December 1, 2020

Hysteresis is coming – La Provincia



The example of the maddening of the algorithm in 2010 is famous, which sent the United States into bankruptcy for a few minutes, of which a trader was accused years later who from his London home was able to manipulate the day’s prices. The permission to convert money values ​​into an object of expectations, together with the abandonment in the hands of the computer algorithms of automatic decision-making, provoke those financial crises where money changes hands, ruining some and enriching others.

Next to this is the real economy, the so-called fundamentals, which depend on the productivity and commercial success of the goods and services produced and exchanged between people, companies and nations. Well, this whole mechanism undergoes hysteresis. Hysteresis, first studied in physics, especially in ferromagnetic metals, is the influence on the state of a system in the history of that same system. For example, hysteresis in lung respiration is detected when the voice carries an initial volume that then affects the subsequent rhythm of the voice. Hysteresis occurs in physics, in chemistry, in biology, in ecology, in sociology… but we are going to review hysteresis in economics. Mainly the phenomenon has been studied in employment crises. There is a structural unemployment in the countries, around two percent in those with the strongest and most dynamic economies and reaching six or seven percent in those with the weakest economies. When a crisis occurs, as in a company, the workforce loses workers who are unemployed, during the crisis the workers who remained employed take advantage of productivity improvements by taking on more dense jobs, then the economy and the mass of workers who Those who join the job are not those who have lost their jobs, older and more flawed, but rather, those who have just entered the labor market are welcomed, with a lower salary amount, because they cost less and are better prepared or have better physical conditions. Therefore, it has been observed that unemployment always increases after crises, and leaves a large trace of long-term unemployed, and this phenomenon is called hysteresis in economics.

An increased unemployment rate becomes structural after the hysteresis effect on a sick and convalescent social body. Unemployment rates last for years until they pick up again. These behaviors are reflected in macroeconomic equations, and they seek to find out the evolution of economic rates through models such as the NAIRU. Neither labor reforms nor economic growth remove these workers from unemployment affected as if they were keloids, nails or hair, who have been expelled forever from the labor force of society. Global financial organizations have been concerned about this effect. In 2016, Lawrence H. Summers, from Harvard University, and Antonio Fatás, Professor of Economics, published The Permanent Effects of Fiscal Consolidations, where they blamed the generation of a weak labor market, due to hysteresis, on fiscal consolidation policies (brake the maximum deficit at 0.5% or 1% of GDP, depending on the percentages of public debt, introducing austerity policies at all levels) undertaken by the countries in 2010.

Already in 2016 hysteresis was diagnosed in the labor market in Europe and somewhat in the US. In short, the hysteresis of the effects of the planetary crisis that began between 2008/2010, produced degeneration in the labor masses with abnormal unemployment rates, and now with the crisis of the coronavirus pandemic, the situation is going to worsen, adding more gravity to the previous hysteresis effect, not yet processed by the economic recovery already lost. Millions of workers sent to unemployment for life, machinery that efficiently substitute their work, generation of a large percentage of the population subsidized by the state by not being able to work and progress within the economic mechanism, causes famines, famines cause social tensions, social tensions provoke states of alarm and curfews on the part of the state to protect itself from the malaise of a large part of the condemned population. We will see this situation worse in all the countries that have crushed their populations with confinements. And this breeding ground is the one that extreme politicians (left or right) need to seize power and remain in command over dark societies, with bad appearance, sad, impoverished and generators of a pathological tendency to equality in misery, the abuse of the political elite, and the curtailment of freedom. The perfect breeding ground for the ontological emergence of the higher being.

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