In Tuesday’s issue of Hospodářské noviny, a commentary was published in reaction to my interview for the daily published on New Year’s under the headline Další biftek už je moc [another steak would be too much]. I am glad a discussion was sparked. Here is my contribution to keep it alive.
In their commentary, Jan Mysliveček and Filip Petrold come to the conclusion that I have doubts regarding the importance of economic growth, that I consider it useless and I am “delighted to see the GDP growth falling”.
There is nothing I could add to such a statement, except for this. I have never written anything like that, not even between the lines. I am very sorry for this fundamental misunderstanding of my words.
A growing economy is always better that a slowdown, and lower unemployment and inflation are always better than vice versa. This is common knowledge, which doesn’t need to be reminded in an article.
What I’m opposing is the society’s natural expectation that our economy will continue to grow. Such thinking is incorrect and I consider it spoiled. The economy grows in cycles and I have no idea what makes people believe the growth is something we can insist endlessly.
The strength as a weakness
You will never turn the autumn into spring, even though you may like the spring a hundred times more than the time of the falling leaves. Left-oriented approaches were mistaken in their assumption that the GDP growth must be maintained under all “weather” conditions. But it is not possible to govern the wind and rain. And it was communism, which tried desperately to entirely eliminate the economic cycles.
My point is to accent our thoughtless adoration of the growth. My point is to emphasise that we should be grateful for what we have got because we have got plenty.
We should not accept from God only what’s good or better for us but also what’s bad. We have got a lot in the last couple years. We should be more grateful though if we are to get more. I don’t know why but I have a feeling that we have not been very grateful the last seven years of our significant growth.
Our real GDP has grown by 46.3% since 2000 (the difference between the third quarter of 1999 and the third quarter of 2007)! If calculated in euros, we have grown by 158% in the same period!
No one can deprive us of the growth we have had. And if recession hits the Czech Republic, it will only take a minor bite. I’d like to note that our economy is expected to keep growing in 2009, even though it will slow down. We should be grateful for that.
I never said the growth is a bad thing – saying that would be highly ungrateful. But I have said many times that we were blind in many aspects during that growth.
We wasted the years of the growing economy and we didn’t use the ideal time, for example, to implement economic reforms. Stunned by the sharp growth, we were overlooking problems and power became our biggest weakness.
The strong economic growth overshadowed many problems. Now the time is much less ideal for making cuts in the budget, implementing tough structural reforms and privatising. It is unfortunate. We slept through our chance.
The fate of statistics
The authors of the commentary also say: “Different sectors and different regions need a different pace to develop. If the economic growth falls to zero, it is likely that the economic efficiency in some sectors will fall – the automotive or glassmaking industry are good examples. Laying off employees will increase the unemployment that is typical for certain professions and regions.”
Certainly, this is the fate of statistics called average – as the name suggests – that most of the monitored factors grow either faster or slower than the average number. That’s what makes the average average.
Holena has a problem
As mentioned above, the autumn and winter are involved in the cycle. What would have Holena told Maruška to bring in the winter? It is January and yet it is not a problem to get fresh strawberries.
Sometimes it may be useful to think of how little we are missing in the middle of January. Holena would have a problem today.
The author is chief macroeconomic strategist at ČSOB.