‘THE 1+1 OF SOCIOECONOMIC GROWTH’

Sir,

An economy is an organised system of production, trade and consumption. For there to be growth in any economy, there must be growth in at least one of these three economy-defining parameters.

But a good and closer look at all of these three economic imperatives (production, trade and consumption), would reveal that in fact it is just one of them which must grow first in order for the rest of them to follow suit.

  The economic imperative which must grow first is obviously production, or as economists would want to specifically call it, primary production. It is obvious that there cannot be secondary production (manufacturing), or tertiary production (trade), or consumption without primary production.  This is the reason why the primary productive economy is often referred to as the real economy.

There cannot be any maize milling companies if farmers, local or foreign, did not grow and produce maize, neither would there be any trade in maize or mealie-meal if farming did not happen. It is as simple as all that. With economics being this simple, where do our economists and governments get lost in this very simple and small one roomed house of economics?  Why can’t they get all our national economies fixed once and for all?    

 The answer seems to be that our governments and their economists do not know this simple root of economics. One Cambridge University Economics Professor from South Korea, Ha Joon Chang put it succinctly well when he said economics was 90 per cent common sense made complicated! He also went on to say good economists are in fact not needed in order for any country to run a good and successful national economic policy.

Experience

Coming from someone with 20 years of teaching experience at Cambridge University, we better believe what the professor said about economics. The reason why our countries and their governments get it wrong is because they insist on tinkering with secondary economic issues instead of concentrating on primary ones.

In both his books, Professor Chang successfully demonstrated that trickledown economics does not work. He demonstrated that making rich people richer does not improve the economic fortunes of the poor people around them, In fact, it makes them poorer.

Such being the case, cutting corporate taxes like what President Donald Trump did in the USA will eventually not make poor Americans any better than they are today. It might give them temporary jobs today while the rich men are scrambling for the new investment incentives like what is happening in the USA right now, but the profits from those new investments will never be sustainably re-invested as envisaged by proponents of such a capitalist ideology. 

Demonstrated

 The professor also demonstrated that the only thing which is guaranteed to significantly and sustainably improve the economic fortunes of poor people and also simultaneously improve the economic fortunes of the whole country in a similar way is income redistribution, or in other words, social protection. Social protection of an unprecedented scale is what saved this world from the dire consequences and effects of the 2008 world financial crisis.

And yet it is social protection which no rich man wants to hear about, talk about or do anything about! Regardless of this opposition to social protection by rich people, facts are always stubborn.

When you listen to most politicians talking about the economy all over the world, there are so many nice words which they use to describe so many good socioeconomic wishes and beautiful socioeconomic dreams for their countries, but usually there is absolutely no concrete and practical means proposed by which to make those superb dreams and nice wishes come true!

The South African Government spends nearly R400 billion of its R1.3 trillion annual budget on social protection alone. This is a fact, but does anyone here know this? I don’t think so. The SA productive, manufacturing and retail sectors are sustained and propped up by this awesome income redistribution and public expenditure on social protection; otherwise there would be nothing, absolutely no socioeconomic growth and development at all to talk about!  

France, Germany, Spain, Portugal, Italy and even the UK directly spend 40 to 60 per cent of their public expenditures on social protection alone. Even the USA government directly pays for 40 per cent of all the expenditure on public health in that country. This is what drives their huge economies and this is what has made them become developed countries in the first place.

Saved

 What exactly saved the world from crushing to the ground in the 2008 World Financial Crisis, the second biggest economic meltdown in the world, second only to the 1929 Great Depression?

 It is social protection of an unprecedented kind which saved the day in 2008 up to 2010 thereabouts. Yes, avowed capitalist governments from the USA through the UK and all across the European Union abandoned their usual capitalist rhetoric and shamelessly donned the social solidarity gowns of social protection.

The collective trillions of public Dollars which were quickly and energetically injected into financial crisis affected banks and other industries by these First World governments right from the USA through the UK and all across the European Union were not injected therein just in order to save the affected banks and companies from collapsing.

These trillions were urgently injected in order to avoid a looming social catastrophe of great proportions, a catastrophe which could have been bigger than that of the Great Depression of 1929.    
 If this unprecedented capital injection into the troubled businesses had not been done, millions of people all over the world were guaranteed to lose their jobs, houses, livelihoods and all.

And luckily, this is something which most of the affected governments, although being hard core capitalists at heart, had the guts and wisdom not to allow to happen. They displayed amazing feats of social solidarity (social protection) by pouring in previously unheard of and astoundingly huge amounts of otherwise public funds in order to bail out what were essentially private companies much against the dictates of capitalism itself.

The point here if you have not got it yet is that public funds were used by world governments in order to bail out financially troubled private companies not because these governments had shares in these private companies or because they loved the companies so much, but because as governments of the people by the people for the people, they could not bear to stand aside and watch millions upon millions of the people they served being consigned to the dust heap of joblessness, homelessness, bankruptcy and unrecoverable financial ruin as what happened during the Great Depression of 1929.  And for their magnanimous display of incredible feats of social solidarity (read social protection), may the good Lord God continue to bless them all.

Protection

Social protection is the biggest driver of all national economies worldwide. The reason for this is quite simple actually.
With spending power in their hands, thanks to social protection, the vast majority of people, that is to say the majority poor of us because we are obviously in the majority, go around boosting everything from primary production, through secondary and tertiary production and up to consumption itself.

We trigger a vicious economic cycle of production, trade and consumption in which most of us inevitably find ourselves drawn in as both consumers and producers as we get employed in the booming industry all around us! Simple enough to understand, isn’t it?

Now, if you want to know where your country is headed today in terms of real and sustainable socioeconomic growth and development, just ask yourself these questions and the answer will be there: Does your country have solidly built and people-based social protection institutions, systems, strategies and practices firmly in place?

Dr Cleopas Sibanda
Occupational Health and Social Protection Specialist Physician

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