Archive for February, 2013


Our poor knowledge on Economics

I was recently reading an article on an economics blog about the multiplier of public expenditure on GDP (Gross Domestic Product) which aimed to show Portugal is not under a recessive spiral.

I realized that for many people in Portugal, as well as in the whole world, this whole sentence may have a very obscure, undecipherable meaning. With this, I mean the lay person knows very little or nothing about Economics. For instance, I have a superficial understanding of what GDP is and what a recession is. However, I did not understand what a multiplier was and I still do not have a good level of comprehension of it. From what I understood, it is a coefficient that may descibe the relationship between economic variables, whatever they might be. In the aforementioned case, this multiplier would describe the effect of public expenditure manipulation on GDP.  My point is not exactly we should know what a multiplier is, for I think it is a very complex concept. I have searched for it on several websites and I did not find a clear explanation of it. But I think we should have a basic Economics background that should guide us throughout our lives. We are economic agents: we have a financial income, spend money on economic activities of our choice, thus shaping the market; we can eventually save money, invest it in savings bank accounts, which will be used by the banks for loans to other economic agents. We should have an idea of how wealth can be created through the circulation of our money. Also, the governments we vote for choose how to shape a country’s economy in order to maximize our well-being as individuals and as a society. How can we vote in any government model, presented by alternative parties, if we don’t know what Economics is and how the State can manipulate it? I feel we currently vote in political projects we cannot understand. In this setting, we do not know what we choose and an uninformed choice is not democratic enough for me.

In Portugal, Economics is only taught to Economics specialized students in high schools and in college, nothing else. No other people have contact with even the most basic Economics concepts. Yet, in other countries, like the United States, the United Kingdom, Australia and India, Economics is taught at schools to all children, in different ages. Well, let’s follow their example in order to educate citizen who will be more informed about their future political choices. This policy could only leverage our degree of citizenship.

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Corruption, the cancer of any human society

Here I am writing about one of the phenomena I hate the most in human societies calling themselves developed. Actually, one interesting thing is that the Corruption Perception Index and the Human Development Index seem to be related. The countries on top of both are somewhat the same, New Zealand, Australia, Norway, Sweden, Canada. Ireland seems to be the exception making the rule, ranking in 7th in terms of human development, despite being placed in the 26th place in the Corruption Perception Index.

“[Corruption] is one of the greatest obstacles to economic and social development around the world.”

World Economic Forum

 

I viscerally hate corruption. Now we are recurring to the World Economic Forum, corruption amounts to 5% of the global gross domestic product. Saying this in another way, 5% of the wealth produced worldwide is absorbed by people who deviate this wealth to benefit themselves, their family or their friends, at the cost of the public, widespread welfare.

Needless to say, in the most corrupt countries, the political effort towards transparency in every public policy is the least, for corruption is immensely pervasive in these societies. This is a hard struggle, but I still uphold it is the most important one on the road to human development.