I have triangles on the mind lately. I used to think that economic activity was a triangle with growth, competition and distribution making up its three sides. The perfect triangle is equilateral. That is to say, its three sides are identical in length.
It would then follow that economic activity has reached perfection when its three elements of growth, competition and distribution coexist with identical force. Things start to go wrong when the three sides of the economic triangle lose their identity. Too much growth. Too much competition. Too much distribution. In each case, perfection is destroyed.
That image still holds, but I now feel there are other ways of defining the three sides of the economic triangle. They could be thought of as people, goods and money. Alternatively, they could be defined as global, national and local. In both cases, the law of perfection applies: The three sides must be identical in length for perfection to reign.
So how close are we to perfection as we stand today? Let us first think about this from the people-goods-money perspective.
In the run up to the Lehman crisis, money reigned supreme in the global economic triangle. So much so that it eventually left the other two sides of the triangle stranded and went its own way — very fast and very violently.
With one of its sides breaking out of the trinity, the economic triangle had no alternative but to self-destruct. That is what happened as the credit crunch led to a full-blown economic meltdown. Chaos ensued.
Governments stepped in at this point. A no-holds-barred approach was adopted in their effort to put the triangle back together. Fiscal spending ballooned and monetary injection knew no bounds. As a result, the economic triangle managed to get its shape back. But not with the perfection we all would have liked to see. Far from it.
The people-goods-money triangle has now taken on a very odd shape. The two sides of goods and money are now quite long because of the artificial pull from policy. The people element, meanwhile, is looking increasingly shriveled as unemployment rises around the globe. This is not a happy picture.
Policy might start losing its pull as governments run out of money and central banks get cold feet about carrying on too long with unorthodox monetary easing.
Alternatively, policy might keep pulling for too long, coaxing us into bubble land once more. Then the new bubble will eventually implode, landing us back where we are now. This bubble-bust loop could become never-ending.
There are also concerns from the global-national-local perspective.
The global element became very prominent as we came into the 21st century. Nation states didn’t know what their role was in the greater scheme of things any more. Local communities suffered from the intrusiveness of the global. But now that global finance has created all this havoc, it is nations that are ascendant once more. But not in a nice way.
Nations have caught the protectionism disease. They are trying to ring-fence economic activity. Each nation wants its very own people-goods-money triangle. Sharing and caring seem to be disappearing from the face of the globe.
The two triangles of economic activity need to be restored to their proper and elegant shapes. The people element needs to be given a boost and the nationalistic element needs to have its wings clipped. This is no time to shy away from the pursuit of perfection.
For imperfection is not only displeasing in economics, it is also dangerous.
Noriko Hama is an economist and a professor at Doshisha University Graduate School of Business.