Friday, November 27, 2015

Preserving Economic Freedom in an Uncertain World

A decade earlier, who could have imagined that our economic freedoms would begin to feel so imperiled?  If only the news were better. Scott Sumner noted that New Zealand will no longer be able to carry the market monetarist prediction market, and Lars Christensen wrote a good post recently. Here's Lars:
I am trying very hard not to become alarmist, but I must admit that I see very little positive news at the moment and I continue to see three elements - monetary policy failure/weak growth, the rise of extremist politics (Trump, Orban, Erdogan, Putin, ISIS etc.) and sharply rising geopolitical tensions coming together to a very unpleasant cocktail that brings back memories of the 1930s and the run up to the second World War. 
It has long been my hypothesis that the contraction in the global economy on the back of the Great Recession - which in my view mostly is a result of monetary policy failure - is causing a rise in political extremism both in Europe (Syriza, Golden Dawn, Orban etc.) and the US (Trump) and also to a fractionalization and polarization of politics in normally democratic nations.
Today's social media tells the story. Many in the U.S. - as elsewhere - don't have a problem with extremist politics at all. Even on Thanksgiving Day: often - in place of the usual holiday greetings - online political diatribes continued with scarcely a break. The paradox in all of this is that so few realize, what is actually at stake. In some important respects, normal economic conditions are beginning to shut down. Why?

Much of today's economy is structured for forms of access which are anything but incremental, in spite of those who could grow stronger from incremental ownership options. One is either able to scale the currently high levels of expectation for living and working, or else exists in a sort of endless limbo, from which it is all but impossible to escape. Because everyone has to work so hard at what access requires, few are willing to see anyone gain access on easier terms. This is why alternative equilibrium is needed: to make further economic access possible, in a world which is quickly donning "no vacancy" signs in prosperous areas.

Nations are reluctant to allow the level of economic freedom that people now need for services formation, because structural evolution in this regard would also require some loss of centralized control. Just the same, doing so is necessary, in order for economic, social and political stability to be maintained in the years ahead. Too much centralization in today's services centered economy, would further destabilize areas which lack sufficient complexity to begin with. Worse, hollowed out regions would become vulnerable to terrorism, extremism or both.

In order to strengthen freedom through greater economic complexity, populations need access to knowledge use in a full range of diversity at local levels. Even so, populations are woefully unaware of an overall lack of monetary representation, which poses systemic threats at multiple levels. Policy makers need to provide faithful monetary representation for their citizens, before any issues regarding long term growth can be realistically addressed.

The challenges of the present are immense, and considerable effort will be needed, to raise the level of awareness that citizens desperately need. Governments jump at the chance to fight for "freedom" on military terms, but the underlying reasons for war have been covered up too many times. One can only hope that the most important battles ahead, will be fought for greater economic freedom, instead of blindly maintaining the status quo.

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