December 14, 2008 ... The Corrections.

In spite of the dramatic slow down in consumer activity, we are not experiencing a recession, but are simply experiencing a return to more normal levels of credit availability, and an attempt to ward off too rapid a readjustment of the market by aggressively injecting liquidity backed up by future earnings and taxation. Most recently, this amounts to another, €200-billion stimulus package.

As per economics, aggressive intervention of this order in the market correction mechanism prolongs the time it will take for the correction to occur. In this case, it has been reasonably speculated that the correction will take a generation to accomplish. Whilst this is probably true, it also excludes the possibility that, over that period of time, the value of productive activity will not increase because of new lines of business, driven by technological change on a global basis, where 80% of the world's population still endure extreme levels of poverty.

Whilst this may be the get-out-of-jail-free-card which will significantly reduce the time for the correction to occur, it must also be acknowledged that real income value has not significantly increased since the early 1970s, but what is earned goes further on non-essentials because of technology and/or lower cost labour including other factors of production from the Orient and SE-Asia.

A specific issue may be useful at this point, in order to amplify the long term futility of trying to subvert the market and force it into conforming to a preferred model and associated policies at the national and global levels.

It has been proposed by the UK government that it would like to see young mothers in the workplace, as soon as possible, instead of remaining at home on benefits. Young mothers have promptly protested that they would have to employ an accredited child-minder, which they cannot possibly afford, and have any income to live on. This has been countered by pointing out that the young mother will probably be eligible for top-up payments to compensate for the inequity, which is a consequence of minimum wage legislation which has pushed up prices and the price for such a class of labour. After all, a responsible, and accredited at considerable expense, child-minder has to live, too. In both the case of the young mother and the accredited child-minder, working time directive legislation and tax band policies makes working beyond 48 hours per week illegal and/or totally unrewarding.

This ignores the value a young mother may gain from being outside the home, in terms of being more able to network with others. However, for value to be seen in terms of money, which is the commodity which has made modern economies possible, it is vital that government interventions are not counterproductive to the extent that too few will be incentivised to improve the value of their earnings, and the misdirection of huge amounts of capital allied to the destruction of savings, which underpins investment, will cause the emergence of higher value employment opportunities not to occur, at all, or in any useful timeframe.