Cut taxes, cut government regulations, and lay off workers. With this antisocial recipe, President Ronald Reagan woke up the world economy at the time. Today, more and more experts are calling for “Reaganomics” to return.
People are finally starting to shop, the national economy is waking up. Many domestic economists welcomed the increased turnover of the retail trade at the beginning of the year. Ten years ago they would have been right. The crisis at the time was caused by higher unemployment, lower earnings, and thus lower demand. When demand woke up, production also picked up and the economy could accelerate.
This time, however, we are experiencing a different crisis, for example, the head of the German Ifo institute, Clemens Fuest, pointed out in the Frankfurter Allgemeine Zeitung. Enterprises with state support have kept jobs, there is enough money left in the wallets of ordinary citizens and in the economy, the problem is that suddenly there is nothing to buy.
It started with the disruption of global trade chains during the pandemic and continued with restrictions on housing construction and car deliveries, both of which caused historic price increases, especially in Europe. Not only the Czech Republic experienced a sharp fall in the most common services, including restaurants and retail.
Public institutions promise to invest, and in the Czech Republic they have hundreds of billions in reserves in their accounts. Yet less is being built than before 2020 because there are “no people” in construction companies.
In short, Europe and America are not experiencing the usual demand crisis, but a supply crisis, the last time the developed world experienced it in the 1980s.
The world leaders of the time, Ronald Reagan in America and Margaret Thatcher in Britain, were faced with the task of reviving the outdated economy and thus strengthening the supply of unavailable services and goods. This meant convincing entrepreneurs to invest and at the same time providing them with a workforce.
Both statesmen used the neoliberal procedure, according to which it is necessary to forgive companies’ taxes and open the frozen labor market. This meant, among other things, that the labor force would be freed from inefficient enterprises and, through the unpopular path of temporarily higher unemployment, they would find a place in more efficient operations.
Reaganomics and Thatcherism became symbols of anti-social politics, which most politicians have since rejected. However, this was only possible until the supply crisis came again. That is, until today.
“Give people money to buy what they want,” according to New York Times columnist Ezra Klein, has been the golden rule of advanced economies. However, this did not solve anything in the past two years, it only contributed to high inflation.
Now it became true: “Get as many people as possible working in the right places.”
Two minutes
Regular author’s glosses of Seznam Zpráv personalities. Opinions, observations, comments. In two minutes, in text and sound, every weekday.
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