My somewhat negative view on the global economy and of course Romanian one is mirrored in the view of some very famous economists. I attach here two of those views.
Robert Shiller’s view here.
Here is Martin Wolf’s view.
Similar messages were sent by some economists, not just the ones I cite here, in the eve of the 2008 crisis. Then much like today nobody had a definitive answer but they raised concerns about economic health and sustainability. In 2008 much of what was feared by some has happened. The history does not need to repeat itself but it is not at great cost to buy some insurance against such negative shocks.
In other words what should Romanian government do? In layman’s terms it needs to get prepared like one would get for a hurricane. Last week New Yorkers braced themselves for hurricane Irene. The outcome was not as bad as expected but they prepared for the worst as memories of Katrina’s effects on New Orleans are still vivid. Most importantly damages were reduced to a minimum and there were no complaints from the public on how the pre-hurricane preparations were managed.
This is what the Romanian government should do. Look at what they did wrong in 2008, 2009, 2010 and not do it again. Here are few ideas:
– keep the markets liquid
– keep the trust in the financial sector by spotting the weak and the unregulated/unsupervised (excessive risk takers/conflict of interests/front running potential) and help them or regulate them as quickly as possible
– DO NOT RAISE TAXES, this is very important. As you know I am in favor of lower taxes right now
– help/support the consumer and institutions in similar fashion. In times of crisis corporations have a tendency to abuse the client and transfer their costs entirely to consumers
– manage your finances well, do not be caught without short term liquidity
– pay your bills, you do not need to be another obstacle for the private sector
– set up the incentives – taxes, social contributions, rebates etc – in a manner that allows capital to move towards the most profitable sectors of the economy
– have some faith in the market and allow it to weed out some of the rotten/weak/non-profitable actors
All these ideas sound simple and we all thought about them at one time or another. Implementing them could prove a nightmare if not all actors involved have the same objective: long run sustainable growth for Romania.