The Role of Public Investment and Pro-People Growth in Economic Development
By Mayen Ayarbior, Juba, South Sudan
January 27, 2016 (SSB) — In order to explain the important role people’s purchasing power will always have on economic growth, John Maynard Keynes, the father of modern macro-economics, once referred to gainful employment as being at the heart of his theories. He supported his arguments with an assertion that even if there was no jobs to give, the government could make people dig holes and give them money, then make them refill the holes and give them money. They will use that money to purchase goods and services, hence provide an incentive for producers to produce, and employ more workers for more production. It creates and economic cycle which includes more taxes for government from higher economic activities.
To the simple mind, Keynes’ contention would seem absurd, but it is what makes presidents win elections in the developed world. [Un]Employment has been at the heart of all presidential debates across the world because it determines whether a clique of leaders understand the fundamentals of running an economy or not.
With that introduction, it is unfortunate that the current financial restructuring policy our government is undertaking is going through twists and turns of not so intelligent approaches. On one hand, injecting millions of borrowed U.S. dollars into our economy through banks has not borne the wished-for sweet fruits, and this is according to the Minister of Information who aired the government’s frustration about the continuous rise in the dollar price at the black market. He exclaimed ‘where is the injected dollars going to!’
On the other hand, after protracted discussions, our Council of Ministers decided that there is no money to pay government employees “higher” salaries, notwithstanding that salary increment should have been an element and indispensable step within an overall organic readjustment to the new financial regime, rather than being considered “higher” pay per se.
Since South Sudan became autonomous it has not experienced meaningful public investment in infrastructure. To put Keynes’ outlook into our local context, public investment (through injecting the borrowed IMF-World Bank dollars), such as building a railway which will employ two thousand young men or so, would be more meaningful than giving that money to banks and wondering where it went. For the railway will have a positive multiplier effect on both economic growth and financial stability a zillion times what commercial banks could ever have.
The railway will even be a more sustainable (reliable) source of tax collection for the government, if giving those huge sums exclusively to the banks is based on a desire to “close the current budget deficit.” If the idea is to have enough SSP, then why not getting it through widening the country’s tax base? Roads and railways will widen the tax base. Why is it sounding like rocket science!?
Over the coming few weeks, our government will have injected over a hundred million dollars into commercial banks, hoping that this will reduce the price of U.S. dollars in the market. But, for sure, the order given to the country’s economic security personnel to oversee the commercial banks’ operations (in regard to the injected funds) shall bear no fruits. This is because the money is going to East Africa through foreign and local traders who are importing foodstuff, no foul play in that regard. As expected, they (traders) may officially buy it from commercial banks the same day these banks get the funds. We cannot underestimate the absorbing capacity of our consuming markets.
Instead of getting surprised as to where the injected money has gone, we should know that the money is injected into the wrong channel in the first place. It is high time we looked at public investment as the domain of government and private investment as that of private investors. After all, even before the current desperation to rescue the dollar (no longer ssp), the business community’s excuses for high prices had been based on the black market rates. What is the clamor towards the business community all about? Why not target “the people” when making economic decisions?
Let private investors (companies not banks) get money only for meaningful infrastructural projects that will create meaningful employment and multiplier effects, rather than hard cash from government to banks and from banks to food importers. Injecting IMF-World Bank money into public investment is the only approach which is pro-people and pro-growth.
Mayen Ayarbior has a Bachelor Degree in Economics and Political Science from Kampala International University (Uganda), Masters in International Security from JKSIS-University of Denver (USA), and Bachelor of Laws (LLB) from the University of London. He is the author of “House of War (Civil War and State Failure in Africa) 2013” and currently the Press Secretary/ Spokesperson in the Office of South Sudan’s Vice President, H.E. James Wani Igga. You can reach him via his email address: mayen.ayarbior@gmail.com.
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