Tuesday, September 8, 2009

As summer recedes, public figures resume their work a new waye of stupidity strikes?

Not only I have returned from a long vacation accompanied by a hopefully exceptional silence, but the public figures of Europe and with them the media is filled with a new wave of opinions regarding the crisis, its consequences and effects in the individual countries. As if nothing have happened, and the mood of the economic world wouldn't be impressed by the new leading theme of "recovery" the first appearances were nothing else than sheer stupidity. Moreover, the cacophony and the surprise developments can undermine the very hope for a fast and strong recovery, especially in ECE.

As for simple tragicomic imitation of the economics as a working and credible science the World Economic Forum published its annual ranking of competivity. The very idea of such lists amidst a crisis the economic consequences of which are hardly predictable seems a bit crazy, as no one really can tell what factors will positively contribute to competivity in the nearest future. But the Swiss organization simply assessed countries based on their traditional factors as if no economic upheaval would have happened. Could it really be that economies in free fall, like Slovenia Hungary or Romania can improve their ranking, others - like Estonia, with dire future perspectives - can lose only three places and be still among the best 35 countries? Is it true that economic collapse and the possible social consequences are not affecting seriously a country's competivity?
Well, stupidity is not confined to Switzerland, the Hungarian finance minister today proudly quoted the new ranking as a sign of real progress in Hungary. But he was clearly outranked by his Estonian counterpart, who admitted in an interview that - together with so-called "analysts" and "economists" - was caught by surprise due to the fact that the spending cuts in the budget, implemented in order to comply with the IMF was completely offset by the raise in social costs and unemployment benefits caused by the worsening situation. Therefore the cuts only affected domestic demand and made the economic decline more pronounced but were not capable to restore budget balance and competivity, as forecasted by fiscal orthodoxy. Somewhat related to this news is the dire situation of the Polish budget. Although Poland is the only ECE country with economic growth (and that means my earlier predictions were wrong) its budget deficit and debt to GDP ratio is soaring, foretelling strong fiscal adjustment, while in Poland not only the budget deficit is limited in the constitution but - according to the latest "progressive" ideas of economists that they can set up the most efficient and optimal models for the whole society, the level of social benefits as well, leaving no room for manoeuver, especially for tax cuts.
Anyway, contrary to the positive mood among investors, analysts, economists the future is not that bright, and even positive news from the real economy can be offset by the limitations imposed on every ECE country by their economic models. The end seems not so close as it is suggested and the perception of important differences between countries could easily be turned out to be false at the end.

Update: The stupidity continues, the World Bank released its Doing Business 2010 report, listing collapsing countries among the first 30, the Baltic States in front of Austria etc. I think that the current circumstances can highlight the serious problems of such lists either regarding their composition or the methodology. Once a country is listed high it is quite hard to lose positions. And an important factor of the comparison are the introduced reforms in the last year. (Obviously not only making something, but making something business friendly, but it is not a clear cut concept.) So, ladies and gentlemen, let's make business in Ireland (7)Georgia (11, somewhat dubious democratic credentials, geopolitical confrontational zone, but a "Liebling" of neo-liberal "analysts", like Estonia was in the last decade), Iceland (14 Estonia (24) Lithuania (26), Latvia (27) (just look at the GDP figures) but do not try Luxemburg (64), forget Poland (72) and the Czech republic (74) and maybe some caution is advisable in case of countries like France (31). Is there really nobody who can imagine rapid changes in the economic policies of countries struggling for life, with the necessity to lower budget deficits, paying out rocketing debts? Can anyone seriously consider the situation remains the same even for next year? And yes, it is treated as a serious piece of information, with headlines "The business environment deteriorated. Bulgaria overtakes Hungary" (well, why do these guys not highlight the hopeless situation of Czechs and Poles, they are doomed according to the list!) or "Horrific opinion on Hungary" And it is not necessary to emphasize the nationalistic undertones of the former title...

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