Centres of Politico-economic Activity
Applying the Duality
Valuing commerce, enterprise, investment and other economic activities is rational, because otherwise government would lack funds to pay themselves and to cover costs of intervening. However, there is simultaneously a political pressure from business lobbies and the financial sector demanding to be treated with due importance.
This Level/Centre is Balanced: L1B.
Enforcement must be rational, otherwise the rules cannot be understood or accepted, preventing both adherence and sensible enforcement. However, enforcement affects earnings and activates self-interested urges, leading to pressure being applied on regulators.
If political issues are not taken into account, businesses will discontinue activities, or move to foreign markets. If enforcement is viewed as too heavy and restrictive, grey or black markets will develop and that reduces tax revenues.
This Level/Centre is Balanced: L2B.
Rational economic principles based on capitalism must be understood and promulgated by the government.
Quite apart from capitalism, all societies have historically-derived beliefs about commerce and wealth. Widely held values carry a political force. They cannot be ignored by governments, and politicians will naturally desire to endorse or defend them.
This Level is Bipolar: L3R & L3P.
Dominance:
This level has a Rational Centre that promotes capitalist principles, and a Political Centre that defends popular beliefs. These must affect each other to some degree. For electoral reasons and to preserve social peace, the defence of traditional beliefs would seem to dominate promotion of abstract and potentially alien and challenging capitalist principles.
Interventions must have some rational basis, otherwise they cannot possibly be beneficial and will not be easy to promote within the government system.
At the same time, political factors play a part, because interventions must have support from the populace as being broadly valid and appropriate (whether they are or not). Otherwise, the intervention will be ignored or rejected, passively or actively; and there may also be repercussions at election time. So …
This Level/Centre is Balanced: L4B.
Politicians must give attention to popular sentiment at all times: they use opportunities to warn, advise, assign blame, encourage, rally support or scapegoat—in typical kinship fashion. Widespread suffering, complaints and sometimes panic, may all need to be handled via a flow of relevant communications and public appearances. This is all emotional and political.
Quite apart from this, there is always a concern for domestic industries. It is rational for governments to focus on strategically significant sectors and to care about unemployment due to the potential for social instability, as well as the human waste and suffering. During economic crises, this focus may activate L4-interventions (e.g. temporary aid for specific firms or tariffs related to an industry).
This Level is Bipolar: L5R & L5P.
Dominance: This level has a Rational Centre that cares about and is protective towards domestic industries and a Political Centre that attends to public sentiment. These must inform each other, but the industry focus needs to dominate due to its potential for conversion to tangible interventions that may be of benefit.
Policy-making requires good information so as to guide strategic interventions. On the rational side, firms need good information to plan; and governments need past or potential economic policies to be dispassionately analysed using good information.
On the political side, there is a requirement to release figures combined with a desire to suppress information that could disturb people or reflect poorly on government policies or their execution e.g. true inflation figures might lead to wage claims; information on dysfunctional banks might lead to runs on banks and even precipitate a national crisis.
This Level is Bipolar: L6R & L6P.
Dominance: This level has a Rational Centre that performs economic analyses, and a Political Centre that releases economically-relevant information for anyone to make analyses. These must inform each other, but analyses would seem to have greater weight than the release of information.
Recognizing realities requires information and rational calculations, as well as a feel for social pressures and possibilities. But it is not mechanical. Governments must be in touch with the current situation, appreciate its historical evolution, and also have view of the future with its obligations and uncertainties. Explaining these realities in public requires a deft political touch.
This Centre is Balanced: L7B.
Originally posted: Q3-2009