—Emmanuel, L’Arche, Charismatic Renewal, etc—into the daily life of Catholic parishes in Paris.

To be sure, this approach hasn’t converted everyone. It could also use refinement here and there. But it is having much more measurable success than all the progressivist alternatives combined, and doesn’t involve embracing a siege-mentality. That’s no small achievement in a Western Europe where “Christophobia” and anti-Catholicism has increasingly become a cultural norm, or, as some put it, the last acceptable prejudice.

The Gettysburg Address is the set of words actually spoken by Lincoln at Gettysburg. And, as it happens, we know what those words are. (The Bliss copy nearly perfectly reproduces them.) Three entirely independent reporters, including a reporter for the Associated Press, telegraphed their transcriptions of Lincoln’s remarks to their editors immediately after the president spoke. All three transcriptions include the words “under God,” and no contemporaneous report omits them. There isn’t really room for equivocation or evasion: Abraham Lincoln’s Gettysburg Address—one of the founding texts of the American republic—expressly characterizes the United States as a nation under God.

George goes on to ask why an organization such as the American Constitution Society which, presumably, values the American constitution and other important documents in America’s legal and political history would make such an omission. Even diehard atheists, one might add, who purport to believe in truth should be asking what is going on here. It’s one thing to argue about the precise place of religion and religious-informed belief in the public square. It’s quite another, however, to try and ever-so-slightly distort the lens through which we examine the history of these matters.

Professor George, one of the world’s leading natural law theorists and a leading scholar of constitutional interpretation and civil liberties, also appears in Acton’s documentary, The Birth of Freedom, which likewise underscores the historical role played by religion and religious belief in the American Founding and other key events in America’s experiment in ordered liberty. Again, it’s not a question of whether one is a believer, an agnostic, or an atheist. It’s a matter of accurate historical memory. Nations that deceive themselves about their pasts build their present and future upon the shifting sands of lies and half-truths.

In some instances, these measures may not be enough to prevent countries such as Greece and Portugal from sovereign-debt defaults. Still, the alternatives are ever-rising government debt-to-GDP ratios (which invariably prolong stagnation as has occurred in Japan since the 1990s) or attempts to simply inflate the debt away (thereby risking the terrible experience of 1920s Germany or America’s 1970s economic malaise).

In the end, however, escaping the Great Recession’s effects is going to require more than spending cuts. The only long-term way out is economic growth. Here, however, much of Europe faces a problem that most non-European countries do not. The challenge is one of an overall population decline and an aging population. As stated in a 2006 IMF report, “The population of the 25-member European Union in coming decades is set to become slightly smaller—but much older—posing significant risks to potential economic growth and putting substantial upward pressure on public spending.”

However one examines the statistics, the demographic picture for Europe—including Eastern Europe and Russia—is bleak. Statistically-speaking, the numbers of births per woman required merely to maintain a population’s size is 2.1 children. Not a single European country meets that figure today. Germany’s birth-rate, for instance, is 1.38. Italy’s is 1.41. Spain’s is 1.39. France and Britain are doing comparatively well at 2.0 and 1.94 respectively, but—you guessed it—Greece is the lowest in the EU.

Nor is any consolation to be found in the aging statistics. In Belgium, the percentage of the population over 65 will increase from 16 percent to 25 percent by 2050. In 2007, a World Bank document stated that by 2050 approximately half of Spain’s population will be 55 or older.

The reasons for these trends are many. The twentieth century’s two world wars tore large generational holes in Europe’s demographic landscape. Women are also having children later in life. There also seems to be a broad correlation between increasing material prosperity and diminishing population growth. Then there is the greater access to contraception from the 1950s onwards.

But more subtle cultural factors may also be at work. For one thing, it’s striking how many Europeans are reluctant to discuss the subject of their population decline. This may owe something to an association of calls to have more children with the population policies of totalitarian regimes such as Hitler’s Germany, Stalin’s Russia, Mussolini’s Italy, and Ceauşescu’s Romania. Another factor may be many Europeans’ susceptibility to population-growth alarmism, as manifested in many European governments’ aggressive promotion of population-control in developing countries (which strikes some as verging on neocolonialism).

At a deeper level, however, Europe’s declining birth-rate may also reflect a change in intellectual horizons. A cultural outlook focused upon the present and disinterested in the future is more likely to view children as a burden rather than a gift to be cared for in quite un-self-interested ways. Individuals and societies that have lost a sense of connection to their past and have no particular interest in their long-term destiny aren’t likely to be worried about a dearth of children. Here Europe’s generation of 1968—which promoted a radical rupture with the past and is intensely suspicious of anything that might broaden people’s outlooks beyond the usual politically-correct causes—has much to answer for.

