TANZANIA like many other small economies is engrossed in the liturgy of “efficiency” without proper economic management in such a way that its economic body has eschewed public-sector investment and abdicated critical strategic roles.
In this imagination, “we” have mistakenly embraced the thinking that the government’s major role is to rescue markets, not to strategically create ones that work for many; that it should just protect those who create value, rather than creating value itself.
As a result, the public sector is bereft of policy wonks who understand that economic growth with equity requires public confidence in government. To tackle the inefficiency problem in the economy, policy thinkers, many wired to think like business executives, have consistently prescribed strategies to specific corporations in the country as they would do in big corporations.
Whereas the country as the economy works as a system not in silos, these experts have chosen to ignore the general theory of the economy in favour of organisational-related strategies. This in turn, has perennially left the state to become the apogee of capture by business interests.
As a country, we never miss an opportunity to link our state of poverty whenever our economic institutions perform sub- optimally. Yet, the suboptimal standards in government economic institutions are always a function of the general health of the economic body.
But the economic body is a place where people are, and as such, the economy ought to be functional from that place not from another place of a different economic body.
As Harvard development expert puts it; “There are no poor people. There are people living in poor places.” This means, policy measures in an economic body must be intentionally designed to suit the purpose of the people within a society in which the economic body domiciles.
The lofty statements such as “ease of doing business” are only meaningful if the purpose is to make people more prosperous rather than profits of the companies from any economic body in the world. For this to happen, a critical way of looking at the economy as a country and not a big corporation is paramount.
Indirectly or directly, our policy platforms are captured by the owners of capital within and outside the country. Courtesy of a business executive’s logic, our policies are formulated to quench the thirsty of foreign capital and not the internal mechanics of the economy. The case in point, is the DP World initiative.
Misguidedly, the debate about this initiative, took a business interests tangent of the company as opposed to the strategic economic interests of the country. We saw how some business gurus showcased their skin in the game by arguing in favour of the initiative as a smart business move.
Some intellectuals within and outside government went even further to show how foolish those against the initiative are, simply because they never trade through the Dar es salaam port.
Their braggadocio aside, one could not fail to notice that these people talked from the same talking points. What is frightening is that even those on the driving seat of the economy shared the same talking points. Having listened to every government official, my conclusion is our country is managed the company way.
Point of Departure
To paraphrase Friedman Milton; there is only good and bad economics. Economists have a professional duty to debunk bad economics as such because bad economics is worse than corruption. Organising the economy as a big business empire through the minds of businesspeople is bad economics and should be debated as such.
The intellectual rigour that makes a great business leader is not what makes a great economic analyst; a business guru with a personal fortune of $2 billion is not always the right candidate to advice about the $90 billion economy.
This, in any way, doesn’t mean economists are sharper, it is just that economists asks the right questions about the economy and businesspeople asks the right questions about business empires. As such, the required thinking for a businessman is inevitability different for good economic analysis.
And because the country’s economic purposes supersedes business empire’s destiny, the difference of what it takes to shape either side is like day and night. Let us do some interrogatories on employment and productivity in foreign direct investment initiatives.
Job Creation
Businesspeople often confuse the relationship between international business agreements between nations and domestic job creation. Their belief is that, for a country to reap the benefits of free trade, the means of production must be accommodative to foreign capital regardless of the internal mechanics of the economy.
They argue that, for the jobs to be available in the economy, new investments are key in order to boost exports that lead to surplus. This means the economy creates employment than a deficit-laden country.
Are businesspeople without a point? Of course, they have. However, economists understand international business agreements in a mere free trade context does not lead to lower unemployment even if exports increase compared to countries with trade deficits.
The matter of fact is that, even when exports increase where there is starved internal mechanics of the economy, trade deficit remain the constant feature. Our economic history with regards to this aspect is a clear vindication.
But let us assume it does create surplus. The economics of this business argument doesn’t make sense. One country’s exports mean another country’s imports. Mathematically, every “shilling” from exports should be matched by a second country’s ratio of domestic goods to imports.
This comes from the fact; it is not the aim of free trade to increase global total spending and therefore, in this arrangement the world aggregate demand do not which could otherwise lead to different results.
As such, a country with poor productive capacity such as Tanzania, even if exports increase as it has been in more than thirty years of foreign direct investment, our economy’s capacity to roll-back imports has nothing to do with job creation.
Productivity
Because businesspeople think of their own companies, their imagination is if foreign companies identify a country as an investment destination hub and pour billions of dollars a year in this attractive country, the country’s productivity will automatically flourish and surplus will obtain.
The assumption is that their companies would create more value hence less imports and more exports and thus, the whole economy will eventually catch up.
However, economists know that’s not the way the economy works. This is because the balance of trade is significantly the balance of payments, thus,the total balance of payment which is the gap between total sales outside the country and purchase from outside must always be equal to zero. This is to say, the capital account as a matter of principle is matched with the imbalance.
So, when a country attracts a lot of foreign investment, it’s the citizens from another country who access more assets than the citizens in the host country. In accounting, the host country’s imports must be above its exports. The reason why large capital inflow in a country implies a trade deficit. And this is case in Tanzania as per the economic history of foreign direct investments.
From the above demonstration, it is evident that business-people are undoubtedly wrong and economists are authoritatively right. What is to be recognized here is that, the individual- business reasoning of the country is weaker than reasoning the economy as a whole.
Rethinking our Economics
From classical economists to Schumpter, the conceptualization of the market economy had been of an “economic organism”. Whereas, it may not be a perfect analogy, it is sincerely instructive and logically productive. When we think of the economy as an organ and not just a simple system, we reduce the risk of forced errors.
The responsibility to grasp the difference between the big business and national economy squarely lies upon our leaders in the policy space. If the Tanzania economy,for example, employs more than 20 million people, 700 times as many as MeTL, the largest employer in Tanzania, it is only sincere to conclude that the complexity of managing the economy requires a more polished but sophisticated policy analysis.
In any case, the mathematics discipline teaches us why and how the number of potential interactions among the large group of people is proportional to the square of that number.
The DP World Investment debate, has vindicated Menard Keynes; Economics is a difficult and technical subject. Whereas it is for the businessmen/women to operationalize the economy, it is for the economists to first think through of what needs to be operationalized.
