I have failed to generate any discussion in Denmark about the bleak vision of the two previous articles.
Ostrich-like we prefer to hope for the miracle. As I have explained to Azar Gat it seems natural to a nation that was saved three times in a century by the efforts of others: in 1918, 1945 and 1989.
Another matter is that until recently the discussion about what will happen beyond the next couple of years has been limited to climate change. Only now it is now being joined by an intensified discussion of competition and potential conflict over limited resources.
Even if that debate is now starting, the main political and economic horizons seem deliberately limited to the next 2-4 years, as well as castrated by a framework created by the words recession and depression – meaning economic crises limited in time – and the frantic search for renewed growth.
There is little willingness to face that the real challenge is to manage future decades of constant economic contraction to a far lower level without the collapse of the societies and political culture that the West has spent 250 years creating.
No Western politicians seems willing or able to face that by handing over full power to the market has undermined their own possibilities to serve their constituencies far more effectively than any federal agency or European Commission ambition or plot would have been able to achieve. They are unwilling to admit their ideological naïvity.
In Denmark we may have a little time before the slide starts in earnest, and in some ways the politicians are using the delay in a prudent way, by investing in renewable energy infrastructure that will reduce the requirement for fossil fuels import. There are, however, serious limits to what can be achieved because of the nearly full replacement of muscle power by machines in all activities during the latest decades, from households to major construction work.
This country may also gain time because a large part of the remaining Danish production industry is depending on the neighbouring European markets in Germany and Sweden, even if the competitiveness in these markets was seriously weakened by the irresponsible opportunistic policies of the liberal government of Anders Fogh-Rasmussen some years back. If the country succeeds to regain a productivity level similar to the neighbours, we may slide downwards with them.
However, such a delay is not certain. A significant part of the currency earnings come from the large merchant fleet which is already under pressure from the initial reduction of the volume of world trade. The Danish Ship owning companies are really multinational like an increasing part of the rest of the Danish industry, trading and service companies. In order to serve their share-holders they do not invest in high-cost production in Denmark or other parts of EU, but in the expanding markets in other continents. In an ever worsening economic situation the companies and their Danish owners will escape from the increasingly more demanding national and European taxmen to more beneficial environments.
Realising that the production jobs were fast disappearing, the politicians and the tunnel-vision advisors have tried to push an increasing part of the youth through high schools and thereafter academic education. It is a desperate idea as a significant part of the increased number are neither suited nor motivated for such education. The attemp is as vain as futile as an earlier attempt to create ‘the Soviet Man‘.
In order to make mass academic education economically feasible, the higher production of university graduates has been achieved by a rather drastic reduction in the study length and quality requirements. An additional and poisonous cost has been demoralization of an academic staff which is unconvinced that the principles of sausage production should apply to their work.
The result of two decades of similar academic over-production is all too visible in southern Europe: in Greece the academic masses were employed at the cost of accelerating the collapse of the state, in Spain the youth are left unemployed, semi-revolutionary and without constructive ideas or hope, but with the state in a somewhat better financial situation.
The over-production ignores that mediocre academics are most unlikely to generate innovation and growth. Through Western history the typical innovator was either a fundamentally practical man with little or irrelevant schooling or a brilliant scientist that was allowed to inspire and drive a team effort.
An invention or innovation is only resulting in income where funds for capital investment, practical implementers and an affordable production can be established.
It is implicitly assumed firstly that Denmark and the rest of Europe could develop attractive ‘creative class’ islands/valleys, secondly that the inventors would choose to stay rather the move to the place of production, and thirdly that the income from the intellectual property generated here would be paid by the producers of the invention to be taxed here to sustain the cost of the state functions. All this is most unlikely, and even if it were realistic, the vast majority of population would be left without meaningful occupation.
How are Danes, other Europeans and North Americans to generate the funds required for the import of energy, imported food, chemicals needed for own food production, reinvestment in machines, and all the other industrial products no longer made within their borders? How are they to collect the money necessary for infrastructure maintenance and investment, hospitals and support for those in desperate need, etc.? It is evident that this unfortunately requires a deliberately managed drastic reduction in welfare and salary levels to regain competiveness while sustaining innovation. Any kind of loan-financing will have to be extremely constrained. This development will take place even if last minute attempts were made to harness the ‘blessed‘ Free Capital Market Molok.
The situation remains – where realized – a taboo in the political discussion. Any such pessimism is considered dangerous as it will hamper a surge in consumer confidence needed to avoid recession from developing into a depression. Please ignore the Siberian blizzard and wet your trousers to keep warm!
Realising that something is wrong one side of the political spectrum try to energize the national economy by spending some money to keep more occupied until the end of the ‘recession‘. By so doing it worsens the situation in two ways. Firstly by ignoring that the free capital market has established an open and uncontrolled drain from the public budget deficit to international finance and secondly and directly because all extra economic activity means extra import. The other side of the spectrum realises the need for reduced public spending, but with the aim of increasing private consumption to minimize the effects of the ‘recession‘, the result will be the same, and its unlimited faith in the market makes it incapable of seing its destructive effects.
While partially true – the article seems to use a temporary ‘ketchup bottle’ effect to draw ideological conclusions. The problem for the contries to the east of us, has been their lack of free markets keeping them poor. Sudden liberalization and opening of markets in a number of countries has left us with the problem of a huge wage disparity. One can only blame that on former regimes restricting the free market. The wage disparity will only gradually disapear. It`s an expensive development aid, but the only one that works.
One of the biggest problems is the lack of liberalization still making it difficult to ensure equal opportunities for European companies to compete in the newly oppened markets. It`s a classical problem that will result in escalating conflict or better posibilities for European exports and ownership.
Another problem is that lower production prices has only partially been tranfered into lower consumer prices in Europe. So we see the owners of some companies becoming wealthier while unemployment lowers the income of others. The lower import prices are a good thing though. A gift of more value for less.
Since this article was written the free capital market has shown it`s reward for the relative strength of the danish economy, giving us lower interest rates.
The possibility of recovering from the present recession very much depends on the extend to wich we insist on open and free markets, and let entrepreneurs do what they do best. No one has ever been able to predict the products and wealth that future companies produce.