The Ant or the Grasshopper?

by Elaine Schwartz    •    May 27, 2010    •    871 Views

“What a silly little ant you are,” said the grasshopper in The Ant and the Grasshopper. “Forget about work…Enjoy the summer!” But all day, everyday, grain by grain, the ant continued to gather and store her wheat. When the harsh winter arrived and the ant’s larder was full, a starving grasshopper begs for some food but Aesop has the ant refusing. By contrast, in a Walt Disney version the ants feed the grasshopper while when the Muppets retold the story  the grasshopper squishes the ant and the grasshopper drives to warm, balmy Florida in his sports car. 

In a recent column, Financial Times columnist Martin Wolf provides a more modern slant. Equating the ant with the Japanese, the Chinese, other Asian nations, and Germany, and the grasshopper with the United States, Greece, the U.K., the Irish, and Spain, he has the ants lending money to the grasshoppers. His moral is: “If you want to create enduring wealth, don’t lend to grasshoppers.”

Is there a chance that we will see an ending that echoes what Walt Disney or the Muppets presented?

The Economic Lesson

Production possibilities curves illustrate the maximum production capability of a country when land, labor, and capital are fully utilized. Because the hardworking ant fully used her land, labor, and capital, the grain she harvested would be represented by dots on the curve. By contrast, the grasshopper was underutilizing resources. His productive capability would be shown by a dot to the left of the curve, closer to the Y and X axes. We can use production possibilities graphs to represent the impact of sovereign debt and the financial crisis on each nation’s production of goods and services.

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