Politicians, not just in the US but across Europe, are rewarded for focusing on today's short-term, tactical issues and voters respond to that. One of the assumptions of Ricardian equivalence is that people care about future generations so people behave in a certain way. But in reality we are incredibly myopic, governments in Europe and the US just can't think beyond two years and unfortunately, the most intractable problems are longer-term, multi-generational problems. We as voters are simply not rewarding governments for focusing on those issues. Now I'm not proposing that Western countries become undemocratic, but I think there are a whole range of things you could do within a democracy: you could try to strip out the politics, you could end up with Mexican-style longer terms, say single terms of six years, which would give you a longer-term perspective to bring in to the policy-making. You could do what Obama has tried to do with his fiscal commission which is supposed to be bipartisan. I wouldn't say it's been a resounding success, but in terms of stripping out politics and focusing on big structural policies, that would be an idea. Or there's the idea of incentives. The essence of Western capitalism is about creating incentives for people to do things, the innovators were incentivised to do that. And yet, over time, through guarantees and subsidies and the increase of the welfare state, we've seen people become less interested in taking up mathematics and science and become innovators. There may be ways to encourage people to become more incentivised to do the right thing. For example, you might have to pay people to take up maths and science. In Brazil and Mexico, for example, these programmes are working brilliantly and Bloomberg has a pilot programme in New York where you are essentially paying people to do the right thing: if a child has a 98 per cent attendance record, they get 100 dollars; if they are immunised against some disease the parent gets 200 dollars. It is a horrendous thing to suggest that we have to be paid to do the things you'd hope we'd do anyway, but I think we've reached a place where there just aren't enough people doing maths and science, yet the future of these economies relies very heavily on research and development, and innovation. How are we going to get people into those industries as opposed to football, or appearing on The X Factor? That's what I think the core issues are. 

DJ: Niall, you're the historian. Have we been here before? Is this comparable to the 1930s when America went through another big crisis and one wondered whether it would ever re-emerge from it? Or is this something completely new, and is the situation here in Europe even worse? Is it conceivable that Europe could somehow pull itself up by its bootstraps, given that we can't agree on even pretty trivial things that don't matter to all this, let alone these very big issues? What is the historical perspective on this?

NF: Well, if you want to feel better as an American today, the first thing you should do is look at the 1930s because that was a lot worse. The policy response then was almost all disastrously wrong. We've learnt from those mistakes and the policy response to this financial crisis has been significantly more successful. It's also worth looking at the 1970s to remind yourself that the US had another bad decade not so very long ago, which we lived through. Each time it bounced back. Even through the teeth of the Depression, American companies were innovating. General Motors and DuPont flourished in the 1930s, and Apple and Microsoft in the 1970s were founded in the depths of stagflation. So one obvious lesson from history is never write the United States off, even when things are looking grim, particularly politically grim. There are still innovators and entrepreneurs out there coming up with new companies at a faster rate than anywhere else. The problem in my mind in the US, and I agree with Dambisa 100 per cent on this, is a political problem. There is still a foundation of innovation and entrepreneurship like no other and so I go back to the great Churchill line: "America will always do the right thing when all the other possibilities have been exhausted." I feel as if we'll go through a painful process of failing to do the right thing until, as per usual, as with 9/11, as with Pearl Harbour, as always, a crisis will force the US at long last to do the right thing. That's how these fiscal problems will finally be addressed. So, yes we have been here before and it's not inconceivable that the US will come out fighting and that there will be another Reagan, or another great president who will lead America in the kind of direction that is implicit in much of what Dambisa writes about. 

DJ: That doesn't sound like Obama to me.