Economy

How Ghana’s economy will top Africa in 2018

Ghana is tipped to lead Africa as the fastest growing economy in 2018 with a growth rate of eight per cent as a result of increased oil and gas production, which boosts exports and domestic electricity production.

In its latest report dubbed: “Global Economic Prospects: Sub-Saharan Africa,” the World Bank has forecasted that growth in Sub-Saharan Africa will pick up at 3.2 percent in 2018, and Ghana will lead the economies in Africa with eight per cent followed by Ethiopia and Tanzania, which is expected to grow at 7.2%

Ghana’s economic growth, which had slowed from 4.0% in 2014 to 3.7% in 2015,  recover to 5.8% in 2016 and 8.7% in 2017, following consolidation of macroeconomic stability and implementation of measures to resolve the crippling power crisis.

 

However the forecasted recovery in economic growth in 2018 will depends on fiscal consolidation measures remaining on track, quick resolution of the power crisis, two new oil wells coming on-stream, and improved cocoa harvest and gold production.

“Growth in non-resource intensive countries is anticipated to remain solid, supported by infrastructure investment, resilient services sectors, and the recovery of agricultural production,” the report stated.

On the Sub-Sahara outlook, the bank said growth in the area was forecast to pick up to 3.2 per cent in 2018.  It also predicated a moderate rise in commodity prices.

Per capita output, which was projected to shrink by 0.1 per cent in 2017, is also expected to increase to a modest 0.7 per cent growth pace over 2018-19.

“At those rates,” World Bank said “growth will be insufficient to achieve poverty reduction goals in the region, particularly if constraints to more vigorous growth persist”.

Growth in South Africa, the second biggest economy in Africa, which is projected to rise to 0.6 per cent in 2017, is expected to accelerate to 1.1 per cent in 2018. Africa’s biggest economy, Nigeria, which is forecasted to go from recession to a 1.2 per cent growth rate in 2017, will gain speed to 2.4 per cent in 2018, helped by a rebound in oil production.

Growth is forecast to jump to 6.1 per cent in Ghana in 2017 and 7.8 per cent in 2018 as increased oil and gas production boosts exports and domestic electricity production. However the bank noted that militants’ attacks on oil pipelines could hold the key.

“If militants’ attacks on oil pipelines in the country decreases further the Nigeria economic will grow further”

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4 Common Capitalism Myths Debunked

Fee.org (by: James Davenport)

One of the most disappointing things I face as a college professor is the lack of understanding most students have regarding capitalism. The simple fact is, despite its importance to our daily lives, relatively few people have a strong grasp of what causes economic growth and why markets are so central to continuously rising standards of living.

In my teaching, I have encountered several myths or misperceptions about capitalism from students as well as individuals outside the classroom. Dispelling these myths has become a focus of much of my teaching.

Myth #1: Capitalism Was “Created”

One of the most pervasive misunderstandings about capitalism is the idea that it was created by someone. Some of this can be attributed to the language used to describe Adam Smith’s role in explaining the market process. The common reference to Smith as “the father of modern economics” can lead people to assume that he in some way created the market system. It is also not unreasonable to conclude that, since socialism is generally reliant on planning, many would assume that capitalism is as well.

Markets arise out of our human qualities.

However, as Friedrich Hayek explained, the market system is not really “created” as much as it is a system that evolves out of human interaction and discovery. Similar to language, the market economy was not created by a single individual or group but evolved over a long period based on the interactions of many people. The rules and institutions which support the market economy arose from these interactions.This notion of a spontaneous order emerging out of the individual actions of millions of people, and the discovery of rules and institutions that will facilitate the continual progress of this order, may be the most important aspect of capitalism. It succeeds because it arises out of humanity itself.

Unlike socialism, which attempts to impose rules and institutions regardless of their conformity to human nature or desires, markets arise out of our human qualities. And the rules and institutions that facilitate the ability of markets to perform are discovered as we discover ourselves and in the way we interact with one another.

Myth #2: Capitalism Creates Poverty

This may be the most pernicious of all the misunderstandings I encounter regarding markets. The idea that absent market capitalism would create greater shared wealth within society continues to permeate the thinking of a great deal of people. This is despite mounting evidence that, as markets are used by more and more countries, global poverty is steadily decreasing.

All developed countries have market-based economies.

