Tuesday, January 27, 2009

Economic Autarchy

Low Depression Just at the moment, I am much concerned with economics, driven by the need to try to understand just what is happening.

The English cartoonist David Low was an acute observer of European politics during the first half of the twentieth century.

One of his concerns was the way in which the rise of economic autarchy - what we now call beggar thy neighbour policies - helped ruin the countries of Central Europe leading to the rise of Hitler.

This cartoon from 1928 is an early example.

Central to Low's concerns were actions taken by some wealthier countries to look after their own interests through protective measures that ultimately failed to the detriment of all. The caption under the following cartoon reads in part - That's a nasty leak. Thank goodness its not at our end of the boat. That's a nast leak

There is a strong whiff of economic autarchy around at present. Just as happened before, it's not going to work.

One of Low's cartoons - I could not find this one - is simply headed Autarchy. It shows a man sitting there eating his own leg.

Since the Access Economic report that I complained about in Anger with Access Economics, there has been a spate of bad economic news. The interconnected nature of our modern world with its instant transmission of information and opinion makes for a great deal of instability.

This links to my recent discussion on the nature of groups - there is a herd instinct at work. There is a stampede under way, and for those who have seen Australia, we do not have a little boy to stand in front of the herd and bring it to a halt before the cliff.

Speaking from my own management consulting experience, businesses facing difficult times sometimes go down because management starts constantly changing policies in response to immediate events, rendering them ineffective. We can see something like this happening at Government levels.

It is very hard to maintain a sense of direction in the face of a barrage of bad news. The sometimes breathless reporting creates a confusing fog.

To provide something of a solid base for my own thinking, I have begun a detailed look at recent Australian economic statistics over on Management Perspectives. I am especially concerned to compare the stats with my own previous thinking and with some of the current commentary including the Access Report.

There is an argument around that the pace of current events invalidates past statistics. There is some truth in this, but only some. Even simple things like size aggregates can be used to test some of the day to day thinking.

The need to educate myself may make posting here a little irregular.

About the Cartoons

The cartoons come from the British Cartoon Archive. This has a useful search facility, making for a fascinating browse.


According to newspaper reports, Australian business confidence jumped 10 points and business conditions improved 11 points in December.

Forget the negative wrapping round the story, by global standards that's a great result.
In another earlier story, total retail sales in December were up 2% from the year before. By global standards that's a great result.

You see what I mean? Things are tough, but we are still doing okay. That is what I have been trying to argue.

By dumping in public on the Australian economy in the way they did, Access just adds to the pressure.


Legal Eagle said...

Good post, Jim. There's an awful lot of panicked thinking at the moment. And if there's one thing that makes an economic crisis worse, it's panicked thinking.

Jim Belshaw said...

I know, and it's hard from my viewpoint because while economics has been one of my tools of trade, it's been a while since I advised on macroeconomics. I worry that I am missing obvious things; yet people including some of my colleagues seem to react rather than respond.