Friday 20 July 2001

Pic of the day: It is always "bull market"[1] for the Sims. But in the real world, some people start to tire of the wild ride ...

Global economy again

Alan Greenspan, chairman of the US Federal Reserve (central bank), has once again surprised the world. In one of his rare and cryptic speeches, he hinted that the weakness in American economy is far from vanquished. I dare say he is right, but why would he admit it? Why not try to stoke the optimism among US consumers? They are, after all, the driving force not just in the American economy but the world.

One problem is that American consumers are already pickled in debt. Extending their optimism means increasing that debt. They cannot continue forever to be "consumers of last resort". By lowering interest rates, Greenspan makes the debt more bearable, and at the same time weakens the dollar. This will make it easier to export and harder to import. So the rest of the world will have to do some buying too, not just selling to the USA.

At first it looks like this won't work. Even the mild setback in the US so far has led to outright recession in east Asia, and a sudden slowdown in Europe. This is not so surprising: The world has got used to producing for export to the American market. Well, they have to look around a bit more now. If the world economy cannot survive without a continued spending spree in America, perhaps it doesn't deserve to survive at all. The goal of production should be to satisfy needs. You can't whine and pout because people aren't needy enough. You just have to find some other need to satisfy.

This is what recessions are for, after all. These periodic breakdowns lead to massive closures and layoffs. Then when the cycle begins anew, there is plenty of available workers and buildings for the new trades of the new era.

***

A recent survey here in Norway shows 4 out of 5 are willing to reduce their consumption to save the climate.

I was half asleep as my clock radio blared out these good news, and some commentary from a politician who said this was nice. It took several seconds before I got the joke; but when I did, it was a great way to wake up. It is a trick question, you see.

Here in Norway, we have used almost exclusively hydroelectric power for generations now. This place has few things as plentiful as mountains and rain, after all. So it is entirely possible that 80% of Norwegians believe their consumption doesn't affect the climate now. But it does. Most goods are imported from countries that use coal or oil power. And even here, most transport is by ship or car, both of which contribute to the greenhouse effect. So if you stop to think for a moment, the question becomes meaningless.

If they had been willing to reduce their consumption, they would already have done so.

Only 1 out of 3 was willing to pay more for petrol, incidentally. I wonder what consumption they would reduce? Perhaps beef? I have on good authority that the methane produced by ruminant digestion contributes to global warming ... (Cattle catalyzators anyone?)

***

In Genoa, Italy, declared opponents of globalization are once again wrecking and looting shops today. But I don't think that even requires commentary. Just the unavoidable pun: "Anti-business as usual".

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[1]: "Bull market" is economist slang for growing prices in the stock market. The opposite is called a "bear market".