Sunday, August 22, 2010

The economic challenge facing politicians and how we see it

This quote from Paul Seabright's book (via Greg Mankiw) is an appropriate representation of the challenge faced by politicians (and the despair of citizens at politicians' inability to make much headway) fighting arguably two of the most formidable macroeconomic challenges of present times - unemployment in the US (and elsewhere) and inflation in India.

"Politicians are in charge of the modern economy in much the same way as a sailor is in charge of a small boat in a storm. The consequences of their losing control completely may be catastrophic (as civil war and hyperinflation in parts of the former Soviet empire have recently reminded us), but even while they keep afloat, their influence over the course of events is tiny in comparison with that of the storm around them. We who are their passengers may focus our hopes and fears upon them, and express profound gratitude toward them if we reach harbor safely, but that is chiefly because it seems pointless to thank the storm."

But just as a sailor intent on wrecking the storm-battered boat, if the politician is intent on extinguishing (by fiscal and monetary contraction, as in the US, and populist short-termism, as in India) the only realistic chance of reaching the shores safely, then the despair of the citizenry is well-founded!

1 comment:

Anubhooti ( Views and News for all) said...

Its quite interesting that many a times the so called Sailors have willingly opted to not to reach the shore ( curbing inflation)in the background of deliberate mismangement of system. A system made by them, for them and of them................and they seek aslyum in the so called web of continued perpetuation of these problems every time ..