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Government has an obligation to sort the economy

01 Sep 2018 at 07:16hrs | Views
In the narrowest sense, the government's role in the economy is to help correct market failures, or situations where private markets cannot maximize the value that they could create for society.  This includes providing public goods, internalizing externalities, and enforcing competition.  That said, many societies have accepted a broader role of government in a capitalist economy.

What should the government do to improve our economy? Everyone seems to be interested in finding a solution to our economic woes. As a result, our interest in the government's role in the economy is a hot topic especially during political campaigns. During these times we often hear about surveys and polls aimed at assessing the managerial effectiveness of current bureaucrats. The promises made during elections must be kept we can not afford to make empty promises. Our economy needs fixing. The next five years demand ED to introduce a completely different political landscape. The politics of the stomach is the key to progress. Like a father who toils for the best of his children ED must prove the world wrong. He must hit the ground running and he must be around and visible on the ground. The nation trooped behind ED and that nation must be rewarded. The youth spent sleepless nights campaigning for ED and indeed they deserve jobs and better life. The time is now that a clear difference between poverty and ZANU PF must be defined. We can not afford our supporters being ridiculed for being jobless.    People typically ask the question this way. Do you think the president, or whichever politician we care to name is effective in his or her management of the economy? It is how we perfom which gives the answer to this question.

But this kind of question is highly misleading because it presupposes that it is the government's role to somehow manage the economy. What if the reality of the situation were that no government could effectively accomplish this undertaking? Further, what if in reality any governmental action aimed at economic management was sure to cause economic distortions which would have to be overcome later? If this is the case, to ask the question of whether old so and so is doing a good job at something that cannot be done is superfluous. The real question then becomes, has this particular politician's policies and actions been more or less damaging to the operation of the economy? Most politicians became intertwined with corruption. It is in ED's manifesto that corruption will be dealt with without fear or favour.  If corrupt officials are dealt with then we are indeed in a high gear towards economic progress.     

Somewhere along the way Zimbabweans have forgotten not only how economies work, but also the proper role of government. Economy is a natural part of life. As we all know, there simply are enough resources and products available in the country for us all to have all we want at a zero price. It is only how this is managed which makes the difference. The reality is that resources are plenty relative to our wants and desires; it is corruption which makes them scarce therefore we are forced to make choices as we seek to satisfy our wants. Choosing one alternative generally means giving up a host of other options. In our choices we first satisfy those desires that we find most pressing. Zimbabwe can do better. Our economy is not beyond redemption.

The development of free markets offers one means by which individuals seek to satisfy their wants and desires. Their rise allows individuals to produce and trade amongst themselves those things that they individually find most valuable. When left unrestricted, prices of goods and services reflect those values and send signals to all individuals about what is profitable and what is not. As a result of this voluntary interaction, the wants and needs of individuals are satisfied (though not perfectly satisfied) with greater and increasing regularity than could be achieved under any other alternative including either self-sufficiency or central planning. Furthermore, in unrestricted, voluntary exchange, the imperfections of the market really provide opportunities for entrepreneurs to meet the frustrated desires of individuals. This is the basis for pursuing greater prosperity and for economic growth.

it is the government's role to stabilize the economy and ensure full employment. It is imperative  that governments will be able to successfully eliminate all unemployment in a real sense, governments need to target some level of aggregate expenditures for such purposes. the government's role with respect to the economy is merely to protect the property rights of its citizenry. It is to guarantee employment, and to control the nation's money supply, and to attempt to plan some aggregate level of national consumption. Rather, as it relates to the economy, government is not merely an agency set up to protect the rights of those who have property against the desires of those who do not have property to steal it from them and to serve as a final mediator in disputes which cannot otherwise be resolved. Government must strive to bring equality and have equal distribution of the national cake.

It is again there to protect the citizens.

Government therefore use the threat of force to protect the lives and property of its people from those who would do them harm. But government must not only protect people in their poverty. It must empower them then protect them in their prosperity.

