Fronteza

Rethinking The Economic Indicators

The very nature of any metrics system is to provide with a non-contradictory set of measures to express the current state of an entity by means of numerical values. The prime goal of a metrics system is to create a framework which can be used to define the comfort zone and to warn of the entity’s state deviations from its comfort zone. The comfort zone can be defined as the state of an entity when its internal processes secure its gradual organic growth. A deviation from the comfort zone causes internal processes of an entity to disorder and hinders the healthy organic growth of an entity.

For example, we are used to measure the health state of our body with the set of indicators such as the blood pressure, palpitations of the heart, the temperature, the level of acidity, etc. We use these measures to define the comfort zone that secures growth of the healthy organism, the gradual organic growth, and we treat any deviations as abnormal events that disorder normal metabolic processes and lead to different illnesses. We use different toolsets to measure the current state of the organism and to identify deviations and anomalies. When the health state indicators signal about a deviation from our comfort zone, we use different approaches in order to return to the normal state, the comfort zone, and to mitigate the side effects.

Another example is the natural processes. Though the Nature does not care of how we call and measure its states and how we comprehend its comfort zone, nevertheless we use the relevant measurement system to understand the nature of its internal processes and circles, to monitor them as well. Both natural and anthropogenic events force its processes to deviate from the comfort zone. It triggers different permutations and environmental adjustments. The intrinsic immune system of the ecosystem engages the mechanism of self-recovery and adaptation. The ecosystem heals itself and evolves thus. The man-made energy chains and anthropogenic factors change the normal evolutionary proceeding of the ecosystem, like a catalyst which not only speeds up a process but shifts attendant permutations in other direction as well. They cannot be considered as the only factors that trigger global permutations. They shift the normal evolutionary proceeding of the ecosystem, like you change your path when you face with obstacles.

Let’s say, you are walking on the street, normal day, and suddenly it starts raining. You do not have an umbrella and you have to find a place to keep under cover until the rain ends. You are entering a near-by bar to have a shot and to warm up. You are feeling good but you have to change you plans and arrangements now. The longer it rains, the more global changes you have to do, and more shots you can have. How deep you will change your plans? Maybe, you have to cancel some arrangements? So, the sudden rain, the natural force, has made you adapt your current proceeding. The traffic jam is another example of the anthropogenic force that can make you change your current proceeding.

Numbers and metrics systems facilitate our comprehension of the world and its processes. They allow us to establish logical and rule-based frameworks to monitor and control the state of man-made systems. They allow us to logically explain natural events. But they are always auxiliary toolsets that must be used to maintain a system in its comfort zone. Every entity has its comfort zone that secures its healthy and organic development: a person, a society, the ecosystem, etc. A person finds its comfort zone through self-identification by means of its needs. The society finds its comfort zone by means of social needs. If the society is in its comfort zone, then it can gradually develop and evolve into the healthy social ecosystem. When it comes off its comfort zone because of the revolutionary development and reckless races, it becomes a weak society.

Since we are used to apply numbers and metric systems to measure each and every, we need some metric system to monitor and control the health state of the social ecosystem. We developed the economic system and the set of economic indicators such as the inflation, the gross domestic and national product, etc. to measure the economic value created by the society. We developed the monetary system and implemented such indicators as the interest rate, the leverage, the liquidity and capital, etc. to account and manage the material value. We developed monetary toolsets such as banks and exchanges to transfer and accumulate the material value. We implemented sound policies and approaches to maintain the stability of economic processes in the society, didn’t we? It looks like we did everything required to secure development of the healthy social ecosystem. Then why there are bubbles, financial crises and economic disasters? Is it the natural evolutionary proceeding of the society? Will such the evolution create the healthy social ecosystem? Will you develop the healthy body be means of reiterative crises, collapses and crashes? I doubt strongly.

The root cause is immature comprehension of the economic measurement system that we created. Yes, we have created the system to measure the economic value added and use it to measure the national happiness and health state of the social ecosystem. But the devil is in the numbers. Basically, the problem is not in the indicators itself but in their application. Nowadays the economic indicators are not applied to measure the covering of social needs, to maintain the society in its comfort zone and secure its gradual development based on social needs (basic needs – improvement of living conditions and secondary needs – safety and stability). Moreover, has any country defined the comfort zone of its society that secures its gradual development? Nowadays, the economic indicators are used mainly to drive the development of society by means of competition with others societies. It causes economic races. The price of races is the high level of debt and the reiteration of economic crises.

As I said, the competition is natural and intrinsic to human beings. The healthy and constructive competition is good because it is driven by gradual self-improvement and allows evolving into the healthy social ecosystem. In this case, the social self-improvement can be defined as the gradual development of social needs (basic needs – improvement of living conditions and secondary needs – safety and stability), not driven by unreasonable external races. Does your society care that you have the world highest GDP growth rate, when it strives to survive? By the very psychology, the average person does not care about the rate of GDP growth at all. But it cares about the satisfaction of its basic social needs (basic needs – improvement of living conditions and secondary needs – safety and stability).

Reckless economic races, as wars, work the society and economy to death by stockpiling debts and wasting resources. The GDP growth must not be driven with your bestial ambition to dominate others societies by numbers. It must be driven with the gradual and reasonable development of your society by means of the gradual development of social needs (basic needs – improvement of living conditions and secondary needs – safety and stability). Gradually develop the needs of the social ecosystem and feed it wisely.

The economic indicators must not be used to drive the social development. They must be used to define the comfort zone of the society, taking into account its current development stage. They must be used to monitor the current state of internal social and economic processes. They must be used to develop the well-founded program of internal social development by means of the gradual development of social needs (basic needs – improvement of living conditions and secondary needs – safety and stability). They must be used to monitor the progress of gradual social development. They must not be used to compete with other societies. A mouse will not become an elephant if it eats twice more. It will put on the weight and die swiftly.

I understand the bestial wish of leading persons to satisfy their basic needs but they are at the level, where their basic bestial needs must not dominate. They are on the level where well-founded and socially introverted decisions must be made. Otherwise they are misfit. Extroverted society that burns with desire to dominate the world by means of races and wars will never develop into the healthy societies. Moreover, it can ultimately stall the social evolution as a whole. It may have good numbers, but its social ecosystem will be weak and it will face with crises repeatedly. Ultimately, such a society will end up with political crises and crises of confidence and respect. And the social standstill as a result.  Do not try to remake the world, remake yourself first. Calm your bestial ambitions and think about the society that has been entrusted to you. Lead by example, lead by healthy society, do not lead by numbers only.