Hemantha Abeywardena writes from London…..
We are in deep recession and it is official. The world has gone into a fiscal equivalent of hibernation and shows the corresponding signs of a disturbing slowdown on many fronts: air lines report reduced traffic and falling passenger numbers; high street traders moan about lack of spending by the public; hundreds of jobs are lost everyday as firms go bust on daily basis; industry giants, ranging from car makers to steel giants, go cap in hand for state bail-outs after drastically curtailing the output.
In a desperate attempt to give the crisis a moral dimension, extravagance was downgraded to vice and prudence hastily elevated as virtue, by those who holds – or a bit more precisely, manipulate – the levers of power.
During these trying times of gloom and despair, the folks who pull the nation’s purse strings, suddenly saw a descending messiah in the form of a single digit through the mist of optimism – inflation.
When the gullible masses have nothing else to look at for hope, we drew consolation in dribs and drabs by apparently falling inflation; dreamt of falling food prices, fuel costs, etc in proportion to the fast diminishing digits. However, much to our dismay, it turned out to be a false dawn. The much-talked-about record-low prices never materialized in reality.
At no time in history, did experts simultaneously get things wrong like this - on a scale of this magnitude - according to those who have a penchant for analysing records.
A limousine with a central banker at the backseat, driven by a chauffer who relies on a satellite navigator for direction, provides a perfect analogy to model the crisis.
If the limousine is the economy, then the chauffer is the economist who feeds the central banker with what he sees on the economic model – the satellite navigator, in this case.
By relying too much upon on a single gadget – a model, in real life – they ended up in a spectacular crash. The team is accused of committing a collective cardinal sin: the chauffer for dozing off at the wheel; central banker for being behind the curve; satellite navigator for giving the wrong bearings. They wish they took commonsense on board before setting off the great journey toward the goal of global prosperity.
We were told these clever people were in pursuit of a holy task of making us richer and the only culprit which got in the way was inflation. So, they did the obvious - tried to keep it under the thumb.
The digit is going down – in some quarters, plummeting – yet, all of a sudden, the hope of prosperity got into an inverse trend; we are going to be poorer and less prosperous than we were last year, despite the falling inflation.
My fishmonger, who finds solace in a labyrinth of smoke by puffing on a cigarette during short breaks, warns me about steep rise in price of fish in the coming months, despite the arrival of the illusive fiscal rascal, the inflation, to a place near us – the ground zero.
He has his own model - a much simpler one, of course - to make customers more informative in this regard: the direction of the cloud of smoke. He just winks at us while raising his eyebrows towards it and that is what happening in real life. Even he can’t account for the imminent rise in price, despite the falling demand, fuel price and culinary enthusiasm.
The man in the street is puzzled by this stupid index, the inflation. When he has to spend the same or even more, for the same necessities of life, in the name of survival - in spite of the falling index of inflation - his index finger flexes up in search of a soul to point at, for misleading him this way by digits – and in digital age!
The inflation, as events indicate, is mired not only in two equally questionable indices - CPI – consumer price index - and RPI – retail price index - but also in controversy. It is catching up with its rival - the growth forecast - in the form of a grasshopper to eat up what is left of highly-exaggerated greenshoots of recovery.
In the world of science, especially physics, no theory is ever rated as eternal. For instance, Newton’s Law of Gravitation that had been accepted for over three hundred years without dispute, was dealt a huge blow by the Theory of Relativity introduced by Albert Einstein, in the early part of the 1900’s.
Since then, people have been looking at nature from a different point of view, not necessarily to elevate Einstein at the expense of Newton, but to accept the inevitability of the process of progress.
Unfortunately, we don’t see the same progress in the science of economics as yet, if it has got any science in it in the first place. There is little sign of evolution in the indices that led us to this disaster; the theories that failed to forecast the present outcome still thrive on unabated in academic text books.
All in all, the tendency to take refuge in myriads of contradictory indices when the going gets tough and crying wolf during good times, is not certainly the trait of a true scientist.
If economist don’t own up en masse for the mess they got us into, we rate them as non-scientists – an honorary title for illusionists.
- Asian Tribune -
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