Importantly, the evidence is clear that this decline in poverty has happened as countries have come to embrace market capitalism as the way forward – especially China and India. As other countries see the success of these two previously very poor countries and begin following their lead, we can expect to see poverty in the rest of the developing world significantly reduced as well.In the Wealth of Nations, Adam Smith explained how markets, by continuously expanding the range of goods and services to an ever-increasing number of people, would produce what he called “universal opulence.” However, since Karl Marx & Friedrich Engels first launched their frontal assault on capitalism, many intellectualsentertainers, and even politicians have embraced the idea that capitalism causes poverty, or at least prevents people from escaping it, and more disturbingly, that socialism leads to greater prosperity for the masses.

It’s not surprising, then, that these ideas filter down to the public-at-large. But this idea that capitalism leads to poverty for the masses while socialism leads to their prosperity is exactly opposite to all the evidence we have.

All developed countries have market-based economies. Those developing countries seeing the greatest growth have adopted market principles. Contrast this with countries that have fully adopted socialism, such as Venezuela or North Korea. It is troubling that incoming students do not understand this.

Myth #3: Capitalism Is about Capital

The underlying foundation of capitalism is human freedom.

The term “capitalism” was coined by Marx as a pejorative towards market-based economies. The term stuck and has led to some confusion about why markets actually work. As economic historian Deidre McCloskey has noted, people at all times have attempted to amass capital (land, resources, and money). But those collective attempts didn’t lead to the type of society-wide economic growth we have seen since 1800.The underlying foundation of capitalism is human freedom. As Adam Smith recognized, when individuals are permitted to pursue their self-interest through markets, they are amazingly good at finding ways of bettering not only themselves but society as well.

Equally important, as economist Joseph Schumpeter explained, out of this freedom arises a continuous process of improvement – what he called “creative destruction.” It is this constant innovation – discovering and bringing to market new products and services, finding ways of improving existing products and services, and finding more efficient ways to create these products and services – that truly drives economic growth and increases standards of living.

The fact is, while the accumulation of capital is a feature of a market economy, it’s certainly not exclusive to it. It is individual freedom and the innovation that arises from it that drives the engine of capitalism.

Myth #4: Capitalism Creates “Winners” and “Losers”

While it is true that some individuals and firms succeed while others do not in capitalism, this also is hardly an exclusive feature of markets. All economic systems have some individuals who succeed and others who fail in one form or another.

Over the long run, society in its entirety benefits as a result of markets. 

However, capitalism is different in this regard in two important ways. First, capitalism increases the number of “winners.” Unlike other systems, capitalism reduces the barriers to entry into market activity for larger numbers of individuals. The resulting competition provides greater opportunities for success (both great and small) than in any other system.Second, over the long run, society in its entirety benefits as a result of markets. This is because markets, as mentioned above, bring more goods and services within reach of more people than any other system.

Markets also produce products and services that improve our lives in ways that our ancestors could never have dreamed. Just consider all the things that exist today, that didn’t a mere thirty years ago. The simple fact is that today even the poorest modern Americans have more goods and services at their disposal than kings and queens did just two hundred years ago.

So, although individual firms may fail, and individual people may not gain great wealth, the fact is that, over the long-run, we all win by enjoying better living standards than previous generations.

We Need Better Education

If the United States is going to continue to see its economy grow and the living standards of its citizens improve, it is important that students are taught the basics of the economic system that has allowed them to experience Adam Smith’s “universal opulence.” Without this basic knowledge, they’re easily led to believe the myths I’ve mentioned and to vote for politicians and policies that will ultimately undermine the very system that has made their lives significantly better than their ancestors, as well as better than most of their contemporaries across the globe.

James Davenport

James Davenport is an award-winning professor of political science at Rose State College and has also taught economics at the University of Central Oklahoma. You can find him online here.

Republish from Fee.org

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Why We Need to Bring Back the Gold-Backed Currency

By  Jacques Jonker

When people are confronted with the daunting question of “What is money?”, they usually stare at you like you’ve just asked them to explain the equation for special relativity.

Money is anything with inherent value that is used to measure the value people attach to products and services. It acts as a medium of exchange in order to facilitate trade. What started out as people trading physical goods for one another, developed into an immensely complicated modern economic system as more specialised products and services arose. People realised they needed a universal medium of exchange, and this led to the revolutionary invention of money.

There exists an interdependent relationship between money and goods & services: the value of money is measured in the number of goods and services it can purchase (purchasing power) and the value of goods and services is in turn measured in what amount of monies is needed to purchase it (prices). It is a very delicate balancing act which can only be achieved by the invisible hand of the market, which is why the market must be free.

As far as inherent worth goes, gold seemed a pretty solid option to use as money. Here’s why:

The amount of gold relative to the number of people is relatively miniscule; the demand outweighs the supply by far. Gold thus has a lot of value attached to it. Seeing as the global population keeps increasing, the demand for gold also keeps increasing. Hence the rise in the value of gold; it keeps getting relatively scarcer. It thus makes complete sense to use it as a medium of exchange seeing as it keeps its value.

