Article / 08 June 2016 at 15:00 GMT

Steen's Chronicle: 'If I were president...'

Chief Economist & CIO / Saxo Bank
  • Low-growth, low-expectation world needs a shot in the arm
  • Democracies beset by short-term thinking, bloated political class
  • Policies should emphasise the micro at the expense of the macro
  • Military investment brings surprising rewards in terms of innovation
  • Successful policies are elegant, balanced and simple

The Athenian Acropolis
Some of the world's oldest and greatest democracies are beset by low growth, stagnation, 
and endless political wrangling. What sorts of policies could turn the tide? Photo: iStock 

By Steen Jakobsen

I have just returned from a very interesting week in Athens and Paris, two capitals home to their share of dysfunctional politics. My extensive travels bring me to over 30 countries each year and one of the questions I am most often asked is this:

"If you were president, what would you do?"

Never one to back down from a challenge, I have over the years tried to to finesse my "programme", so here is president Jakobsen's political plan.

  1. I will do absolutely nothing for my entire presidency. 
  2. I will embed into law that for every new law Parliament introduces, two must be retired.
  3. I will create a zero-growth target for the public sector for the next 10 years – minimum
  4. Investment into basic research and military will increase as a percentage of GDP 

That's it! Now here's why...

Doing nothing

There is ample proof that a programme in which politicians do nothing is the best medicine for any economy. In Greece and France, the political system stands in the way of business and jobs. In Belgium, which was without a government for two years, all macro indicators actually improved during that period.

An economy is driven by its micro structure. Here we speak of the small companies, the ambitious teachers and business people trying to make better products, ideas and systems. An economy that is not growing is simply an economic system where there is too much macro and too little micro. 

Too much government, too many central banks and economists alongside too few students, small- to medium-sized enterprises, incentives, and basic research.

This weekend, the cover of The Economist declared "Freedom of speech under attack". To that, I would quickly add "so are free trade, free markets, and free thinking".
Free speech under attack
Source: The Economist
If you look at world history, you will find that the stronger economic systems have been the ones in which opposing powers have limited each other. The inability to force macro ideas onto the economy has historically been met with superior growth.  

Doing nothing for my entire mandate will allow society to move on and become disturbed by the spectacle of media-craving politicians constantly seeking attention for all the wrong reasons; politicians listening to themselves instead of setting a standard for where the country should be in 10, 20, and 30 years.

One for two laws

The biggest problem for any country is dealing with government red tape and bureaucracy. In order to have a working legal system characterised by transparency, equal rights, and fairness, the judical system needs to be simplified. Fundamental rights needs to be secured, but a functioning legal system should reduce overall complexity, not increase it. 

The US constitution remains one of the most amazing documents ever written; it created a benchmark for all countries to follow. For the record, the US constitution is a grand total of 4,543 words long – less than many of my articles! It remains the oldest and the shortest written constitution of any major government in the world.

Finally, in public policy the rule has to be that all provisions or clauses included in regulation and statutes need a “sunset provision”. That is, unless legislative action is taken the law will have a maturity day! For my more historically inclined readers, this principle goes back to the Roman republic, where the Senate’s ability to collect special taxes and use troops was limited in time and extent.

The Roman Forum
The Romans were all too familiar with the perils of political overreach. Photo: iStock 

Zero growth for the public sector

I don't believe in far-reaching interventions into the very nature and setup of a society, but it's absolutely clear to me that democracy and growth come under attack when more than 50% of the population benefits from state income transfers. Such a circumstance makes it perfectly rational for this group to seek no change even as such a situation represents an aggregate net-loss proposition for everyone – including the transfer recipients!

The lack of political movement we have witnessed over the course of this financial crisis has been minuscule relative to the wealth loss experienced. Democracy is at its weakest point when society becomes stalled and constant votes for "no change" become the norm.

In order to reduce this issue, the public sector and all its associated income transfers needs to drop to below 40% – at least. I suggest indexing this year's nominal expense levels as "Index 100"; from here onward, any savings made will stay in the system, thus making it more productive. 

The opposing forces of demographics (higher costs) and digitalisation (significantly lower costs and an improved ability to fairly assess income and expenses) will again provide a better product here.

Basic research and military

Both need to grow as percent of GDP. Basic research because today we have the lowest productivity to GDP ever in history and we know from studies that productivity and basic research are closely linked. The higher the basic research and the average education of the population, the higher the innovation, productivity and employment level (which again lowers social costs).

The world's richest countries have one thing in common... better-than-average education levels. Sweden, Norway, Denmark, The Netherlands, Singapore, Germany, Australia, Canada... these are all countries that perform well when measured by education, and their wealth is no accident.

As for the military? This may come as a surprise, but we need a strong military for several reasons... the most important being that having a strong military makes it less likely we will ever have to use it. 

USAF SR-71 'Blackbird'
One of these is worth its weight in overwrought United Nations speeches. Photo: iStock 

There is nothing that is able to deter conflicts more forcefully than the potential might of the opposition. Military spending also comes with high levels of technology and innovation attached to it. Finally, we have the most productive reason: the military remains one of the best training grounds for young people, and teaches that discipline and teamwork are invaluable to the strength of both the military and the identity of the country.

Finally, let me stress that I will never run for office anywhere or at any time, but in a world where the populace's consensus rules in elections, referendums and certainly among the likely winners of all elections to public offices over the next two years, I think it important to look at how does a society really evolve over time...

It’s our quest to be better, to learn more and to drive towards higher goals that keeps the momentum of growth moving forward.

I happen to believe that everything is about simplicity, or to use a more contemporary word, “transparency”. We as humans are not trained to remember more than three things and hence we need frameworks: the incentive and the direction; the vision and the productivity; the education and the basic research. 

Without this, you have the present-day alternative: no free markets, no belief in the division of labour, no social mobility, the lowest productivity in world history, the largest degree of inequality ever seen, the biggest governments and central bank interventions of all time... I could go on!
My list is not only incomplete, but is also naïve in a world still looking for macro solutions. 

Let me conclude, however, by quoting Leonardo da Vinci: 

“Simplicity is the ultimate sophistication”.

Vitruvian Man
Vitruvian Man: The genius of simplicity is that of truth. Photo: iStock

— Edited by Michael McKenna

Steen Jakobsen is chief economist and CIO at Saxo Bank

Gord Vancouver Gord Vancouver
Outstanding and insightful as usual, Steen. This is a MUST read for everyone and their children if you love them enough to want them to truly differ from what we have currently 'established' for them (yuck!!) and succeed with their own ideas and hard work. Pass it on!!
Paul168 Paul168
All hail President Jakobsen - very good piece
Thanks Steen, agree with it all except military spending - Yes it's a source of innovation, but there is too much money being made through encouraging conflict not deterring it. The US has enormous military might and without a doubt one of the poorest track records of deterring conflict. Israel/Palestine is another example that military might does NOT deter conflict. Thus your theory is purely idealistic, and not workable in the current or foreseeable geopolitical environment. Would be interested to hear your thoughts on this.
buelte buelte
Great stuff !!! Only disappointment is to hear that you where in Paris and i didn't have the chance meeting you there. To illustrate your example regarding the volume of modern day legislation: the stillborn "Labour Law" in France fills a grand total of 131 pages. No more needs to be said.
Per Jenster Per Jenster
Me too....
doretta blake doretta blake
Steen , please keep in touch Doretta Blake , i really need to speak to ypu and see how the family is doing.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail