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The Warsaw Voice » Other » November 19, 2008
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Perceptions or Playing Pooh Sticks
November 19, 2008   
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Like Winnie the Pooh and others, I am of simple brain. The complicated economics sometimes needs defining in simple terms to understand the traumas we have been having. We see the inputs into the system and, after a time lag, the results of the actions. Often we are unable to make the connection between inputs and outputs.

It is like playing Pooh sticks, throwing twigs upstream of a bridge and then seeing the result a few seconds later on the opposite downstream side. Why one stick floats faster than the other is a mystery. What is almost certain is that size, shape and method of throwing the sticks has some effect on which twig won. But when we thought our developed theory predicted the outcome, the wrong stick came first. We cannot see what's happening under the bridge.

As individuals, most of us have long lasting stable jobs with nothing to fear. But if we have the perception that there may be a recession down stream we take risk reducing measures. Examples include; keeping the old banger, hence delaying buying a new car, spending the next summer holiday within driving distance and not flying to our destination. If, by listening to the media, sufficient numbers of people do the same, then we have a motor and airline industry recession or worse. These are high fixed cost industries with relatively small variable costs requiring that sales meet the budget.

If company bosses in healthy firms have the perception of bad times ahead, they tighten budgets by shedding some staff and cutting expenditure. If sufficient firms do this, then cost reductions lead to a slowdown of spending, hence recession.

Governments react by trying to stabilise the currents under the bridge by mandatory inputs such as water direction enhancers and stray stick fishing nets. But it is the stick throwers that decide whether they still want to play and how. Often they do not believe in the improved playing environment. Governments then try to force Pooh Stick nationalisation and bridge control without the ability to sufficiently control what is happening under their feet in the stream.

An age-long perception is that the grass is greener the other side of the fence. Therefore as soon as Poland entered the EU, there was a 10-percent mass exodus of the Polish working population west. The shortage of skilled labour in Poland led to an unplanned, faster than predicted, wage rate growth.

My recent trip to Britain confirmed the panic fed by very negative local perceptions of the future. Poles, on the other hand, have not panicked and generally have positive perceptions. The net Polish economic effect of rising wage costs, smaller currency differences and a sunnier outlook has changed the perception of Poles towards the other EU countries. They are returning in droves to the barszcz and pierogi they love and dream about.

The land flowing with milk and honey is not always were we think it is. So have positive perceptions and play Pooh Sticks!

Joe Smoczyński
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