Excerpt from Siize Punabantu’s 2010 Book: the Greater Poverty & Wealth of Nations
Split-Velocity Solutions, Outreach 27th January 2019
In this excerpt from the book the Greater Poverty & Wealth of Nations Siize Punabantu analyses how inadequate theory in contemporary economics is responsible for poverty in the world. Unfortunately developing countries, unable to see past the imperfections in theory adopt the same inadequacies into their economies and experience even worse economic conditions than their more developed counterparts.
“Weaknesses in contemporary economic theory have created the greatest dystopian fantasy in human history where technocrats endorse the grand delusion that poverty must remain an indelible part of mankind’s socio-economic existence”.
Enhancing the efficiency and effectiveness of money entails redesigning the economic and financial operating system. It has to be recognised that productivity is doing just fine. People and industries the world over work very hard to earn a living and to survive. Some nations or communities being more developed than others does not mean one or the other is lazy or more industrious. This is a common misconception that arises out of not having any answers. Generally, people and industries will dedicate themselves to doing whatever work they need to do to survive and live a decent life, developing countries are no exception. What distorts, complicates and diminishes the growth and development process is money and a sluggish economic and financial operating system that wastes much more than analysts are willing to give it credit for. Economic implosion permits a 3 percent gain in GDP whilst hiding a 97 percent waste or loss. This degree of inefficiency is caused by the way the operating system or circular flow of income allocates money. This ratio repeats itself in national and global settings by creating a very wealthy few and a not so well to do majority. Zambia, with poverty levels once as high as 80% in 2001 is no exception to this phenomenon. Even in the most industrialised nation in the world, the United States of America it will be found that a small percentage of the population are extremely wealthy, whereas the remaining majority is not as well to do in comparison whilst ghettos and slums harbour those who have fallen between the cracks. This pattern severely dilutes the capacity of the market in the United States and other parts of the world to act as a driving force for growth and development.
It becomes very clear that developing nations that are today inheriting these economic/financial theories and concepts and having them ‘downloaded’ into their socio-economic systems are being taken on the scenic route to prosperity. They are being taken to a destination it is likely the passengers will never live long enough to arrive at as the driver doesn’t know where he or she is going, but assures everyone that they do. Countries like Zambia receive accolades when GDP grows by three percent. This in itself is an affront to the intelligence and genuine desire to make progress needed by people living in poor nations. It’s like increasing the salary of the teacher who could not afford a bun for his sickly daughter by three percent per annum and telling him that in so doing he will one day be rich and able to fly his daughter abroad for medical attention and rather than a bun he’ll buy her imported chocolate cake, maybe – but he will have to wait the next 500 or so years, only he will not live that long. It is the expectation that by following Scarce Resource Theories (SRT) prescriptions you’ll one day be a developed nation, just hang in there. Developing countries that direly need assistance lap up these ideas and it can become a pass time of academics and scholars in respectable policy making institutions around the world to hold up hoops to see if people in poor countries can jump through them then wait to see for how much, or which new theory they’ll keep doing it for before they get bored and the bother of thinking up another policy or theory comes round. The pageant of popular ideas keeps coming around and the latest fad as to the cause or solution to development and poverty swings its hips up and down the runway to the awe and applause of the gallery.
There is a very real danger in this predicament. The global efficiency of the present day economic operating system is hazardously low. When an economy grows by 3%, even that of a developed region like North America or the European Union, it means, in terms of efficiency, that for every dollar or euro spent three cents worth of productivity was realised while 97% was lost or wasted, not necessarily by corruption, lack of good governance, lack of priorities, poor accounting practices, management errors, misuse or any other easily blamable human weakness, but by implosion [subtraction] within the economic operating system. These proportions speak volumes. Academic institutions have not allowed economic theory to evolve sufficiently enough to appreciate this digression, in fact analysts and planners are taught to give a standing ovation to low growth rates. Such low performance margins are rapidly creating an aggregated process of diminishing returns. This means that developed nations are getting wealthier [and growing] far too slowly to tow poorer countries out of poverty, but in the meantime are saying to poorer countries you should strive to be like us, yes copy what we are doing if prosperity is what you are after. Some developing countries will get poorer as their stock of wealth is not growing fast enough to sustain the aggregate socio-economic needs of their populations. Nobody sees this as observers have been taught to marvel at mediocrity and the belief that it is developing countries that are holding global development back by being a perpetually broke family member of the ‘rich’ world. The core economic and financial systems of developed countries are poorly designed, their fundamentals are too deeply flawed and to make matters worse these dysfunctional approaches to the management of economies are being replicated in developing economies. In essence it means paltry annual growth rates will be incapable of coping with global increases in population and human needs augmented over time. Faulty economic theory sees resources as finite and people’s infinite wants as a liability. This in turn leads to policies that exasperate human development. The gap between the rich and poor, developed and developing will continue to grow further increasing tensions and hostilities. Resources will become increasingly scarce leading to periods of domestic unrest, xenophobia, tensions in trade amongst peoples and between nations. Even credible academic institutions sometimes fail to see the real faults in present day economic theory. No one wants to see this continue and institutions have to take the challenge to carry out extensive reform in economic theory that will avoid this. Ultimately we should be one nation, one people who share one fortuitous destiny.
Very often developing countries, like the struggling school teacher or the failure of Anglo-American Corporation to make Konkola Copper mines in Zambia successful, are blamed for the difficulties they face. When we see children with large hungry eyes and swollen bellies, failing industries, men and women covered in dust as they quarry rocks to make a living, companies filing for bankruptcy, countries laden with debt and millions of people without hope, governments failing to cope with the socio-economic needs; it is not due to the developing world being backward or due to the school teacher who cannot buy his daughter a morsel not working hard enough. It is due to fundamental economic theories, systems and concepts in the industrialised world being built on an archaic contemporary economic (CE) system. Though this system is mistakenly considered exoteric and progressive it leaves a lot to be desired when it comes to the generation of national and international wealth sufficient to completely change the landscape of resource availability the world experiences. This operating system is designed to create growth with development far too sparingly in the very heart of the industrialised world itself where the immediate problem lies. There is thus a perpetual depression in global demand which possibly functions far below its full potential and that will generally be prone to periods of collapse. Metal and raw material prices on the LME remain far below what they should be nudging primary sectors that the developed world relies on, into dire straights. What is unfortunate is that people living in the developing world have been taught to celebrate these ideas and take the blame for mediocrity and underdevelopment to the extent that social norms impose a subculture of inferiority that many workers in the developing world have to deal with on an ongoing basis by often being paid much less than what their counterpart from a “more developed” part of the world may earn. Yet all the while even they don’t realize they should be in a much higher place economically, not alone but with the very people they burden with economic discrimination. It reads much like a Greek tragedy where the “educated gods”, in preaching economic salvation, have enslaved the world by failing to see that they themselves reside in the very same ignorance and scarcity. They reside deep in the very bondage they desire to emancipate those who embrace their doctrine from. In propagating sound economic and financial doctrines that are ill-conceived at the fundamental level they are unknowingly sustaining the very suffering, division and poverty they are trying earnestly to mitigate against or bring to an end.
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