As nations rose and fell and economies grew ever more complicated, governments the world over decided that the best way to maintain gold as the primary means of exchange, but also make it more “flexible” in order to adapt to modern specialised markets, was to have it represented by paper money and coins. Currency was thus invented.

Currency is different from money in that it has no inherent value. It merely represents the real money: gold. Currency is also easily divisible into much smaller units. Currency was essentially a middle man that nudged its way in between gold and domestic products and services. The balancing act became even more delicate. The gold standard was created.

The gold standard is a fool-proof system at worst. The value of the gold is measured in terms of the currency used. The gold backs up the currency and gives it value and consequently purchasing power; another fine balancing act that can only be achieved by the market’s invisible hand. This act determines the purchasing power of the specific currency.

As explained earlier, in the long run the value of gold keeps rising as the level of demand grows at a faster rate relative to the level of supply of gold. The paper currency representing the gold will thus not lose its purchasing power. When the US finally decided that the whole “live within your means” thing wasn’t working for them, Nixon abolished the gold standard in 1971 and replaced it with a fiat currency.

The word fiat’ is a Latin term meaning “let it be done”. A fiat currency is a system of currency that is backed not by anything of value but by a central government’s arbitrary authority. The US Federal Reserve, for example, is allowed to print US dollars non-stop as long as its financial overlords give it the green light. The only difference between a $1 bill and 1 Monopoly bill is that the government sanctions the former as a viable means of exchange. Yet, it has no inherent worth.

Currencies’ worth is now determined by market forces within the money market, the place where currencies compete for domination. The quantity of currency within an economy can now be adjusted by a central government in order to influence the exchange rate, internal interest rates, and thus the value the currency holds. Reserve banks can also influence exchange rates by actively competing in the money market, also known as ‘dirty floating’. It is no mystery why governments keep on printing worthless paper money: massive expansionary fiscal and monetary policies demand it.

Economists such as Michael Maloney keep warning governments and central banks that they’re creating an unsustainable global financial bubble that is going to implode. There is no foundation on which modern economies are based. Money exists no more.

What we now have is an artificial form of “money” with no inherent worth. It is simply not sustainable. The gold standard keeps the economy in a state of natural unison. It is a system that balances itself out. It is a system that works. It is a system that is endowed with foolproofness by its very nature.

Republished from RationalStandard.com

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The Core of Liberty Is Economic Liberty

By Deirdre McCloskey

Since the rise during the late 1800s of socialism, New Liberalism, and Progressivism it has been conventional to scorn economic liberty as vulgar and optional—something only fat cats care about. But the original liberalism during the 1700s of Voltaire, Adam Smith, Tom Paine, and Mary Wollstonecraft recommended an economic liberty for rich and poor understood as not messing with other peoples’ stuff.

Indeed, economic liberty is the liberty about which most ordinary people care. 

Adam Smith spoke of “the liberal plan of [social] equality, [economic] liberty, and [legal] justice.” It was a good idea, new in 1776. And in the next two centuries, the liberal idea proved to be astonishingly productive of good and rich people, formerly desperate and poor. Let’s not lose it.Well into the 1800s most thinking people, such as Henry David Thoreau, were economic liberals. Thoreau around 1840 invented procedures for his father’s little factory making pencils, which elevated Thoreau and Son for a decade or so to the leading maker of pencils in America. He was a businessman as much as an environmentalist and civil disobeyer. When imports of high-quality pencils finally overtook the head start, Thoreau and Son graciously gave way, turning instead to making graphite for the printing of engravings.

That’s the economic liberal deal. You get to offer in the first act a betterment to customers, but you don’t get to arrange for protection later from competitors. After making your bundle in the first act, you suffer from competition in the second. Too bad.

In On Liberty (1859) the economist and philosopher John Stuart Mill declared that “society admits no right, either legal or moral, in the disappointed competitors to immunity from this kind of suffering; and feels called on to interfere only when means of success have been employed which it is contrary to the general interest to permit—namely, fraud or treachery, and force.” No protectionism. No economic nationalism. The customers, prominent among them the poor, are enabled in the first through third acts to buy better and cheaper pencils.

Economic liberty, that is, is part of liberty. Of course.

Mussolini and Hitler won elections and were popular, while vigorously abridging liberties.