It is this necessity which illuminates the nature of government to us. Specifically, government is an agency of force seeking to deter certain types of behavior so as to maintain the public peace and promote justice. The very concept of justice has traditionally been interpreted as the occasion when people are able to receive their due. On the basis of this concept the founders of our liberation laid the principles for our nation. Thus they specifically advocated the protection of our lives, our liberty, and our property rather than a bureaucratic array of entitlement programs. Within this context we can then consider the question of the government's impact on the economy. Government is responsible for our youth and their welfare it is responsible for the whole nation. Jobs must be created not only dreamt of. We must move away from big mouths sounding nothing.  The promises of the campaign error must be fulfilled. The promised glitter must brightly beam and show the flowing honey. Praise singers must turn to be doers of the beneficiary deeds.  

Government actions and policies use resources. These resources must be paid for and the money to pay for them is either raised through taxation or borrowed from private lenders. As such, government spending poses a burden upon the economy for someone must pay for the expenditures.

We must realize that At the margin the increased governmental expenditures come with a price of destroying marginal business operations. ED must not reward friends. We must all start a race and win it for our future. Our country our Zimbabwe.  Those marginal businesses are the very ones which provide viable incomes for the poorest segment of the nation's population. Therefore, the key to good government, from the standpoint of promoting economic success, is to minimize the need for and size of government. It is not good government to expand its operations to ever more and more areas of control and thus destroy the opportunities of its citizenry to ever greater degrees.

Unfortunately for Zimbabwe, it appears that Corruption has successfully challenged the foundational ideas upon which the country was established, for no one seems to understand that the very structure which made Zimbabwe great is being undermined in our day by greedy corrupt people in leadership and those who have the executive protection. The government is responsible for stabilizing the economy when aggregate demand falls short of levels needed by the populace.

The Depression in Zimbabwe was the result of market failure. As such, we need a view that government action is necessary if full employment in the economy is to be restored. Zimbabwe must introduce price inflexibility (at least in the downward direction) which could lead to surpluses of products and resources and a aggregated fixed capital stock which was only altered for psychological rather than economic reasons. By aggregating all other spending variables we must conclude that government spending is needed whenever there is a supposed "short fall" in aggregate spending caused by an autonomous decrease in consumption. This action, will restore full employment.

Finally, why did certain types of capital sit idle while other capital projects continue unabated? Perhaps the problem of this superficiality is that the real explanation cannot be discerned once it is masked by aggregation.

economic downturns are most likely to result when individuals have made their plans based on false signals. These false signals arise from the many governmental programs or manipulations of the economy which artificially alter prices.

Business firms must start by undertaking long term capital projects which appears profitable because of the new lower rates of financing for these capital programs. However, the substance (or what we might call the real resources) of saving necessary to sustain these capital projects is simply not present. As a result, at some point in the future it will become clear that the resources to complete these projects simply are in our hands. The price of borrowing will then be driven up as business firms compete for funds to complete their projects and only those programs which are most profitable will be successful. The remaining failed projects must then be liquidated. However, due to the heterogeneous nature of capital, the process of liquidation will be disruptive to the economy.

The point of this explanation is, nevertheless, quite clear. Any attempt by government bureaucrats to manipulate economic activity will at best be successful for only a short period of time. Any artificial boom created by government will necessarily be followed by an economic bust when the essential nature of the underlying elements of the economy are revealed. You can't fool all of the people all of the time."we must practice honest business and one day we look back and say surely Zimbabwe is a prosperous nation. 

If the government protects, rather than abuses, the property rights of its citizenry, then the stage is set for economic growth. In protecting these rights, the government's goal must be to minimize its size in order to limit any distortions it may create so that market prices provide true signals to the participants. In this environment, individuals can more effectively plan their productive efforts and coordinate them with the wants and desires of others.

Our economy can improve if we stop politics of patronising and enjoy politics of the economy. It is difficult to lead a hungry nation.

Source - Dr Masimba Mavaza
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