Economic Political Spectrum Part 2: Rationality and Proactivism

Many politicians and political phylosophers tend to mention issues frequently in size of government, big or small, but rarely in rationality and proactivism. This fatal misunderstanding of economic policy is based on the fact they just tend to generalise economic policy down to microeconomics as majority of them lack of macroeconomic understandings. Some of them even categolise Kenyesian economics into the new deal liberalism or social democratic economics. However, this is entirely based on the historical fact that Franklin Delano Roosevelt referred to the advice from Professor John Maynard Keynes in order to overwhelm great economic recession in 1929. However, Keynesian economic principle was not precisely about size of government and socialism because this is about the positive planning. The positive planning implies neither collective economics nor welfare state; this implises responsibility on "the macroeconomic climate" of both government and private economic agents. Prof. Nolan notoriously lacks of knowledge and sense of distinction between microeconomics and macroeconomics. Prof. Nolan should be critised about the aspect he categolised Keynesian as the economic leftist who supports "big government". However we must know big government merely implies microeconomic political issues such as wealth distribution through income tax, priority on efficiency to equity, which means subsidying public goods, high responsibility on individuals' living standard and habits, etc. Macroeconomic political issues, by contrast, imply the attitude toward price inflation rate and the form of "fiscal planning" which does not matter how the size of government is. Therefore, I have decided to create another dimension of scale in order to measure priority on possitive planning and economic rationality.


Focusing on the graph, the vertical axis denotes the level of rational attitude toward macroeconomic climate; the upper implies more proactive response to the economic cycle meanwhile the downer implies stubborn attitudes toward any situations regardless of both social-democratic interests and priority on productivity. The level of proactivism and rationalism varies across different perspectives on macroeconomic theories, and across different levels of economic development as well. More proactive government and private economic agents are keen on more flexible fiscal policy which implies fluctuant direct tax burdens (direct tax includes, income tax, corporation tax, property tax, etc). More stubborn government and private economic agents prefer keeping fixed fiscal policy which implies fixed direct tax burdens. Modern and developed countries with relatively more stubborn policy are more likely to respond on macroeconomic climate by the monetary policy rather than the fiscal policy, which is called the monetalist economy. Prof. Nolan categolised all these monetalist economy into the right wing economy, which means small government preference. However, this contradicts the fact althuogh Germany, for example, is one of typical monetalist economy driven countries, German microeconomy is operated under social-democratic interest. Even Sweden, one of the most typical welfare states, shows less stronger proacvtivity than France used to do; althuogh nowadays, in terms of the relative term, Sweden keeps a higher proactive economic policy than majority of European Union (EU) member nations.


Speaking of German stubborness, German economy has been able to be stablised without either an intensive fiscal stimulus, and German keeps the conservative (in terms of macroeconomic criteria) monetary policy which only concerns lowering inflation and does not have any accountability on economic climate. The reason is because German economy contains a strong productivity per person and per capital and society is highly stable and well-civilised so that it does not particularly require either stability based on dictatorship nor the proactive fiscal policy. People say that the main reason why Germany puts priority on keeping the inflation rate the lowest possible is because of the histrical factor that higher inflation encouraged Nazis coming into power. However, the fundamental reason is that West German economy has been exceptionally stable without interference of the fiscal policy. Furthermore, West German society was able to guarantee its harmony among citizens based on moral consensus and its high secular education level. Therefore, due to the stable economic surplus and social stability Germany has been possible to sustain its social democracy, which promotes an egalitarian wealth distribution and a high self-expression value.



The most intensive proactive and rational economic policy takes place in majority of emerging countries, Organisation of Petroleum Exporting Countries (OPEC), and European countries following Anglo-French model of macroeconomic model. The reason why emerging countries could achieve their rapid economic development and social stability is they have been so pragmatic about their policy making that stimulated a high and stable growth. These emerging countries combined the strength of dictatorship's high productivity and political and social stability which secures stable growth and peaceful environment. Government and private economic agents in OPEC are highly in charge of preventing economic cycle becomes fluctuant, which disturbs entire economic and social stability. As OPEC extremely rely on international trade and do not have any specific traditional industries unlike majority of developed or emerging countries except their oil reserves, the macroeconomic situation tends to be very fluctuant and uncontrollable by the spontaneous stabilisation so that they are inevitably required to hold a strong attention to the macroeconomic situation.


