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We can import knowledge, technology to boost the economy

18 Feb 2019 at 07:06hrs | Views
AS our government continues with the belief that borrowing money is one of the means to kickstart the economy, perhaps they can be reminded that they can also import new knowledge and technology, which has historically proven to be one of the most effective means to boost economic growth.

Money alone when not backed by productive ideas will not add much value other than to fuel corruption. Zimbabwe needs to organise itself and produce. We need wealth-creating initiatives, which take into account that money is an output of production and that production stimulates trade, which generates income. The country possesses everything needed to bolster the economy, except organisation. We need to organise ourselves.

Most economies that have risen from the doldrums have done so largely by borrowing new ideas from others and perfecting them to meet the needs of their local situation, which would bolster their economies. One such example is the United States economy, which started to gain stability and maturity in the 18th Century, after it was largely built on agriculture and plantation. However, their economic growth story only started after they gained independence from Britain in 1776.

There are three key factors behind their success story, which are discussed in this instalment. Firstly, soon after independence, their leadership prioritised putting in place strong systems, structures and policies that would enable the country to make good use of available resources, facilitate trade and economic growth and ensure transparency and accountability. After experiencing an economic stagnation, they needed to organise themselves. Those systems have remained intact and are the cradle of the US economic success over the centuries.

Secondly, despite that the European Industrial Revolution had started much earlier than theirs and that European investors were prowling on their shores in search of raw materials to feed their growing industry, the US leadership instead preferred to go for a home-grown model, by empowering their local entrepreneurs and facilitating their access to and acquisition of British and European industrial and scientific knowledge. They realised that economic growth is a highly competitive venture.

Their agriculture industry was among the first to show signs of rapid growth due to mechanisation, which altogether contributed to the high standard of living for their workers and the general population.

Thirdly, with the European Industrial Revolution in full swing, the sale of raw materials to Europe was more than tempting and would have been an easy route to take. That is the easier route currently taken by most African countries, which undercuts their revenue for growth.

The US government instead chose to massively invest in the beneficiation and processing of their own raw materials. Locally produced products boosted domestic trade, while exports of the same strengthened international trade with Britain and the rest of the world, which helped to give rise to the American Industrial Revolution between the 1820s-1880s.

These three factors together with others, spawned the industrialisation of the United States, with its local entrepreneurs taking the lead in iron and steel, engineering, oil and gas, finance, electric, textile and eventually motor vehicle industries. Cotton textile factories were also among the preferred ventures that later became the foundation of the industrial revolution.

An economic boom put pressure on the government, which led to the expansion in the transportation sector such as road, canals and railway lines to facilitate the trade and distribution of goods and services. Infrastructure development helped to stimulate industrial growth, including minerals and oil mining. The US government was only able to achieve these because their income base from taxes also increased from their Industrial Revolution.

These developments and others prepared the US to become a global industrial powerhouse. Of course slave trade and the expropriation of poor countries' resources played a part in the US economic growth story. By the 20th Century, the American economy was among the biggest in the world even though European Industrial Revolution started earlier. A big economy comes with colossal military power, which together made the US to be the most powerful country in the world.

The Chinese story is similar, but more recent and shorter. When they shifted from communism to capitalism in the late 1970s, they acquired Western industrial knowledge as one of their growth policies. Both President Obama and Donald Trump have on several occasions complained to the World Trade Organisation over China's alleged unorthodox acquisition of its patents, scientific knowledge and some of their innovation policies. But this has not deterred China.

They have localised this knowledge making China one of the leaders in intellectual property. The story does not end there. A massive Chinese cheap labour force that possess western industrial knowledge and skills became a big global economic attraction, which resulted in a stampede by Western industries to China.

As its economy grew, and its people becoming wealthier, Western companies have become more established because they make more profits by trading their products and services with the now wealthier generation of children of the same labour force which manufactured them.

Source - newsday
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