Indeed, economic liberty is the liberty about which most ordinary people care. True, liberty of speech, the press, assembly, petitioning the government, and voting for a new government are in the long run essential protections for all liberty, including the economic right to buy and sell. But the lofty liberties are cherished mainly by an educated minority. Most people—in the long run foolishly, true—don’t give a fig about liberty of speech, so long as they can open a shop when they want and drive to a job paying decent wages. A majority of Turks voted in favor of the rapid slide of Turkey after 2013 into neo-fascism under Erdoğan. Mussolini and Hitler won elections and were popular, while vigorously abridging liberties. Even a few communist governments have been elected—witness Venezuela under Chavez.The protagonist of Forever Flowing by Vasily Grossman (1905–1964), the only example of a successful Stalinist writer who converted wholly to anti-communism, declares that “I used to think liberty was liberty of speech, liberty of the press, liberty of conscience. Here is what it amounts to: you have to have the right to sow what you wish to, to make shoes or coats, to bake into bread the flour ground from the grain you have sown, and to sell it or not sell it as you wish; . . . to work as you wish and not as they order you.”

The blessed Adam Smith was outraged by interferences in 1700s Britain in the right of workingmen to move freely to find profitable work. “The property which every man has in his own labor, as it is the original foundation of all other property, so it is the most sacred and inviolable. To hinder him from employing this . . . in what manner he thinks proper without injury to his neighbor, is a plain violation of this most sacred property.” Not as they order you.

And economic liberty, surprisingly, has massively enriched the world in goods and services. How much? In 1800 the income per person of a country like Sweden or Japan, expressed in 2018 prices, was about $3 a day. Now it is over $100 day, a 3,200 percent increase. Not one hundred percent or even two hundred percent, but thirty-two hundred percent. The enrichment was not a factor of two, as had been routine from time to time in earlier spurts, such as the glory of Greece or the prosperity of Song China, to fall back to $3 a day. It was a factor of thirty-three. No starvation. Taller people. Doubled life expectancy. Bigger houses. Faster transport. Higher education. If you doubt it, see the late Hans Rosling’s startling videos at Gapminder.

We became rich by giving ordinary people their economic liberty.

The usual explanations of the Great Enrichment from economists and historians don’t compute. Accumulation of capital or the extractions of empire were not the causes. Ingenuity was, and the ingenuity was caused in turn by a new liberty after 1800. The liberal plan of equality, liberty, and justice made masses of people bold–first the free and wealthy men, then poor men, then former slaves, then women, then gays, then handicapped, then, then, then. Make everyone free, it turned out (the experiment had never been tried before on such a scale), and you get masses and masses of people inspired and enabled to have a go. “I contain multitudes,” sang the poet of the new liberty. And he did. He and his friends had a go at steam engines and research universities and railways and public schools and electric lights and corporations and open source engineering and containerization and the internet. We became rich by giving ordinary people their economic liberty.And now the “we” has extended far beyond its heartland in northwestern Europe. China after 1978 and India after 1991 began to abandon the illiberal European theory of socialism, devised in the middle of the 1800s and exported by the 1970s to a third of the globe. The result of turning towards economic liberalism was that the annual growth of goods and services per person available to the poorest in China and India rose from its socialist level of 1 percent a year, and sometimes negative, to 7 to 12 percent per year. At such rates, it will take only two or three generations for both countries to have European standards of living. Such a prospect for this four in ten of humans is no pipe dream. Similar enrichments were achieved over a similar span in Hong Kong, South Korea, Singapore, and Taiwan, with other startling success stories for new liberalism and a reasonably honest government in Ireland and Botswana.

An economically illiberal government can, of course, borrow from countries honoring liberty. The USSR did from 1917–1989, for example, and for a long time even many economists in the West believed its fairy tale that Central Planning Worked. When communism fell in 1989 we discovered decisively that planning did not work, not for the economy or the environment or for other liberties. Singapore is sometimes cited as an example of intelligent tyranny. And so is China, dominated still by an elite of communist party members. Both, however, practice substantial economic liberty, despite their lamentable practice of jailing political opponents.

And enrichment, in the end, leads to demands for all liberties, political as much as the economic liberties, as it did in Taiwan and South Korea. Enriched people will not long put up with serfdom. And anyway the average record of tyrannies is economically disastrous, such as in Zimbabwe, next door to prosperous Botswana, or for that matter in the long and dismal history of illiberalism worldwide from the invention of agriculture down to 1800.

The ethical habits of commerce are expressed daily in the way an American shopkeeper greets his customer: “How can I help you?”

