Practical analysis for investment professionals
30 October 2012

Don’t Sell Economic Stability to Buy Economic Growth, Warns Tomáš Sedláček

“Don’t sell economic stability to buy economic growth,” warned Tomáš Sedláček, chief macroeconomic strategist at CSOB Bank and author of The Economics of Good and Evil (Oxford University Press 2011), to an audience of investment professionals at the CFA Institute European Investment Conference in Prague. Sedláček’s unconventional view is that our problem is not lack of growth but too much of it. He believes that the role of the economist should not be to encourage economic growth but to decrease the swings of the business cycle.

Sedláček said that there are parallels between how a depressed economy is treated by today’s economists and how a depressed patient is treated by doctors. The economist’s prescription of running budget deficits and thereby increasing debt is similar to the doctor’s prescription of anti-depressants. The problem with both debt and anti-depressants is that they can become addictive.

“Our problem is not lack of growth but too much of it,” Sedláček said. An economy that uses debt to grow must continue to do so by taking on more and more debt or, alternatively, face a slowdown that will lead to bankruptcy. It is like owning a car that explodes when it stops, argued Sedláček.

Read more on the European Investment Conference blog →

About the Author(s)
Usman Hayat, CFA

Usman Hayat writes about sustainable, responsible, and impact investing and Islamic finance. He is the lead author of "Environmental, Social, and Governance Issues in Investing: A Guide for Investment Professionals," and the literature review, "Islamic Finance: Ethics, Concepts, Practice." He is interested in online learning and has directed three e-courses for CFA Institute: "ESG-100," "Islamic Finance Quiz," and "Residual Income Equity Valuation." The other topics he writes about are macroeconomics and behavioral finance. Previously, he was a content director at CFA Institute. He is a former executive director at the Securities and Exchange Commission of Pakistan (SECP). He has experience working in securities regulation and as an independent consultant. His qualifications include the CFA charter, the FRM designation, an MBA, and an MA in Development Economics. His personal interests are reading and hiking.

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