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March 13, 2011

Page: 27/36

Home > 2011 Issues > March 13, 2011

Trust quotient a victim of economic bust
By Dr R Balashankar

Economics of Enough: How to run the economy as if the future matters, Diane Coyle, Princeton University Press, Pp 346 (HB), £16.95

THE economic recession has spawned a series of books from very pedestrian to very academic that have discussed the various dimensions of the issue. It has also given rise to literature on how to manage life in future. Diane Coyle’s book, The Economics of Enough: How to run the economy as if the future matters, combines a bit of analysis of the past policies and tries to suggest a road map for the coming decades. By the very title she has suggested that the economy till now was done as if there is no tomorrow. Hence, sustainability is the underlying thrust of her book.

Coyle points out that the economic slide has eroded trust in institutions, especially finance, and in governments and the system because they had allowed this to happen. "While majorities in many countries report in opinion polls that they don’t trust politicians and establishment institutions, there is no obvious political process or vision that will allow us to reach a democratic agreement about what to do," she says and there lies the crux of the problem of the future course of action.

‘Trilemma’ is a three-way dilemma in economic management: how to use resources efficiently, fairly and allow as much freedom as possible to make choices. According to the author only two can be achieved at a time. Tilting towards the market for growth and efficiency compromises fairness. Emphasising on fairness and equality would downplay individual freedom.

Speaking of the political systems, she points out that the political parties appear to speak from different ideological and philosophical positions. But in action there is little difference. "The rhetoric of parties might differ greatly, but the differences between specific measures typically are matters of nuance."

Coyle rightly points out that "debt should not be mistaken for a merely financial indicator. It is an indicator of social obligations and excess debt is a sign of the depletion of social resources."

The record of economic equality is rather poor in thriving economies. The US and the UK have the highest disparities while Japan has the most equal distribution of income. Denmark, France, Germany and Switzerland have experienced a decline in inequalities since 1990. "Excessive executive pay has played a part in all the countries that saw increasing inequality. Chief executives of big companies are paid very well in many countries - typically more than 100 times the average pay in their corporation, and 183 times more in the United States."

The recession brought several banks and MNCs tumbling down from their heights, where they reached by the sheer greed. Coyle quotes former US Federal Reserve Chairman Allan Greenspan, "It is not that humans have become any more greedy than in generations past. It is that the avenues to express greed had grown so enormously." And these avenues are the financial institutions and the government indifference.

Coyle, a BBC trustee and visiting professor at the University of Manchester, has suggested a 10 step beginning to right many wrongs of the past. While most of them discuss governmental measures, mutuality and patience are social necessities. In our race to earn more and do better than the man next, we have forgotten the values of sharing and fairness. The Western model advocates growth at any cost, even at the expense of the fellow human. This book is about that philosophy in economics, where the line enough is drawn, by the governments, politicians, institutions and the people. This is about the human beings, not just statistics and numbers.

(Princeton University Press, 41, William Street, Princeton, New Jersey 08540)

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