I used to believe that the economic and financial world was meant for grown-ups in suits and ties, holding calculators and yelling at screens filled with blue and red digits.

However, this is really not the case. From various occurrences, incidences and phenomenon in the economic sector, I realize that economics is really built on values which even a child can understand, but requires the wisdom and tact of an experienced elder to execute.

Take for example, this article on Asian growth: http://www.livemint.com/2009/10/15165844/Asia8217s-growth-outlook-cl.html?d=1

Help!

It exemplifies the very overused, cliché about the importance of rendering help. Unless each man is completely independent, we would need the help and resources of others in order to attain success or even an acceptable standard of living. The Asian countries have weathered the storm well and enjoy a healthy growth outlook. However, this is not the case for their Western counterparts – and this may dampen the recovery process of the Asian countries. Taking a step back and thinking from a child’s point of view, the innocent yet politically disturbing question would be “Why don’t the Asian countries help the Western ones?” After all, they are dependent on each other.

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Growing up

“So Asia cannot be the sole driver of its own growth and we still rely on external demand,” he (Lee, chief spokesperson for Asian Development Bank on economic forecasts and trends) added at the forum organized by the Peterson Institute for International Economics.  

To a child, this statement would seem only natural. Possibly, the word growth could be interpreted as growing up – a glaring mistake, but not completely irrelevant. Just like a person growing from a child to a man, economic growth shows the progression from a vulnerable marketplace with a low level of output and employment, into a flourishing cash-house jam packed with years of experience, maturity in making purchase, sale and monetary policy decisions, with higher output (given a neutral economic situation). In a sense, it is growing up. Naturally, this process of maturing cannot be executed on a solitary basis – often, hand-holding, advice and much help is needed. The question is, how much?

“The ADB’s Lee warned governments against prematurely winding down their stimulus measures or tightening monetary policies as this could derail the fragile recovery.”

The government is one of these hand-holders. They lead infant industries into the market, they utilize various policies to influence behavior, with the objective of economic growth, amongst others. The point is that help and co-operation is needed. But from that statement above and various historical data that government policies may not always be the best solution, the grower (economy, person) needs to firstly accept the fact that growth cannot be a path travelled in solitude. Secondly, that his companion may not be always right – some level of sieving needs to be done.

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Don’t stop

“My worry, of course, is that the initial bounce back from an extremely sharp downturn in world trade and industrial production will not continue at a 10 to 20% rate quarter-on-quarter for the next three or four years,” Mussa said.

 Mussa’s worry is not unfounded, neither does it need critical analysis. Complacency is often the downfall of many. Even a child would know that. To put it simply, if after acing a test, and an inevitable swollen ego surfaces in the form of decreased effort, it is very likely to see deterioration in the next test results. Bouncing back from a downturn is an impressive feat, given that some economies continue to struggle against the forces of demand and supply, but remaining status quo is definitely not the answer for long term sustainability.

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 Truly, “Kids Say the Darndest Things” 

 -Stella