Immigration is one way for European countries to escape these conundrums. After all, it has proved to be one of America’s engines of economic growth and continues to help the United States avoid the population trap in which Europe now finds itself. For decades, Western Europe relied on immigration, especially from Islamic countries, for cheap labor, especially for those unpleasant jobs some Europeans prefer not to do.

For the moment, however, increased immigration doesn’t appear to be an option for Europe. The policies of multiculturalism have failed and produced such deep fractures in many European societies that most European governments are presently reducing immigration from non-European countries.

Is demography destiny? It need not be. Demography is only one variable among many. Moreover individuals and nations can make choices, and choices change our future. Sometimes circumstances, such as the global economy’s present problems, can provide the incentive and opportunity to break away from apparently unalterable paths.

The clock, however, is ticking. The longer Europeans fail to address their demographic difficulties, the smaller becomes their room for maneuver, and the more likely Europe will be reduced to being a bit-player on the world’s political and economic stage.

The loss would be not only Europe’s, but ours as well.

One of the most famous plays in Western history was penned by the German writer Johann Wolfgang von Goethe (1749-1832). His two-part drama, Faust, is considered one of the greatest works of German literature. This complicated and sometimes disturbing text tells the story of a young scholar, Faust, who enters into a pact with the devil, Mephistopheles. In return for Mephistopheles’ services to help him realize his ambitions, Faust wagers the devil his soul.

Throughout the play, Faust asks Mephistopheles to help him achieve several ostensibly good ends. But each time he summons up the devil’s power, Faust gets more than he bargains for. In one scene, for example, Faust finds himself living as the landlord of a prosperous estate. His tranquility is disturbed only by an elderly couple who holds a freehold enclave on Faust’s land. Faust asks Mephistopheles to displace them. The devil fulfils his request, but in a way unanticipated by Faust: the elderly couple’s house is incinerated and the couple murdered.

At the beginning of part two, however, the play makes a surprising excursion into economics. Accompanied by Mephistopheles, Faust attends the court of a ruler whose empire is facing financial ruin because of profligate government spending. Rather than urging the emperor to be more fiscally responsible, Mephistopheles—disguised, revealingly, as a court jester—suggests a different approach, one with disturbing parallels to our own age.

Noting that the empire’s currency is gold, Mephistopheles maintains there is surely plenty of undiscovered gold underneath the earth belonging to the emperor. Thus, he argues, the emperor can issue promissory notes for the value of this yet-to-be-found gold, thereby generating fresh monetary resources for the government and solving its debt problems.

Not surprisingly, the emperor and his treasurer are delighted with this idea. It means the monarch can avoid making hard economic choices while simultaneously providing the empire with desperately needed currency. Mephistopheles subsequently deluges the court with paper money, and Faust is praised by emperor and commoner alike.

The results, however, are not what are expected. First, the issuance of paper money does not solve the emperor’s spending problems. Instead the ruler and his court become even more extravagant, knowing they can always print more paper money to cover their ever-growing expenses. Second, the devil has subtly but fundamentally changed the basis of the empire’s currency. Instead of being rooted in the solidity offered by a tangible and valued asset, the currency is now based on flimsy paper promises. Thus long-term monetary stability and powerful restraints on extravagant government spending are sacrificed for short-term gain.

Goethe finished writing the second part of Faust in 1832. Modern economics was then only emerging from its infancy. Yet Goethe’s insights go to the heart of some of our most intractable long-term economic problems.

One concerns the impact of fiat money. Technically speaking, fiat money is a currency that a government declares to be legal tender, even though it has no intrinsic value. Throughout history, fiat money has been the exception rather than the rule. Most currencies have been based on physical commodities, particularly gold. By contrast fiat money is ultimately based upon enough people having faith that a given currency will be accepted for the purpose of economic transactions.

Such faith, however, is easily shaken. The euro’s recent tribulations are a good example of what happens when people begin losing their faith in a fiat currency. The expression “as good as gold” underscores the confidence people have always attached to commodity-backed currencies, especially in difficult economic times.

The second problem concerns the temptation faced by governments as they struggle to solve their deficit problems. In 2009, America’s federal government posted a $1.4 trillion deficit. That’s 10 percent of U.S gross domestic product, a level not witnessed since World War II. Given a choice between cutting spending, borrowing, or inflating the money-supply, the third option appeals to many politicians. Moreover, like Goethe’s emperor, it’s exactly what many Western governments did between 1945 and 1980: short-term relief was bought at the expense of long-term fiscal stability.

