Making Economic Policy

Editorial

It has become a ritual to focus all public attention on the budget each year. People make it as if everything will be done or undone by the decisions taken in the budget. The tendency is to oversell the exercise. There is no doubt that the budget is the occasion for making major policy decisions about the economy but it is soon forgotten that one budget is but part of a bigger whole.

This larger part consists of the government’s program on which the government was voted to power. While changed circumstances may shift the emphasis placed on certain items in a particular budget, the overall vision of any particular budget should essentially reflect the orientation of public policy as contemplated in the Government Program. 

The appointment of a new Minister to take charge of the portfolio should not make any difference to the broad philosophy of the government. There is every reason to abstract from personalities if we hold the long term in view. We have been given to understand that this philosophy is based on a more equitable sharing of economic opportunities among members of the population. It has been labelled the “democratisation” program. This main direction is assorted with other pursuits such as preserving a sound environment and giving positively discriminated opportunities to others who have remained on the periphery of development for long, while keeping to the objective to grow the economy with fairer sharing of economic opportunities across the board.

The implication of this approach to economic management is to make economic progress by de-concentrating power and influence from an otherwise self-appropriating dominant economic elite. This elite has, for example, monopolised the production of electricity thanks to well-crafted long term IPP contracts that have made the CEB a docile follower of its diktats. Consumers have to bear the brunt. Another branch of the same elite has monopolised telecommunications and thwarted the further development of this sector by concentrating on making as much money as possible by keeping consumers on a tight leash. For some reason or other, the traditional elite has managed to be always first and foremost whenever significant new economic opportunities have arisen, keeping the rest of the population at the margin of development. We cannot expect the government to spoon-feed a new generation of entrepreneurs but if those who have the potential to take on new areas of activity relinquish their role, you cannot blame the existing economic elite to go on assuming the commanding heights of the economy.

Given the lack of substantive progress in this direction, we will therefore expect the budget to achieve the desired balance by keeping up rational welfare policies in place instead of consolidating the massive transfer of incomes in favour of big corporations. At the same time, the budget is an opportunity to rectify unfair practices that have been applied in the past to the detriment of the population. Thus, one would expect tax policies that have in the past been tilted too much against the general good of the population to be discarded and additional revenues to bridge any gap so occasioned to be raised from those sources where big money is being made. A skilful Minister of Finance does all these things by keeping to a sense of overall balance so that the foundation for balanced and sustainable future growth is laid down at the same time. This requires putting economic operators, big and small, into confidence enough for them to break new grounds and contribute to raising general economic well-being.

One would also expect the budget not to be implemented in such a manner as to make the Ministry of Finance the one which overrules everybody else by posing as the one who holds the strings of the purse. The Ministry may have its pecuniary priorities but it has to take decisions based on a broader consensus about the direction of development of the country after seriously considering priorities enunciated by all other Ministries in their own domains.

It cannot go on riding roughshod on all sensible technical advice tendered on direction to be taken by individual ministries by rubbishing everybody else on the grounds that there would be no funds for supporting sounder projects. Had we not taken certain decisions in the past in the field of promoting education and healthcare, for instance, without counting beans, we would have had much poorer economic perspectives than what obtains currently. One has to look at the longer term picture.

We must have paid a high price for decisions not to expend mind and money on infrastructure development in past years even though bumper crops had been harvested by the MRA and money had been set aside for carrying out related developments. When numerous public capital expenditures are bunched together at the same time, as appears to be the case at present, one has the feeling that the element of coordination is not as much present as it could have been. This coordination gives rise to a judicious phasing and sequencing of projects so that everything neatly falls into place with a maximum economy of resources and a minimum inconvenience caused to the population.

In countries which make concrete progress and are always poised on the way forward, there are think-tanks separate from the spending Ministry. In America, the President himself makes a periodic assessment of the State of the Nation, identifying all areas where action is called for. He is backed by his Council of Economic Advisers, a think tank par excellence consisting of established experts drawn from diverse fields. The job of think tanks is to conceptualize and coordinate action so that when it comes to the crunch, everything is in place to support the intended direction of economic growth accompanied by the necessary social development. If the local Ministry of Finance has to deal with the problem of inadequate social integration from time to time, it really means that the grand scheme towards not allowing unacceptable social “dis-integration” to take firm root was not in place. Such a situation could have been avoided by keeping a close watch and acting before the “standard deviation” became too large.

Let us take the case of the Land Based Oceanic Industry, for example, something that was announced many budget years ago in the past. It would have been only fair to give out to the public the information about the broad outline of its implementation and the opportunities that such a project would spin off to prospective entrepreneurs and to the country. This could have given potential non-traditional investors the opportunity to embark on certain areas of this project, helping them to seek foreign partnerships and engaging in activity in an informed manner. A well charted out plan of action was essential. There seems to be none. Had there been a public body thinking out how to put up the structure, coordinate activities and mobilize the resources for its construction, comprehensive progress would have been made. One can understand why the capital market is not so active.

In the absence of such think tanks, the alternative is to have a hotchpotch implementation of one project here, another one there. It is this kind of adhocism that is making us lose the needed sense of orientation for driving the economy forward intelligently. On the one hand, there is an urgent need to produce the collective momentum for fair and sustained growth. On the other, we have to battle against adverse external developments. We need to have the tools to deal with both of them in a timely manner. If we had them already in our hands, there would have been less of a flurry whenever the annual budget is to be delivered.

* Published in print edition on 4 November 2011