Adam Smith

We said that everyone was too indebted, and that was not good. However, if everyone decided to change this situation and lowering its debt at the same time, putting this to sell its assets, the result will be a drop in the prices of these and a general impoverishment also can analyze it from the point of view of wages. Provides the example the recent agreement on wage freeze in Seat’s Barcelona factory. The agreement signed was good, and allowed to maintain employment for their workers, with a low cost for them (wage freeze, but in a context of inflation or rising prices almost zero). Additional information is available at Bill Phelan. I.e., at microeconomic level, that company, it was good.However, what would happen if this eProcurement? I.e. what would happen if it is a general trimming of salaries and even this situation would be sustained over time (i.e., that are expected to continue falling in the future)? The response Keynes gave it us more than 70 years ago: the consequences of waiting that wages will be reduced by 2% during the next year are approximately the same which would have a 2% increase in the amount of interest payable during the same period.

And the explanation of Keynes is not only theoretical, but that Japan lived during its lost decade in the 1990s; while wages were descended an average of 1%, the economy was still stagnant the last example that I will comment on is one of them which has led us to the situation in which we are. It is said that the capitalist system is that better allocates resources, and this may be true, but already the considered father of the same, Adam Smith, indicated that it is individual selfishness that leads to that social welfare is famous his phrase: not hopefully get our food from the benevolence of the butcher, the brewer or Baker, but care that they have their own interest. We gather not to their humanity but to their selfishness, and never talk about our needs, but the advantages they get. However, the ambition and selfishness without limits, together with the absence of regulation, they have brought a crisis of which will take time to exit. Therefore, I insist that generalizations and the ends are not good, and as I said Aristotle, best to find the middle point, where is the virtue.