Economy

I am sorry for not having contributed since a while (the reason was that there was in Ny Tid so much which invited comment, and if one thinks about what to write there there is no capacity left for writing here …), but in Hbl of To 30.10.14 there was an article which puzzled me more than a little bit: it was written by a Norwegian ”makroekonom och obligationsförvaltare i ett norsk fondbolag”, and titled ”Propagera för prisflexibilitet, herr Draghi!”

According to the article it seems that there are economists who dream of getting (somehow) the inflation up (at present at 0,3 %). How that is supposed to help is not explained. – Personally, I see the possibility that a low inflation is perhaps a SYMPTOM of a rather lifeless economy (which as such is undesirable) – as if everybody were keeping such a strict hold on his money that nobody dares to raise any prices, with a very slow circulation of money (and as slow production of taxes as a result). But to fight symptoms would not be the same as fighting causes. And if the idea were that higher inflation might stimulate the holders of money to become more active economically, then the experience is, after all, that they will turn to speculation (= gambling), with economic bubbles soon to follow. – It is of course possible that I see this wrong, but in that case I should be happy about any enlightening comment from somebody who understands economy better.

The author of the article is anyway of the opinion that getting up the inflation would not be the right way. Instead, he begins his article with the formulation ”Vi måste bort från föreställningen att nominella löner inte kan, eller bör, sjunka”. This is (about two thirds through the article) followed up with the formulation ”Det är kombinationen av fackföreningsrörelse, minimilönslagstiftning och opium till de arbetslösa som gör att de nominella lönenivåerna är trögrörliga nedåt”. Jaha, down with the wages … . The author seems to live in the belief that with lower wages the employers will surely take in more people. But why should they? They will anyway employ just as many people as they need to produce what they can sell (which, if they give people less money to spend, will have a tendency to become even less than at present). And indeed the author’s promises of a glorious future (if Draghi should follow his recommendations) are kept pretty vague, without any detailed explanations how they would be fulfilled.

One question is of course how Hbl got the idea of asking this author for his opinion (and then also publishing it) – but well, we know that SFP is in many things pretty close to Kokoomus … .

Another question is what actually could be done to help the European economy (and if ever possible, the wider world at the same).

Aside of improvements on the educational system (with, e.g., more frequent psychological testing what students are good at and motivated for – which might help them to find a satisfying and productive place in life more easily), which might do good in the long run, it might help in the shorter run if politicians could develop a bit more initiative even outside the box in which neoliberal theory tries to keep them prisoner. It SHOULD be possible to invite ideas from the public, and there are masses of experts who would be able to say which ones of at least technical proposals were feasible. And as to selling technology abroad (e.g. alternative technology for energy production to poor countries) it is to be reminded of James Watt: he did not only invent a vastly improved steam engine, but also a new way of selling it – he was first delivering it, but making a contract that the user would pay for it by the money he was saving by using the machine (i.e. he was essentially selling it on credit while relying that his machine was in fact economically better than other possibilities). – For this specific idea it may in fact already be too late. There are already pretty many countries who have found out that for a decentralized production of electricity (which dispenses with the investment for a grid) solar and wind energy are cheaper than fossil energy already now. But I am quite convinced that an invitation for ideas from the public would bring up further good ideas.

Our system is up to now relying that anybody who has a worthwhile idea has of course also the motivation and the talent to develop and market it (which conveniently makes it unnecessary for politicians to bother about the matter). This idea, though, is psychologically nonsense, and perhaps one should begin to see it.