Tuesday, 21 October 2014

The myth about deficits

The minister of finance is said to be in tight spot because the fiscal position of South Africa does not allow any opportunity to spend or borrow. The argument is that both the budget deficit and the level of debt are high. And the suggestion is that the government should cut down on spending.

Now looking at the last point about spending cuts, economics 101 talks about a multiplier working in reverse. So what the economists are saying is that the government should literally choke the South African economy. The consequences of cutting government spending at this juncture are dire - increase the deficit itself, deepen and prolong the slump, create chronic unemployment and slows economic recovery.

The issue of high deficit being a constraint to the economy is myth because it treats government the same way as individual households and companies. That is, living within ones' means to avoid the suffering in the near future. Well governments assets cannot be simply sold to recover any losses as happens with individuals and companies. The government cannot be broken up - it is a sovereign entity and always has an upper hand in debt negotiations.

And lastly, the IMF has encouraged Sub-Saharan African countries to spend more on infrastructure at this point in time simply because they can afford to - debt service costs are their lowest levels!

The whole argument about deficits is nuat = (nothing Ubuntu about that)!

Wednesday, 13 August 2014

Welcome to the ubuntu-economics blog!

This blog is for sharing my thoughts, views and believes on the subject of economics. Why ubuntu? Well it is very much an appropriate title given my views about what economics as a study into society's survival should be.

Ubuntu resonates very much with issues of justice, fairness, transparency, honesty, etc. Has anyone asked themselves about the nature of economics being taught at institutions of learning (i.e., starting at secondary school!) and reported in the media - does the subject address the concept of ubuntu as well as aligning itself to the issues of survival? Can the lives of the society be bettered given what is being taught and advocated out there? Is the subject meant to address issues that are "important" to the chosen few? The questions are many - and please share yours!

The blog is aimed at addressing this issues from the perspective of the type of economics that addresses what ubuntu speaks to.

Please join me as I share with you my thoughts and views on ubuntu economics - A BETTER LIFE IS POSSIBLE!!!