The Christian gospel says properly, “For what shall it profit a man, if he shall gain the whole world, and lose his own soul?” The claim against economic liberty has always been that even if we gain the world in goods, we lose our souls. We are told from the radical left that free exchange is intrinsically evil. Any extension will merely extend the evil. From the radical right, we are told that free exchange is ignoble compared with the glories of rank and war. But the radical left and right, and also the middle complaining about “consumerism,” are mistaken. The evidence is that economic liberty does not corrupt us, but rather makes us rather virtuous as well as very rich. It enriches in both senses, material and spiritual.For one thing, mutually advantageous exchange is not the worst ethical school. It is better than the violent pride of aristocrats or the violent insolence of bureaucrats. And in economic liberalism, the human desire to excel is provided millions of honorable paths, from model railway building to show business, as against in illiberal societies the narrow path to eminence at the court or politburo or army. We do not lose our souls in commerce, but cultivate them. The military, admired nowadays even in liberal societies, is commended daily for its “service.” But every economic act among consenting adults is service. The ethical habits of commerce are expressed daily in the way an American shopkeeper greets his customer: “How can I help you?”

The upshot? The concert halls and museums of well-to-do countries are full, the universities are flourishing, and the seeking of the transcendent, if not in the established churches, is expanding. One cannot attend much to the transcendent of art or science or baseball or family or God when bent over in a paddy field from dawn to dusk.

Protection of existing jobs has created worldwide a massive and politically explosive unemployment of youths.

The best way to make people bad and poor is the illiberality of communism and fascism, and even the slow if sweet socialism of over-regulation. Women among the theocratic despots of Saudi Arabia are quartered at home, unable to flourish so much as driving an automobile. The economic nationalism of the new Alt-Right is impoverishing, and anyway closes us to ideas from the wide world. If betterment is slowing in the United States—a widely held if doubtful claim—we need the betterment coming from newly enriching countries such as China or India, not cutting ourselves off to “protect jobs” at home. Protectionist logic would have us make everything in Illinois or Chicago or our local street. Breakfast cereal. Accordions. Computers. It is childishly silly as economics, though stirring as nationalism.At the heart of communism and fascism, and the regulating impulse from the middle of the spectrum of governmental compulsion, is massively messing with other people’s stuff. In the United States, over one thousand occupations require licenses from the government. Opening a new hospital requires the existing hospitals to grant a certificate of need. In Tennessee, if you wish to open a new furniture moving company—two men and a truck—you are required by law to ask permission of the existing moving companies. Protection of existing jobs has created worldwide a massive and politically explosive unemployment of youths. One-quarter of French people under 25 and out of schooling are unemployed. It’s worse in South Africa.

Yet true and humane liberals are not anarchists (Greek an-archos, no ruler). One can admit that it can be good to abridge economic liberty a little to the extent of taxing the well-to-do to give a hand up to the poor, such as publicly financed education. No serious argument there—Smith and Mill and even Thoreau agreed. (True, big government routinely gives also a hand up to the rich and powerful, such as protections for farmers in the U.S. and the Common Market. Big governments follow the nasty version of the Golden Rule, namely, those who have the gold, rule.) And one can admit that if the Canadians invade the United States, economic liberty might usefully be abridged for the duration, if prudent for defense. No argument there, either. (Yet big governments routinely break the peace for glorious conquests. Fear those Canadians.)

Better keep the government leashed.

The solution, liberals believe, is to restrict the power of government, even when the government is popular. Fascism often and communism sometimes, unhappily, are popular. Moderate versions of both, in nationalism and socialism, are very popular, until they go wrong. People favor for the nonce the alleged glory of governmental aggressions against foreigners (see Europe in August 1914) and the alleged free lunches of governmental control of the economy (see Venezuela in August 2017).Better keep the government leashed. Of the 190 or so governments in the world ranked in honesty from New Zealand at the top to North Korea at the bottom one might generously take the top 30 as adequately honest for the task. Spain is the marginal case. Britain and the United States qualify. Italy, ranked 75th, just above Vietnam, does not. But the top 30 moderately honest governments serve merely 13 percent of the world’s population. That is to say, 87 percent of the world is governed corruptly and incompetently, by a relaxed standard of goodness. The calculation shows why the optimism among amiable people on the left and among not so amiable people on the right about extending the illiberal powers of government is naïve. Thoreau wrote, in true liberal style, “I heartily accept the motto,—‘That government is best which governs least,’ and I should like to see it acted up to more rapidly and systematically.”

Yes, with a few modest exceptions.

This essay will appear in a volume for the Renew Democracy Initiative. 

