Economic Limits

Why politicians fail

Economics is very important to politicians because a buoyant economy while they are in office is believed to improve their chances of holding on to power. Former US President Clinton is said to have had a slogan on his office wall that read “it’s the economy, stupid”. However, the two factors that determine the economic climate are virtually impossible for national governments to influence in the short time, if at all.

These limits to political influence are thermodynamic laws and human difference and both have been recognised by economists from the birth of the so called ‘dismal science’ in the late eighteenth century. In fact, some might claim that the purpose of economics is to discover ways to reconcile these sometimes incompatible factors.

Thermodynamics determines where energy is at any time and where and in what form it flows. Energy is constantly on the move and all human activity changes the energy we use. To have a sustainable economy we need to ensure that there is an adequate supply of energy in the form people want available when demanded. The only possible way to have any influence on global energy flows requires integrated action at an international level that continues for as long as is necessary to allow energy to complete its cycle and this is made difficult because of the second limiting factor: human difference.

Each human is different from all others and this affects what we perceive that we need or want from the economy and how we react in an effort to secure the resources we seek as a result. Rulers and governments may create currency to stimulate the economy but they find it hard to predict and control how it is used in what economist call “markets”. Wealthy individuals and organisations are not restricted by currency boundaries and can obtain access to transnational markets. In addition, as human population continues to grow and communication becomes more global, there is a greater scope for human difference to have an effect.

If politicians admit the limits that these two factors place on their scope to influence the economy they can no longer claim to be in control. However, they need to do so because a problem can only be successfully addressed if it is acknowledged. We need the political equivalent of the foresight of those who planted many trees in the past even though they realised that it would be their distant successors who would benefit from the fruits of their wisdom.

Paul Newman