Economist or village idiots. (An European Perspective)

Economist or village idiots.

 

Do Economist and Politicians apply system thinking? Looking at what is happening in Europe in 2013 it is clear that they do not.

The current financial crisis  could only have occurred because so many people (politicians and economist) were willing to sacrifice long-term interests for short-term gain or subservient of one member state (Germany) rather than collective interest.

The evidence is their actions, actions that are responsible in great majority Senge 11 laws.

Specially Senge law 11 ‘The cure can be worse than the disease’

Unless one fully understands and addresses the dynamics that led to the crisis, even further economic disruption is likely. This is now clear with respect to downward spiral.

Austerity measure has actually caused irreparable damage to the economic system in Europe and member states.

One of the key austerity measure is to comply with deficit / GDP ratio of -3%. This in turn is not a bad idea if one wants to keep government debt in check.

What did Europe do? They cut government spending, increased taxes, limited money supply, kept interest rates higher than major trading partners like US and UK. Therefore they did everything in their power to reduce GDP which in turn caused a major downward spiral and casing no change to deficit / GDP. Economist do not understand simple maths, or ratios: if GDP keeps reducing it is clear deficit will remain high even if spending reduces.

They did nothing regarding efficiency or effectiveness or to make Governments and states more efficient and lean. Even the European Central Bank is a disaster, a bank that operates in sync with German elections. A bank that has not clear rules for the EU economic game, a bank that allows member European Union members to take steroids, countries like UK, Sweden, Denmark (non Euro) that can manipulate exchange rate, manage their own money supply and interest. It is like a football game where you allow certain teams to take steroids, change the rules of the game.

There are countries today in the EU where they actually promote tax evasion and money laundering, one can go to Cyprus, Luxembourg and have all required banking secrecy to protect fruits of tax evasion. Even approach major UK banks and they will channel funds in places like Jersey or Malta.

One would think that in Europe with all the super economist they would able to put together a system that would function for the benefit of its citizens.

How can Euro members and EU members (some non Euro members) play the same game with same rules?

System Thinking plays a major role for economic systems.

The performance of a complex system is largely determined by interdependencies among its elements, many of which are indirect, circular, and nonobvious. The most critical relationship is reinforcing feedback, which explains the dynamics of both exponential growth and spiralling decline.

The basic idea of system thinking is that every action triggers a reaction. In system dynamics this reaction is called feedback. There are two types of feedback – reinforcing feedback and balancing feedback. Sometimes a feedback (or a reaction) does not occur immediately – the process contains delays.

From Wikipedia http://en.wikipedia.org/wiki/System_archetype#Growth_and_underinvestment

Limits to growth

The unprecedented growth is produced by a reinforcing feedback process until the system reaches its peak. The halt of this growth is caused by limits inside or outside of the system. However, if the limits are not properly recognized; the former methods are continuously applied, but more and more aggressively. This results in the contrary of the desired state – a decrease of the system. The solution lies in the weakening or elimination of the cause of limitation.

Archetype limit of growth.png

Conclusion : Economist do not apply System Thinking and no, cannot compare them to village idiots; but worse.

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