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How Prices Promote Peace

By Matthew McCaffrey

Donald Trump’s plan to escalate the war in Afghanistan makes it necessary to once again stress the value of peace and the importance of rejecting US militarism and imperialism. Yet it also provides an opportunity to think about the foundations of a truly peaceful society, and to reaffirm a basic social truth: no institutions more effectively promote peace than the institutions of the market economy.

Cooperating not Expropriating

Peace begins at home, or rather, it begins wherever you and I decide it does: at any time and place we realize that the best way to improve our lives is to cooperate rather than to brutalize each other.

Trade allows us to benefit from our different values, while hurting no one.

As economists like Ludwig von Mises point out, this realization is actually the foundation of human social relations. It also explains why we establish social bonds through trade: we recognize, first, that we each possess resources and skills that are less valuable to us than others that we hope to acquire, and second, that other people value things in just the opposite way. Trade then allows us to benefit from our different values, while hurting no one. It is an act of peace, one reason why it’s no surprise that Mises refers to the moment after exchange as a “state of rest” – including an absence of conflict.

Voluntary exchange is thus a rebuke to violence and war-making: it reveals to each of us, in a personal way, that increasing our own welfare means cooperating, not expropriating.

Prices are a social recognition of this deeper fact. They tacitly acknowledge that many individuals have foregone violence and realized the benefits of cooperation and trade, so much so that they can establish between them an objective estimate of the social worth of the things we hold dear: a price.

Eventually, a vast network of individual exchanges creates the price system, a gigantic engine for improving the welfare of all members of society. This engine works 24 hours a day to overcome the greatest cause of conflict among human beings: scarcity.

The Struggle over Scarce Resources

Property, exchange, and the price system enable us to put aside our conflicts.

Scarcity presents seemingly intractable problems: how can we thrive in a world where human wants outstrip the resources available to satisfy them? How can we ensure that the goods and services we produce will get to the people who need them most?

Prices are the answer, and the price system works from moment to moment to appraise and allocate countless scarce resources over which we no longer have to fight.

Property, exchange, and the price system enable us to put aside our conflicts. In fact, when prices can’t be established because property rights are unclear – as in the tragedy of the commons – the result is a desperate conflict over scarce resources as each person tries to exploit a “free” good.

Similarly, price controls prohibit buyers and sellers from agreeing on a way to mutually benefit. Inevitably, someone leaves the market unsatisfied. In fact, price floors and ceilings cause conflict by eliminating exchange and replacing it with rationing. Without prices, producers and consumers arbitrarily discriminate, thereby creating special privileges for certain individuals and groups.

For example, landlords of rent-controlled apartments might choose tenants based on their racial characteristics rather than those who need housing the most. Similarly, faced with increasing minimum wage rates, fast food restaurants hire college students instead of workers from less wealthy or educated backgrounds who more urgently need a job. Inevitably, the non-privileged groups start to resent the beneficiaries of discrimination, and social conflict is the result.

Non-Market Goods

The lack of prices for such “goods” reveals that they’re nothing of the sort.

Importantly, this effect works across borders as well, as domestic producers and unions reap the benefits of trade barriers and immigration controls at the expense of foreign workers. This kind of exploitation sows the seeds of economic and, eventually, military conflict. Allowing prices to exist for foreign goods and labor is, therefore, a vital step toward achieving global peace.

For that reason, we should also be deeply skeptical about the production of any weapons or military technologies that have no market applications – and no prices – in a free economy. The reason is simple: the lack of prices for such “goods” reveals that they’re nothing of the sort. Their purpose is to destroy life, not improve it.

Seeing prices emerge and change in the marketplace should be a cause for celebration just as much as the sight of a soldier laying down his weapons. Both are victories for humanity, but prices especially reflect a deep commitment on the part of many people to choose cooperation over conflict. In that sense, it’s not much of an exaggeration to declare: Blessed are the price-makers.

Republished from FEE.org

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Twelve Economic Concepts Everyone Should Know

By Richard N. Lorenc


When I tell people that I work at the Foundation for Economic Education, they sometimes ask: “What economic ideas should people understand?”

We at FEE have thought about this quite a lot for our articles, courses, seminars, and videos. We have distilled “economic thinking” into 12 key concepts. The following list has guided us internally for a few years, and I figure it’s now time to share it with the world.

1. Gains from trade: In any economic exchange, freely chosen, both parties benefit–at least in their own minds.

2. Subjective value: The value of any good or service is determined by the individual human mind.

3. Opportunity cost: Nothing is free, and the cost of anything is what you give up to get it.

4. Spontaneous order: Society emerges not from top-down intention or planning but from individuals’ actions that result in unplanned outcomes for the whole.

