Rikus Grobler | Oct 18, 2017 | 0
Fool’s paradise papered over by borrowing to spend
Incompetence, corruption and fertility in that particular order, are the three key obstacles to achieve all the lofty visions we design and all the ambitious targets we set, to reduce poverty.
A contribution we ran last week from a young intellectual, set in motion a train of thoughts to get my mind around exactly what we are striving for when it comes to poverty.
Our young intellectual defined two types of poverty, – absolute and relative. This, in my mind is a crucial distinction.
The first, absolute poverty, is akin to what social economist would describe as either above or below the so-called poverty line. It refers to and tries to define the minimum income any individual or household needs, just to survive. In this scenario there is no surplus, consequently zero savings, and hence, a significant vulnerability when it comes to dealing with emergencies. People below the poverty line typically become the government’s problem. That holds true for any country but it is very obvious in Namibia. Unless the government supports these people, they scavenge on the fringes of society to eke out a daily living. The sprawling shanty settlements surrounding many African capitals are a living example of this kind of squalor.
Relative poverty is a quantified measure of comparing the lowest income (above the poverty line) to the most affluent. It leads to another widely-used but seldom understood concept, – income inequality. The trick for any poverty alleviation programme is to reduce this gap without reducing a country’s national wealth. It is a complex problem and there is no single all-encompassing solution that I am aware of. It is a battle fought on many fronts and in a manifold of manifestations.
When we talk about relative poverty, our focus tends to be on education and health. Nobody can fault this fundamental premise. But when we measure national wealth and we come up with a per capita figure, we must also remember to calculate a per capita figure for national debt. It is an exercise in futility to focus only on the income side and conveniently forget that even the poor share in the burden to carry a country’s debt load.
One person’s income may be higher than another’s by a factor of hundreds but that same person also contributes many multiples more, to service the national debt. It is indeed relative.
After many years of observation, I have come to the conclusion that income inequality is not our biggest problem. Our problem is our national debt, specifically if it is reduced to a per capita figure. The developmental problem is a combination of fiscal constraints, wasted investment, and sputtering economic growth. When the per capita national debt grows slower than the per capita national income, then a country is making headway in its endeavours to improve the lives of all its citizens. When these two ratios are inverted, then a country has trouble. Usually this deficit is papered over by borrowing money in the capital market and then spend lavishly on a myriad of interventions designed to uplift the poor. The problem however, is that very few policy-makers ever bother to measure the per capita impact and per capita burden of these investments. It is also fairly difficult to quantify the results in a single fiscal year, or even over a three-year period since the results may take a generation or even longer before they start contributing to the national balance sheet.
When it is important that every (borrowed) dollar a country spends to elevate its economic growth, shows a measurable return, then it requires a critical assessment of milestones reached, and of impediments.
We could have made our development dollars work so much more efficient, were it not for the pervasive incompetence in a plethora of government ministries, departments, agencies and parastatals. The incompetence is so overwhelming, it slaps one in the face every time one deals with one of these institutions. It is also very difficult to quantify the damages caused by a lack of ability, but I would estimate it runs into the billions every year.
But there is no real need to tolerate this situation. Of that, the major turn-around at the Ministry of Home Affairs is the most beautiful example. Corruption, on the other hand is easy to define and to quantify. We all know what graft is and what stealing is. But it is not so easy to prevent since so many people derive a significant income from it. Still, it too is costing us billions.
Finally, fertility. This is arguably the most sensitive issue since no politician is prepared to state outright that the number of children you have determines your poverty or your prosperity. Unwanted and uncared-for children are a big drag on economic growth. Ultimately, this also becomes the government’s problem and no matter what fancy schemes we design, if the number of neglected children keeps growing, poverty expands, not declines.