The governments of Italy, Germany, France and the UK are struggling to reform their economies, but little is happening. Is it impossible to launch substantial reforms in these countries? Do countries need an economic crisis to change? Or can only small countries do it? Are Romano Prodi, Angela Merkel, Nicolas Sarkozy and Gordon Brown stuck in a maze of reform obstacles?

Evidence from at least a dozen reformist countries of the Organisation for Economic Co-Operation and Development suggests not. Those that reformed substantially have had remarkable results. Ireland doubled incomes in a decade after dramatic reductions in the corporate tax rate; Spain integrated millions of immigrants into its labour market after deregulation; Sweden improved schools by allowing choice; New Zealand achieved full employment by labour market deregulation; Icelandic banks are all over Europe after privatisation and 16 countries introduced flat tax.