5. Incentives: Individuals act to maximize their own reward.

6. Comparative advantage: Cooperation between individuals creates value when a seller can produce a given item or service at a lower cost than the buyer would spend to produce it himself.

7. Knowledge problem: No one person or group knows enough to plan (and force) social outcomes, because information necessary for social order is distributed among its members and revealed only in human choice.

8. Seen and Unseen: In addition to the tangible and quantifiable effects, there are quite often invisible costs and unmet opportunities to any action or policy.

9. Rules matter: Institutions influence the decisions individuals make. For example, property rights extend from the reality of scarcity which demands that ownership must be vested in individuals and not a collective.

10. Action is purposeful: Each person makes choices with the intention of improving his or her condition.

11. Civil society: Voluntary association permits people of all backgrounds to interact peaceably, create value, cultivate personal character, and build mutual trust.

12. Entrepreneurship: Acting on an opportunity to gather underused, misused, or undiscovered resources and ideas to create value for others.

You might think about all the ways and places these principles appear–as you shop, socialize, and plan your future. As we like to say, economics is everywhere!

Republished from FEE.org

Richard N. Lorenc

Richard N. Lorenc is the Chief Operating Officer of FEE and serves as managing director of FEE’s Youth Education & Audience Research (“YEAR”) project to develop and promote new content and distribution techniques for free-market ideas.

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New South African Airways bailout package shows government is not committed to transformation

By Martin Van Staden

With low economic growth prospects, ever-increasing unemployment and destitution, government appears to be more concerned with the useless prestige and status that comes with our national airline, than the wellbeing of the South African people.

In mid-July, EWN reported finance minister Malusi Gigaba saying that “too much money has been invested in cash-strapped South African Airways (SAA) in the form of guarantees and bailouts” and that government was going to seriously try to waste no more resources on “inefficient state-owned entities”. In an about-face, Gigaba now says that Treasury is considering a R13 billion bailout for the national carrier.

Proposing such a bailout in the midst of a tax shortfall is evidence of government’s deep-seated contempt for the people of South Africa and a preoccupation with satisfying its short-term and short-sighted ambitions. Its intention to introduce more and more taxes to finance programmes like the National Health Insurance (NHI) is mindboggling, let alone the proposal made earlier this year that, in addition to television licences, it would consider requiring licenses for other devices to boost revenue for the national broadcaster. The Davis Tax Committee too is considering increasing wealth taxes.

These desperate attempts to get its hands on more revenue are unnecessary in the face of the most obvious solution – significant tax transformation – and dangerous, in that it is unlikely that businesses, especially small ones, can survive for much longer in such an environment. Companies like General Motors and AngloAmerican already have either left our shores or are in the process of reducing their investments.

ANC MP Pinky Kekana proposes that, to help our national carrier, government intervene and give to SAA air routes currently operated by other, profitable airlines. For her, this would be radical economic transformation. By what logic could forcing the productive and efficient private sector, which creates unquantifiable wealth for millions of people every minute of every day, to yield to the ineffective and bloated dinosaurs of the public sector radically transform anything? South Africans already find more affordable and higher-quality travelling products with foreign airlines. Even domestically, it is estimated that SAA contributes less than a quarter of commercial air travel.

If government wants more money, it should look to decreasing taxes and repealing regulations across the board to allow significant economic growth to occur. In turn, more South Africans will become taxpayers and contribute to the national purse. But, even if this should happen, the national purse should not be an ATM for state companies that have proven time and time again that they are unable to stand on their own two feet in the market. Both SAA and Eskom have been given repeated opportunities to become profitable, but each ‘second chance’ ends with yet another ‘turnaround’ strategy. These companies are lost causes which South African taxpayers are propping up with no benefit to themselves, and certainly none to the poor.

Radical economic transformation would be to get rid of wealth sucking, economy strangling state-owned enterprises that are firmly rooted in the social engineering logic of the apartheid regime to fulfil, as the first apartheid labour minister Ben Schoeman explained, “State control on a large scale” that replaces personal responsibility with a “system of State responsibility.”

There will be no radical economic transformation while government and state-owned enterprises get first dibs on the hard-earned produce of the people. The people have a natural right to keep what they earn, and government is under an obligation to spend what it takes from the people wisely. What we are seeing now, however, is a commitment by government to itself, and not to the people.

 

Republished from AfricanLiberty.org

Martin van Staden is Legal Researcher at the Free Market Foundation and Academic Programs Director of Students For Liberty in Southern Africa.

