I love listening to Nouriel Roubini, the economist professor from NYU who called the crash correctly. He's a voice of reason and his opinions are always well-considered. Having said that, as I've listened to him and other economists talk, I've come to the conclusion that Nouriel is sometimes just as culturally blinded as the rest of them.
When faced with the issue of the Greek debt crisis, Nouriel correctly points out that the Greeks are insolvent. Their wages are too high to be competitive, so economic growth is unlikely until that falls. Their government budgets are way out of whack and if they cut them, it will probably lead to a recession. All kinds of havoc will ensue. And that's where his analysis ends.
There's another side to the equation, one that afflicts us here in San Diego as well and that is over regulation. In Greece, as I understand it, you need approval from 11 (or is it 17?) government entities to start a business. Growth by human creativity is impossible because the government strangles it. Here in San Diego, we considered building an addition on my wife's old home instead of moving. The building regs were such that it was impossible, no matter how reasonable it was. We couldn't work anything out with our neighbors, either. Instead, the government told everyone what to do with conflicting, confusing and monstrous regulations on every phase of the effort. So we gave up that idea and our potential contractor lost business.
The Greeks (and we here in California) have an untapped source of revenue - their citizens. If they placed less power in the hands of the government and more in the hands of their people, they could, without changing budgets or wages in any way, increase economic growth instantly. The fact that even a brilliant sage like Nouriel doesn't make that a central point of his talks or essays indicates just how indoctrinated our society is in the religion of government omnipotence.
2 comments:
One big problem is that there seems to be a "sweet spot" in the population density where it is easy to start a profitable business. At the opposite extreme from where you are, when we built our house there was pretty much zero hassle in getting a building permit. As long as we had a test done to prove that our septic system would work properly, they just wanted to do a couple of inspections and we were good to go. But, anyone who wants to take advantage of the relatively relaxed approach to regulation to start a business runs into the problem, "Who am I going to sell my products/services to?" There just aren't enough customers for most things, and not everything is easy to ship to population centers.
So, someone starting a business has to find a place where the population is low enough for the regulations to be manageable, but high enough that you can actually make money from what you do.
I wonder, are regulations proportional to potential business acitivity? That is, does government grow to consume some optimal amount of hassle effort on the part of the populace?
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