Shifting positions that duck reality.

Remembering old times has a purpose. Recollection can be help to escape the present. The other is to recall the failings of erring opinion makers. Those that write the official record prefer to suppress the reminders of their causes. The purpose is to recycle old, tried, and failed snake medicine. With an updated sales pitch, the illusion of a better future reappears for consumption by gullible amnesiacs. Such a recycled theme is about growth, progress, and austerity in the context of the global economic crisis.

In the past, the honestly red as well as their green junior section had enlightened us with a prophecy. It was the coming end of civilization if economic growth continues. The mene tekels began in 1972 with the “Club of Rome’s” prediction of ruin. Nowadays that is a forecast of which the original propagators resent to be reminded. Those that bring up the embarrassing matter are dismissed as antediluvian reactionaries. They are accused to soil the “progressive forces” by reminders of past missteps into intellectual cow-pies that they wish to have ignored. 

With that in mind, we propel ourselves into the present. The Medias tell that a debate is dividing the healers of the economy. Some schools of thought advocate austerity to overcome the consequences of the previous policies of profligacy. The other camp advocates “growth”. It proposes to deliver it through government spending. It is to be stimulated by the allocation of funds borrowed by indebted states to heal a debt-ridden economy that suffers from lacking credit and investment. 

The advocates happen to be the crowd that saw the enemy in growth when the table was green. Now that the color is red, as in red ink, the position has shifted. Does it shed light on the matter to insert that in photography, red and green are complementary, and therefore, adding or deducting either, will emphasize its reverse. In politics, where red is green or green can switch to red, the interrelationship is comparable. 

That appears to be a contradiction between the truths advocated at two different points in time. Does the plan gain in credibility if we identify the new engine of growth? The left’s projects of expansion are government-financed undertakings. True, creating jobs by expanding the public sector will put someone on the payroll but that will hardly stop the economy’s bleeding. (The policy is analogous to having indebted governments printing money to finance banks with bad debts. The trick of shoving stacks of printed paper back and forth is reversed when sovereign bankruptcy threatens.) This approach contains two explanations that tell about the abandonment of an earlier position according to which growth was ecologically undesirable. Meanwhile, through a red filter, growth points to a revival of cursed capitalism. Private sector growth still stands for the strengthening of an unwanted economic system. According to the witch doctor of two centuries back, it was to collapse then under its “internal contradictions”. 

There is a real world out there with boundaries beyond the limits of utopias. In this rational world, economic development is coupled to the growth of productivity, incomes and of the quality of goods. As such it is, indeed, a “good thing”. Saying so much we remember that this growth comes from the natural and incremental improvement of a rational system and is, therefore, organic. The term implies that the forces behind it are the product of an interaction between the basic factors of economic production. These dealings unfold in a social-political context, which is characterized by “liberty”. In this case, freedom implies that spontaneous forces are allowed to display their dynamic interrelationship without interference. Unencoded, this means that, society may to do its thing without government interference. 

This postulate does not imply that the interaction of the economic actors require a space that is entirely free of government. Anarchy is as harmful to the functioning of men in their chosen roles, as is too much government. Good laws and guaranteed security are preconditions of advancement.

Arguably, the current global crisis is, largely, the result of the wrong kind of government meddling in natural processes. Now high taxes to finance an “over role” in areas in which government is incompetent is proposed. Such measures are not a remedial response to an ailment but more of the virus of its cause. Medical science holds that overdosed medicine is a poison. The propagators of their version of “growth”, from Obama to Hollande and the rest of the socialist crowd, seem to reverse the rule. More of what has caused aches is to cure you. Common sense knows that an overdose of what has already failed will kill you.

In the current context, “growth” is to come from the “investment” of indebted states in unproductive entities. In the crisis of debt plagued and not credit worthy governments, borrowing is to accommodate cuddled voters to renew their mandate and to revive the floored economy. Inserting creatively as Mr. Hollande suggests “Eurobonds” to mutualize bad debts adds a new layer of rugs under which calamity is swept. A real solution looks differently and the going practice suggests that those put in charge have yet to learn the virtue of logical consistency.

The magic concept behind this cure of indebtedness by more borrowing is the “multiplicator”. We were taught in “Econ 101”, that every penny spent creates more than an income for its direct recipient. As the theory has it, that money will be spent and so become an income for the second person in the scheme. The concept, which reminds of a pyramid system, implies endless benefits for a great number of individuals. What is missing –and the writer did not notice that in his second decade- is that the money that spins the wheel must be taken from someone that would also have allocated it. Could that prevented investment have made more economic sense than the government’s? Once doled out, a cut is kicked back and so cascading incomes bring rising taxes. Finally, through that inflow, growing state control by bribed clients is secured.

It seems that the conflict that is said to be between growth and austerity, is not at all what the tags imply. What we have is government spending and power here, and rationalization coupled to responsibility there. The judgment of today’s choice will come from the facts of the future. Whether this verdict will correspond to results achieved at the ballot box, is an open, and by its implications, a rather frightening question.