Tuesday, May 26, 2015

An Economic Suggestion, in Two Words

...for governments in particular. Look inward. Stop the blame game, and focus on moving ahead. (Recently I've kept up with historic levels of flooding in Texas, and blogging has been a bit light. So many areas have been affected - not only where there are family and friends, but where old memories reside as well.)

Look inward. So many positive actions could still be taken, so many changes could still be made, which would greatly improve economic conditions. However, doing so means that governments need to be willing to seek out their own citizens for solutions and answers to seemingly unsolvable problems - and often at local levels. Policy makers have become increasingly stymied, in their efforts to continue with one size fits all remedies. For a long time, it was possible for a representative democracy to do so. But increasingly: large scale planning efforts which expect entire populations to live the same way, can only go so far.

Some national introspection could go a long way, to tone down the reactive nature of today's political rhetoric. For instance, Harold James in a Project Syndicate post, notes the backlash towards migration which has developed in Europe. Of course, Europe's example is indicative of a reaction which has become typical for many nations. Many problems regarding social mobility, stem from the fact that few citizens feel as secure as they did, prior to the Great Recession.

Citizens do not feel their governments can adequately take care of their own, which is why many have become reluctant to assume further taxpayer responsibilities. The U.S. in particular, struggles with inadequate service formations at both national and state levels. Even as spending flows for services need to be maintained, politicians and economists alike are divided, how to do so.

Plus, the asset wealth of present housing stock depends on the ability of monetary policy to maintain aggregate spending capacity, in order that present debts and contracts can be honored. Much of this capacity also depends on maintaining labor force participation as well. Unfortunately, policy makers remain anxious to pull back from those commitments too quickly, as if doing so would somehow make the underlying structural problems go away without further ado.

Instead of reducing monetary flows prematurely, a structural shift needs to take place in both production and consumption capacity. Structural shifts are not just about the need to reduce dependence on pensions and create more flexible wages, but also about addressing the problems that both governments and special interests created for spending capacity, to begin with. Even though it isn't possible for today's institutions to provide wages and benefits as before, it's not rational for anyone to expect populations to be okay with these losses, if basic consumption patterns in services and housing do not also change.

Look inward. Find less to blame, and more ways to make certain that everyone remains economically engaged and has responsibilities which are actually possible for them to meet. No one should have to seek economic mobility to escape what does not work. Look inward to fix what does not work. Travel and mobility are best when they are about exploration, curiosity, and the desire to see the world. By recreating vital economic conditions at home - wherever home is - people can travel to explore, not escape. For any economist who believes a prosperous future remains possible, that should be the ultimate goal.

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