Imagine if you will that ever increasing weight was the generally accepted sign of health. No matter your age, gender, height or physical condition, you are told that the way to better health tomorrow was to weigh more than you did yesterday.
There was a time when such thinking was considered reasonable; when being overweight was a not only a sign of health but also of wealth.
Did you note the magic in that statement? “Weight is a sign of health.” Not that being heavy means that you are healthy (or unhealthy), but what is proposed is that higher (than lower) weight is correlated with health.
This is where the problems come in. Causation versus correlation. Imagine if you were told that increasing your weight will lead to improving your health so you should engage in strategies to increase your weight. You eat more and more, often on the advice of someone who wants to make money from selling you food.
The reality, as we all know, is that health is not measured by weight and that the relationship is not linear. There are weight zones (underweight or overweight) when you may not be healthy just as there are weight zones (optimal weigh) where you may be healthy. You may also be at optimal weight and have some other disease that makes you unhealthy. But if you were told by “experts” to ignore everything else and that increasing weight was your pathway to health, what would you do? What if you were told by these “experts” that as much eating of fat, sugar and salt was your pathway to weight and health, what would you do?
Sounds silly to maximise your fat, salt and sugar intake to improve your health doesn’t it? Well, this is how our political masters and econocrats want you to believe this is how best to manage the economy. As long as GDP is increasing, everything is hunky dory.
(Spoiler, if you don’t want to read on, it is government spending that is the fat, sugar and salt in our economic diet).
Imagine now that we define ever increasing spending as a sign of economic health. It is linear. More spending means a healthier economy. Simple.
The problem you see is the GIGO problem – garbage in, garbage out. As long as it is accepted that the one and only measure of economic health is ever increasing GDP, the only thing that will be targeted is increasing GDP – and GDP is measured by spending. If spending is funded by debt, that does not matter. The mix of spending, public versus private, does not matter. If spending is on junk, does not matter. All that matters is that there is more spending today than yesterday and the economy is better.
As most Cat readers know, GDP is equal to the sum of C + I + G + X – M and problems arise when C or or X fall. This is what our learned political masters and econocrats call declining or insufficient aggregate demand. So the only solution, so as to increase GDP is to increase G – government spending. It does not matter that the spending is on rubbish or that it is funded by debt, as long as G covers the decline in the rest sufficiently to increase GDP, then all must be good.
Would you tell your children to forget about their greens and eat up on cake, chips and soft drinks because it will make them heavier and hence healthier? Well why do we accept this nonsense from Canberra?
As a guide, if you hear any of the following statements, you can be assured that the speaker does not know what they are talking about and should be voted off the island immediately.
- The Government cannot reduce government spending now because it will damage the economy.
- Investment (aka increased spending) in education will lead to higher tax revenues in the future.
- We need to tax more to invest in infrastructure.
- There is no waste in Government administration.
The worst thing about this economic nonsense is that it is espoused by all the major parties.
As we await the release of the Commonwealth budget tomorrow, let’s watch to see how effectively profligacy is described as investment and waste as necessity. It doesn’t matter to them – its not their money.