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Slowdown may be for the best. /05. 01. 2012/
With mounting debt, a global economic slowdown and a protracted political debate over domestic austerity and international fiscal oversight, European economies didn't get off to a very good start in 2012. But does it matter? One economist says we are too enamored of growth and that 2012 should be a year of rest, both economic and philosophic. The Prague Post sat down with Tomáš Sedláček, chief macroeconomic strategist at ČSOB and best-selling author of The Economics of Good and Evil, to talk about what this year will have in store.
The Prague Post:
What do you see for the eurozone going into 2012?
Tomáš Sedláček:
We have solved most of our socioeconomic problems and also philosophical problems with the aid of growth. It's like this: Let's imagine there are three of us sitting around a table, but we only have two beers. Now, would we have to go into a very sophisticated socioeconomic, philosophical and ethical debate about how to split these two beers among three people? Or do we share them? And this is a huge problem - a problem we should have been dealing with for a long time. But the way we solved this in the past is somehow, magically, a third beer appears on the table.
Now, what is happening is the third beer will not appear. And we have to live with the fact that we cannot always be bribed by growth.
TPP:
What do you think about the ways in which national governments are choosing to address the economic slowdown?
TS:
The problem now is that this philosophical debate whether to stimulate the economy that we have had for hundreds of years is dead. It's over. The well of debt by which we have stimulated the economy has run dry. And there is no other way except for austerity.
Deficit spending and also boosting the economy by inflation, and I would even go as far as to say boosting the economy by devaluation - all of these are cheats. They're not real workouts. They're steroids. And the box of steroids is empty.We may not grow for five years. What does that mean? Will we kill each other? Will we cease to be Europeans? Will we cease to be human beings? Is growth a result of democratic capitalism, which I believe, or is it a conditio sine qua non? And if the second is the case, then we don't really believe in democracy, and we don't really believe in markets.
TPP:
What will happen if euroskepticism becomes the pervasive wisdom here and the Czech Republic refuses to contribute to stabilizing the eurozone?
TS:
If we resort to that, I think that would be the biggest mistake we've made in 10 years. We have a saying in Czech, "The shirt is closer than the coat," which means you should first mind your own business. Yes, but if this is what we all do, then we will all freeze, because this winter is too cold for just a shirt. What we need is a common cloak, or fur, and we can't afford to have this for everyone. We have to have one big fur, and this is exactly what I think is happening in Europe. We're trying to put this together, which is a huge step toward the direction of fiscal federalization, which is something we've talked about in Europe for many years but never really had the guts to do. So now, yes, we're doing it, but we're stitching it really quickly.
TPP:
Why is this cooperation so important?
TS:
If you have the euro, you can't devalue, you can't be protectionist, you can't raise tariffs, and that's why the crisis is much milder than it would be without the euro. With Greece or Ireland and Hungary, if the collapse of these economies happened 50 or more years ago, the only thing our leaders would be talking about would be how to besiege these countries militarily.
The fact that nobody has even thought of anything like that is a huge miracle of European integration. Maybe we as Europeans have advanced ethically, or philosophically, but I also think a huge step was thanks to European institutions that don't allow these things, the temptation no longer exists. You can't simply devaluate your currency, so let's try to find something better.
TPP:
Domestically, there are numerous measures being discussed to cut the deficit, including a higher value-added tax which is expected to slow growth. Why is this necessary now?
TS:
It will definitely have an effect which slows down growth. It's more important to be stable than fast growing. What we did in the past is we sold stability and bought GDP growth. What needs to be done now is we need to do it in reverse. We need to sell GDP growth and buy stability.
TPP:
What would you say are the greatest lessons learned in 2011 that are important for 2012?
TS:
In the globalized economy, you cannot solve these issues by yourself. We did not create them by ourselves, we all are indebted, we all have sinned, and we can't really be going around throwing stones. The division of labor is something that we know how to calculate to the last penny. The division of guilt is another issue completely.
We've done so well in terms of technological growth, in terms of work, affluence and influence and integration. I think it's a year of Shabbat, where it's OK to rest and let nature rest, let our machines rest and technology advances rest, let all these things rest for a little while because things work better when they are rested. We are not rested; we are irritated, and we are arresting ourselves in our lack of rest. It's very disrespectful to ourselves. We are not just workers. We are more.
Source: Praguepost.com, 04.01.2012. Full article can be found here.
