The Sunday Mail
We have managed to keep friendly relations with Eastern nations. These friendships have been very beneficial for our economy.
Maintaining proximity, however, should allow us to learn not just from how our friends interact with us, but how they interact with other counterparties and handle their own affairs.
There is so much to learn from Eastern economic methodology. Let us consider government debt and development financing.
Western-influenced economists focus on sovereign debt and FDI as the two main means to secure financing for infrastructure and economic development. These can be effective, but create an economy that is export-focused and profits are largely repatriated back to the investor’s country.
This is why indigenisation laws are proving hard to draft up to an equitable position; because we are struggling to balance internalising as much benefits as we can, yet still attracting foreign interest.
Countries like Japan, China and South Korea have shown an alternative to national debt and FDI. This involves reinvesting into the economy by local institutions and wealthy investors. Their wealthy individuals and institutions make a conscious effort to reinvest into the local market indiscriminately; the essential philosophy being that greater inclusion into economic activity results in investment in infrastructural and human capital development from citizens themselves.
As long as cyclical investment and credit creation exists within citizens themselves, growth will occur and is far-reaching. Allocating capital to citizens and not public institutions will reduce state budgets.
This is because economically-active citizens will have a vested interest in investing in their own infrastructure to sustain their own business expansion. Similarly, because investment is kept at the discretion of citizens themselves, they will know exactly where expenditure is most essential to satisfy their urgent communal needs.
The lesson here is that putting back money in the people’s hands will not only incentivise private investment into infrastructural and human capital development, but it is far-reaching into sectors and geographic locations that may be more costly to the state.
What are we doing that’s different?
As per the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-Asset), highlighted infrastructural and human capital development projects are exorbitantly dependent on public institutions. As a result, greater need to finance the state leads to aggressive fiscal policy, leaving little option but to further seek national debt and FDI when the economy runs dry.
It is not my place to tell individuals how to spend their money, but to the wealthy individuals within our borders, it is encouraged not to save but to spend! Spending incites more industrial utilisation. I disagree with the notion to discourage or shun a consumerism culture. If we are at 30 percent capacity utilisation, that means we are 70 percent below adequate consumerism. The preferred stance would be to encourage those of us with money to spend it locally and inclusively. It is no coincidence that in Asia, national consumption is typically close to half the level of the GDP. That means what they are producing locally is largely being bought by themselves too.
This encourages further infrastructural development and upkeep to meet demand. Cyclical reinvestment! While many of us focused on Members of Parliament missing their flight back from China, my concern was: why do they spend outside?
That money we spend outside is the same money we are borrowing as debt and FDI. If wealthy individuals are not going to spend locally, then they should at least invest locally. Either they can take a lead in infrastructural development, or they can avail funds to the discretion of local businesses.
Some form of regulated micro-financing, or greater involvement with the recently-demutualised Zimbabwe Stock Exchange could help inclusive economic activity. Inclusive participation towards development has proven to be a sustainable method of economic growth in the East. Within decades many, Eastern countries have gone from solely agrarian economies to industrial might.
Such are the fruits of reinvestment into your own economy by local institutions and wealthy individuals, all achieved without excessive dependence on sovereign debt, and foreign direct investment. It is true that Japan and South Korea like us have considerably high national debts. But only 10 percent of it is owed to foreign investors. The rest of their debt is to their private citizens and institutions. South Korea settled all of its US$20 billion debt to the International Monetary Fund in 2001. Of course, national histories, economic models and institutional structures are very different between Eastern countries and ourselves. Likewise, not every Eastern country is the same.
However, an economy is a reflection of the shared values and cultural perspectives of a community. There are valuable traits we can learn from the East, two especially – shared economic responsibility and trust. Sharing economic responsibility is not solely depending on public institutions for economic development. It is incentivising our own industry to contribute to human capital and infrastructural development. Trust is inclusively investing in fellow citizens. If we adopt these values, we will experience our own economic explosion.