Editorial: Welfare and the Wealth of Nations

With this issue of the European Papers on the New Welfare, we again try to stimulate research, discussion and pratical solutions on one of the key issues of our society: the lengthening of the life cycle which little by little is extending the world over. The present financial turmoil is also adding particular significance to the subject, and we would like here to stress some major points:

•    Several ‘experts’ warn of the possibility of a high inflation, or, on the opposite side, of a real deflation. In the course of the industrial revolution, in fact, the latter was the rule until 1929. But with the quantity of debts at all levels (personal and institutional), exacerbated by a superficial analysis of keynesiamism and real social and political pressures, we rather face the possibility of a devastating inflation. Maybe a tsunami of liquidity injected by several means.
•    The question of money and monetary stability is more then ever fundamental, and with it the stability of the key currencies. The value of pensions (private and public), savings, reserves of all sort, incomes must be preserved and with them a reasonable and acceptable fiscal justice.
•    Strangely enough many economists these days underline the idea that the financial world is different from the ‘real’ economy. This is rather odd, as if production, distribution, utilisation of any economic system would not work with money. At the end money makes even machines work.
•    The real point is first a question of ethics: the financial world has given too much space to speculators and manipulators, like wizards, hiding themselves behind apparently scientific simulation models.
•    In these days when you can still buy a Mercedes with 100 euro a month, demand has extended to outer space limits. Those who lend money should be more responsible for the credit they give. And accumulation and selling of assets must be controlled as to their quality, instead of including so many rotten apples in packages with good ones. One should remunerate the quality and not the quantity of transactions, and not give prizes and money for short term results.
•    Faced with all this, we are surprised by the fact that almost one issue is constantly mentionned by ‘experts’: maintaining a high level of demand. Economics (and in particular macro-economics) is then just the extrapolation of the easy to understand problem of any commerce (from the bread shop to the aviation producer): sell as much as possible. This is understandable at the individual level. But at the general, global level, it is necessary that the demand itself is not destroyed by an inflation wave.
•    What about ‘real’ economics then? In recent decades this discipline has priviledged demand over supply (considered as ‘given’), whereas in fact it is this latter which has profoundly modified the conditions for the creation of ‘the wealth of nations’.
•    In a situation in which services respresent, in a modern economy, about 80% of the ‘production costs’ (reseach, planning, security control, storage, distribution, publicity, financing, costs in utilization up to the disposal process, — which all happen over a period of time), it is difficult, almost impossible to have an adequate global view of the ‘production’ process of the ‘wealth of nations’. A process based on uncertainties (no equilibrium price). The tools for quantifying economics (in particular macro-) cannot be those of the times of Adam Smith or Ricardo (when services were considered of little or no value)
•    GDP indicators do not provide adequate information: the value added on which they are based very often quantifies costs which represent a value deducted to wealth (i.e. the costs of all sorts of diposals). In compensation modern technology provides many improvements in the production of wealth which are never or very little accounted. The present economic turmoil, in our view is very closely linked to the interpretation of the economic system which should be updated. We need better tools to measure the real added value to peoples’ life.
•    All this has very much to do with the issue of welfare, which can only be based on an adequate understanding of the system producing the ‘wealth of nations’.
•    Going back to the issue of ageing and of the lenghtening of the life cycle, the specific analysis of all the functions of work involved in the production of economic wealth, would provide better evidence for the productive activities for the older generations (which are mainly services).
Behind the isssue of the counter-ageing society, we discover then a key reference for our economic and social world: the human capital on which a lenghtening life cycle is based, for an economy rediscovering the supply side and the value of things.

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