But perhaps the biggest lesson from Goethe’s Faust is that self-deception is intrinsic to all foolish acts. Whenever governments choose comforting economic illusions over difficult economic truths, then, like Mephistopheles, they will employ dubious means such as state-engineered inflation or public-sector indebtedness to make ill-conceived economic policies seem less burdensome to those who will in the long term eventually have to pay the price.

There is, some might say, something demonic about that.

Western Europe’s postwar economies were shaped by an apparent concern for the economically marginalized and the desire to realize more just societies. This inspired the extensive government economic intervention, high-tax rates and generous welfare states now characterizing most contemporary European economies. After 1945, Communists and Christian Democrats alike rallied around these policies. For Marxists, it was a step toward realizing their dream. For non-Marxists, it was a way of preventing outright collectivization.

Even today, words like “solidarity” and “social justice” permeate European discussion to an extent unimaginable in the rest of the world. If you want proof, just switch on a French television or open a German newspaper. The same media regularly contrast Europe’s concern for justice with America’s economic culture. America, many Europeans will tell you, embodies terrible economic injustices in the form of “immense” wealth-disparities, “grossly inadequate” healthcare, and “savage” competition.

But while such mythologies dominate European discourse, it’s also true that Western Europe’s economic culture is characterized by a deeply unjust fracture. Modern Europe is a continent increasingly divided between what Alberto Alesina and Francesco Giavazzi called in The Future of Europe (2006) “insiders” and “outsiders”.

The “insiders” are establishment politicians of left and right, trade unions, public sector workers, politically-connected businesses, pensioners, and those (such as farmers) receiving subsidies. The “outsiders” include, among others, entrepreneurs, immigrants, and the young. Naturally the insiders do everything they can to maintain their position and marginalize outsiders’ opportunities for advancement.

So how do Europe’s insiders maintain the status quo?

First, one needs to understand that Western European governments are largely managed by a political class that transcends ideological divisions. In France, for example, the main parties of right and left are dominated by people who went to the grandes écoles­ – elite educational institutions that are very difficult to enter but whose graduates supply most of France’s business leaders, politicians, and civil servants. It’s not untypical for a grande école product to work for a politically-connected corporation, switch to the civil service, return to the private sector, before eventually becoming a member of parliament.

France is an extreme case, but this situation manifests itself throughout Western Europe. Not surprisingly, this group – whatever their political differences – generally agree that they should be in charge. Indeed, Europe’s political class is exceptionally good at self-perpetuation. It’s common, for example, for politicians’ children to follow the same road to power. Take Greece’s current socialist prime minister, George Papandreou. His father and grandfather were also Greek prime ministers. In America, not even the Bushes have emulated this dynastic feat. Incidentally, Papandreou’s predecessor as Prime Minister, the conservative Konstantinos Karamanlis, had an uncle who was prime minister of Greece 4 times and president twice.

Second, there is the phenomenon of what the Nobel Prize economist George Stigler identified in 1971 as “regulatory capture.” As Alesina and Giavazzi demonstrate, European regulators invariably identify themselves with those they are supposed to regulate – sometimes in return for jobs in a post-regulator life – and work hard to limit competition from new businesses or entrepreneurs.

This is a manifestation of a third disorder: European insiders’ willingness to use state power to keep European outsiders marginalized. European unions, for example, could care less about the unemployed and immigrants. Instead they press governments to make it very hard for companies to fire anyone, especially union members. Employers are consequently reluctant to hire. Many young Europeans and recent immigrants are thus condemned to cobbling together part-time employment contracts with no benefits.

But perhaps the biggest problem is one of attitude . It is not as if European outsiders are, for instance, clamoring for labor market liberalization. When Paris’s streets were hit by student riots in 2005, the protests were against relatively minor efforts to unblock France’s highly inflexible labor market. Likewise, Spain’s 20 percent unemployment rate has not been greeted with widespread demands for labor market reform. Instead the cry is for the same permanent job security (irrespective of performance) enjoyed by the impossible-to-fire crowd.

Central-East Europe is different. After all, they endured forty years of dominance by the ultimate ‘insiders”: i.e., members of the ruling communist parties. Unfortunately, as the Economist recently observed , there is evidence of a West European-like insider-outsider dynamic asserting itself throughout the region

Of course every society has its elites. The real question is whether a society embodies the possibility of social mobility through hard work and accessibility to economic opportunity.

This is what makes modern Europe’s endless justice rhetoric so distasteful. All the tedious solidarity-talk and social justice-speak essentially masks a social stratification based on the highly-unjust foundation of proximity to government power – a situation which further incentivizes everyone to join the daily jostle to obtain state-mandated privileges.

It’s difficult to imagine a more damning moral indictment of Europe’s discredited economic culture.