Posted by Milos Sugovic
Those that understand the ramifications of economics see through the moral content attached to “econ lingo.” Economic jargon is repeatedly abused in the press, and to mock this trend “an occasionally tactless economist” posted the following juxtaposition on Bluematter:
The moral content of economic terminology in the popular press: A guide
Foreign direct investment (inbound): Good
Current account deficit: Bad
Trade deficit: Catastrophic
Capital account deficit: Not used. Presumably bad.
Weak national currency: Bad
Exports: Good
Imports: Bad
Rising house prices: Good
Falling house prices: Bad
Affordable houses: Good
Unaffordable houses: Bad
Free trade: Neutral
Unfettered free trade: Bad
Fair trade: Good
Outsourcing: Evil
Buying local produce: Divine
Pay rises: Good
Low interest rates: Good
Inflation: Bad
Communism: Very Bad
Socialism: Bad
Capitalism: Bad
Many of these are amusing and subtly humorous. Economic systems work such that any change often leads to other changes, frequently in an unambiguous pattern. So what seems “bad” might actually be “good,” and vice versa.
Take for example weak national currencies and the “bad” connotation. A weak dollar helps reduce imports, which are “bad,” and increase exports that are considered “good.” That helps to reduce the current account deficit, another “bad,” and the trade deficit, which is “catastrophic.” So why do we consider a weak national currency that reduces the trade deficit a “bad” thing?
Look at foreign direct investment (good) and its complementarity with trade. Outward FDI is associated with additional exports (good) and imports (bad). Conversely, inward investment (good) is associated with a trade deficit (catastrophic) of the host country. Does that make FDI “good” or “bad?”
What about wages and inflation? Pay increases are considered to be “good.” But that leads to inflation via a price/wage spiral, which is “bad.” Similarly, low interest rates are considered “good,” but that increases money supply, which causes inflation (bad). So are pay increases and low interest rates as “good” as we think?
Finally, rising house prices are considered “good,” but that creates unaffordable housing in the long run (bad). Falling house prices, on the other hand, are “bad,” yet it leads to affordable housing (good). So which is it?
When it comes to communism, socialism, and capitalism, I’ll leave that one to the political scientists and sociologists. In the mean time, public relations professionals and journalists should be careful when using economic jargon. After all, if you use it correctly (good) you might make friends with a few economists (bad).
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