BIZCHINA> Review & Analysis
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BIZCHINA> Review & Analysis
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The strange and hypocritical world of economists
By OP Rana (China Daily)
Updated: 2009-07-22 13:17 Economics is a strange business. Economic forecasts, or for that matter analyses, are stranger. Give a set of economic data to two sets of, or two, economists and the chances are they will come up with two sets of or even contradictory results. There'd be nothing wrong with that had the results been confined to books, magazines, newspapers, and the virtually real world of websites and blogs. But these are different times, and people don't read books for knowledge, and newspapers and magazines for information, and go about their business as usual, buying and selling, sometimes hoarding, or dropping or raising prices according to the simple law of demand and supply, or just working in an office or factory with the secure thought of going on doing the same for years, or even decades. Our lives are no longer what they were even 20 to 30 years ago. Higher demand for a product does not necessarily mean we pay more for it. The same applies, in reverse though, for lower demand. Everything now depends on the sets of figures our economist and market analyst friends juggle with, and the results they conjure up. They dictate every part of our lives, even those that don't seem in any way connected to the market and its insane rules. It's the same juggling of data that makes a set of experts declare with infectious relief that the worst could be over for the world economy. And its juggling the same set of data, with some additions and subtractions, that leads another set of experts to a totally different conclusion: The worst is not yet over, or it's too early to say. The second group has US President Barack Obama on its side, though - who has declared that lasting worldwide recovery "is still a ways off". Even IMF Research Director Olivier Blanchard seems confused: "The good news is that the forces down are decreasing in intensity. The bad news is that the forces pulling the economy up are still very weak." So no one can say for sure whether recession is over - though the common man is only interested in keeping his job and feeding his family. Nonetheless, this is important for him because a longer recession would mean more job losses for those lower down the pecking order of the hierarchy of an office or factory.
Not surprisingly, capitalism is no longer only about follow-the-US, and you-can't-be-wrong. The world's fourth largest economy, Germany, still refuses to announce an economic stimulus package. And though China has announced a huge stimulus package, unlike the US it hasn't gone about distributing money among financial institutions and manufacturers. That brings us to another aspect of the global economic crisis. No bank or other financial institution collapsed in countries like China and India. On the contrary, they proved to be pillars of strength, keeping on pumping huge amounts of blood to keep the other organs of the economy running and healthy. The rare issue on which economists agree, some reluctantly, even grudgingly, is that it's government control that prevented financial institutions in developing countries from going the Lehman Brothers and Merill Lynch way. Honestly speaking, not all is bad about the US financial institutions, for Goldman Sachs has reported a $3.4-billion profit in the second quarter of this year. But again that was made possible because of a hefty government stimulus package. Some economists have even suggested that since the US government has given its financial institutions and manufacturers billion of dollars it might as well nationalize them - and prevent them from biting more than they can chew and going belly up again. That smells of socialism, and champions of the market abhor such an odor - they cannot imagine even limited government control over the economy. They say it's against the spirit of free trade and globalization. Their philosophy seems to be: Government money good, government control bad. Capitalism has buried and forgotten one of its greatest champions, John Maynard Keynes, or so it seems. Sadly, the dearth of Muhammad Yunuses means there is no place for the poor in the world of economics. Even the most prestigious economics magazine, The Economist, could manage only a six-paragraph report in its June 20 issue on the plight of the poor. The poor are ignored by the world of economics because they do not appear on companies' balance sheets and they are far removed from the boardrooms as polar bear are from the equator. Mainstream economists are obsessed with how to add to the already overflowing coffers of the handful of rich. The fact that a billion people face starvation and have no choice is of no concern to them. These economists can't digest the fact that some developing countries, with substantial populations of poor people, are still relatively immune to the whims and fancies of global capitalism, and are still trying to feed the poor and needy. They want to cast even the poorest countries into their Western mold - even if that means exposing a child to a world of rogue traders with financial derivatives so complex that once he enters it he would end up selling his next life, too. That their failure to predict their own future has exposed them doesn't bother them even a wee bit. By all accounts it seems they have lost the plot. They don't believe in the third-time-lucky adage, rather the 30th- or even 300th-time-lucky version. And financial wizards will wait till they get lucky and the global economy booms again so that they can indulge in greater excesses - even if that means the next reaction (read recession) would be longer and deeper, leaving more poor people to suffer. The author is a senior editor of China Daily. (For more biz stories, please visit Industries)
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