This is a column by BNR’s in-house economist, Han de Jong.
As I am regularly allowed to comment on macroeconomic news on BNR, I occasionally hear myself on the radio. This is conflicting. Sometimes I’m satisfied, then again I hear my own voice with my toes curled.
“I’m afraid things won’t get any better, because all those smaller parties all have to stand out with a limited number of issues.”
When my comments concern economic growth, a curious sense of shame is increasingly added. I’m a firm believer in growth, but this view is becoming more and more socially awkward. The anti-growth movement is on the rise and apparently my mind is receptive, while rationally I have absolutely nothing to do with that idea.
The “degrowth” movement often sees economic growth, materialism and selfishness as synonyms. This is a grave mistake. Growth, beyond a certain level of prosperity, isn’t about “more stuff.” The essence of growth is that it increases people’s options. I have a car, that’s all I need. However, I think it’s great that my current car, unlike the previous one, has “adaptive cruise control” and “lane assist”. This is growth. For many, growth may be too heavy a word and it would be better to speak of economic progress.
Happy with the market economy
We live in a market economy. I am very thankful for that. No other economic system has brought mankind so much prosperity, “it’s not even close.” This is not to say that a market economy is without its problems. Surely not. There needs to be sufficient competition and we find some market outcomes unacceptable for various reasons.
For example, pricing in markets is sometimes incomplete in the presence of external effects. The harmful influence that our economic actions can have on the living environment is an example of a negative external effect. Of course we have to take care of our living environment and thus intervene in the market economy, but that doesn’t mean we have to stop progress. Incidentally, so far history has shown that people place more value on and care for their living environment as the level of material prosperity increases.
Another problem with the market economy is that it does not curb the income and wealth inequality that is created between people. It’s a challenge. How does intervention affect the functioning of the market? Corrective measures to fight inequality weaken people’s incentives to engage in entrepreneurial and productive activities. Ultimately, it must be assessed whether the benefits of the intervention outweigh the possible disadvantages deriving from the restriction of market forces.
Difficult exchanges
It’s not easy to make such a decision. Yet the government must do it. It must ensure that our national earning power develops in the best possible way; our prosperity depends on it. I often wonder if people think this way enough in The Hague. Let’s take the gatekeeper function that banks have in terms of anti-money laundering controls. Reportedly, financial institutions in our country collectively employ 13,000 people for this gatekeeper function. Of course, the banks simply pass the costs on to the customer, who has no other choice and doesn’t know exactly. Are politicians still weighing the social benefits of 13,000 gatekeepers against the costs of banking services becoming more expensive and the fact that these 13,000 people cannot be productive elsewhere? There are so many examples.
What I’m wondering as the election approaches is whether the fragmentation of the political landscape weakens or strengthens concern about our national earning power or has no influence at all. I’m afraid things won’t get better, because all those smaller parties all have to distinguish themselves with a limited number of issues.