By the way, we must focus on the reason why distitute countries were hopeless to develop their countries. This is because they do not have any sense of economic rationale. Unless they are sure about economic rationale, both social stability and freedon cannot not be accomplished because their expenditure from both public and private sectors to social needs causes unexpected deficit. The flexible and rational fiscal planning is key to aboid unnecessary deficit. Expectation of economic growth is valuable in order to increase potential surplus and reduce deficit. Therefore, the pragmatic incentive to stimulate economic growth is more valuable than idealist social planning at the first stage.

Now, we must recall the aspect that there is a big government but not planned. The previous chapter explained "The big difference between USSR and other totalitarian states aiming a development dictatorship is whether or not government interaction into economy is rationally and positively planned." The rationally and positive planned interaction means government can plan its fiscal policy based on cyclicality of the business cycle, not on irrational political ideology. The Key to achieve economic and social development is to adapt to control economic climate such as gross domestic production level (GDP), price inflation rate, and average wage inflation rate, etc, which strongly affect on prospective further economic situation. As a matter of fact, the reason why many emergency countries are succeeding in their high and stable economic growth is their fiscal and monetary planning is harmonised with their business cycle. Under the situation that economy is underdevelopment and society is not stabilised, more dictatorship usually creates stronger progress because of the fact dictatorship can prevent unstable decisiton under democratic procedure. This also reasons the aspect, some developed countries remain indirect democracy, such as "First Past The Post (FPTP)" adopted in major Anglo-Saxon nations, and even transient democracy. In order to secure stability in both economy and society, it is generally inevitable to enforce either weaker democracy or dictatorship to bring stable decision and efficiency in industrial productivity.

Most of distitute countries's fiscal and monetary policy is not planned at all. These non-emerging countries tend to spend excess government expenditure on corraption, defence, unnecessary public expenditure for ideology, etc. This "unplanned but big" expenditure collapses both economy and social stability. Having mentioned in the previous chapter collective economy does not implies egalitarian income distribution, and self-expression value does not matter of egalitarian income distribution because it is simply a matter of maturity of economic maturity, and social stability. Prof. Nolan affirmed that stronger self-expression value induces the more egalitarian outcome of wealth distribution and social values, and therefore in the long-run this attempt induces healthy economic growth and social stability under an "ethically" good cause. However, stronger self-expression value can only produce this egalitarian outcome under the situation majority of individuals have a certain level of moral consensus and satisfaction in their average standard of living. By referring to United Soviet Socialist Republic (USSR), Vladmir Lenin and his followers provoked the world first communist revolution with Marxist cause of creating egalitarian economy and liberal and secular society. Nonetheless, USSR fell into secular but highly oppressive and anti-egalitarian nation. Prof. Nolan denoted in his political compass spectrum that this fact is because the system was originally created as authoritarian and people had not exactly been convinced of "fales-consciousness". His assumption has been highly contradicted because in fact USSR "inevitably" had to install the authoritarian regime because the original Marxist cause was not achievable through their collective economic plan to plot egalitarian wealth distribution and enforcement of secularism to secure moral consensus among individuals. It has been admitted that USSR in fact attempted to equalised wage level , keep everyone enjoying average living standard, and treat every proletariat individual as same citizen of USSR society. Despite this attempt, the required expenditure expanded infinitely relative to its fiscal surplus, the average income level dropped down dramatically because the entire economy became poor, and had to excessively spend for defence and law enforcement to stick to secure the original Marxist ideology. If USSR fiscal planning were more pragmatical and harmonised with natural business cycle, USSR would have achieved their goal without turning to be an irrational oppressive nation.


In conclusion, Prof. Nolan's political spectrum totally neglect that the possitively planned economy which Keynesian economists most notably put emphasis on does not imply the collectively planned economy. Having previously mentioned, neither size of government nor egalitarian wealth distribution is not correlated to the economic proactivism. The economic proactivism simply denotes the rational attitude toward economic cycle. As a matter of fact, many capitalist nations with small government policy, for example Singapore and OPEC, operate an intensive proactive economic policy. Stubborn economic policy, opposing to the proactivism, can be reasonable to operate if either economy or society does not particularly require interventions into. Furthermore, in late 20th century and early 21st century the world economy has enjoyed an exceptionally stable inflation rate so that majority of nations have not had to consider about a proactive and rationally planned economic policy with a flexible fiscal policy. So then, these nations have trusted on the monetarist theory which regards only the flexible macroeconomic policy about economic cycle is the monetary policy. Nonetheless, after the economic cycle ends the stable and the lowest inflationary period the whole world will not be able to be stubborn about the economic situation so that it will inevitably be required to reconsider the proactivism and rational planning in the fiscal policy.