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Money Is the Real Social Contract

By Baudoin Collard

Despite major inconsistencies, the social contract theory remains one of the most prominent founding myths of our societies. Is it possible to revisit this dogma to correct its deficiencies?

The social contract theory finds its origins during the Enlightenment era in the 18th century. In the context of challenging royal institutions, philosophers like Rousseau and Hobbes sought to answer the following questions: How are societies born? Why do humans decide to live together? Where do governments derive their legitimacy?

According to Rousseau, an implicit contract binds men together to form a society. Through this contract, men relinquish some of their freedom to the state. In return, the state provides justice and security. This way, the general welfare is protected from special interests through the legislature, elected by the people.

The social contract theory has had a major influence on Western philosophy. As attractive as it is, the theory suffers from fundamental flaws.

First, no one has ever signed such a contract. One can argue that elections represent a tacit renewal of the contract. But in this case, abstention should be considered. And what about countries like Belgium where voting is compulsory?

Second, history teaches us that human societies emerged well before the institutions that govern them. It is the society that begets the institutions and not the reverse. Moreover,  these institutions have been set up in bloody wars and revolutions.

Lastly, according to Rousseau, since the parliament represents the people, the minority must accept any decisions taken by the majority in the name of a nebulous “general interest.” In the 19th century, Alexis de Tocqueville had already mentioned the risk associated with this belief. Such a system drifts into a tyranny of the majority.

If we looked closer, we would see an institution inseparable from the human society that could perfectly fulfill this role of the social contract: money.

Is Money a Social Contract?

Money is proper to man. Historically, no society could develop without the support of some form of money. Conversely, the concept of money is meaningless when taken out of its social context. It is from its acceptance by users that money derives its legitimacy and value. Men voluntarily adopt money because they benefit from it.

By facilitating exchanges, money allows specialization — the source of new technological developments. As a store of value, it allows users to save, which is the source of investment and protection against the hazards of life. Investment and technological progress both generate growth. This is the fundamental reason why men unite: in order to draw greater benefit from each other’s labor.

Currency Manipulation

If money is the cement that binds society together, what happens when this cement disintegrates? The German hyperinflationbetween 1921 and 1924 is certainly one of the most tragic examples of monetary collapse, but it is far from an isolated case.

Given its critical role, it may be tempting for a minority to manipulate the currency to its advantage. If the phenomenon is not new, it has also become more complex over time.

An early example occurred with the use of minted coins.

Originally, coins ensured the weight and quality of the currency. But gradually, the right to mint coins has become a state monopoly. This has allowed governments to control currency and extract a rent (seigniorage and sometimes debasement).

The invention of the banknote was a major technological evolution. Originally introduced to facilitate increased trade, banknotes have gradually become a monopoly of the power in place. As a striking example, Napoleon Bonaparte gave the monopoly of printing bank notes to the Bank of France, of which he was a major shareholder.

The creation of central banks is the logical continuation of the state’s growing influence over money. Under the pretext of stabilizing money issuance and protect depositors from banking crises, the creation of central banks actually greatly facilitated state indebtednesswar funding, and ultimately inflation.

Speaking of inflation, here is precisely what Keynes said about it:

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some.”

From Social Contract to Social Control

But inflation is not the only stab to the social contract of money. From the moment the money is imposed by the government rather than freely chosen by citizens, it loses its legitimacy. Initially acting as a social contract, money in state hands becomes a tool of social control. It allows a minority to exploit their privileged position for profit and power.

The states impose the use of their currency in more or less subtle ways. In the most authoritarian countries like China, the currency is subject to strict controls.

Exchange rates are set by the government and capital movements are tightly monitored. In the so-called democratic countries, the currency is imposed through legislation and numerous regulations. For example, the official currency is the only one allowed for the payment of fines and taxes. Banking and insurance regulations require individuals to invest a proportion of assets in state bonds, to inform the government of all transactions above a certain amount, etc.

In terms of social control by the currency, governments can be very creative. One example is the introduction of price and wage controls. Another example is the introduction (and increasingly pervasive use) of the food stamp program.

A more pernicious threat now hangs over the money with the disappearance of cash so desired by our governments. The abandonment of cash threatens to increase our dependence on the banking system. It also increases the stranglehold of states over their citizenry by facilitating the establishment of taxation on savings accounts or even an outright confiscation of bank accounts, as was the case in Cyprus.

Freeing the Money

All monies do not fulfill their social contract equally. Among fiat currencies, large differences exist, depending on the objectives of central banks and economic policies. So if we compare the consumer price index (a proxy for inflation), we observe that the US Dollar has lost about 54 percent of its purchasing power over the last 30 years.

The Swiss Franc saw a decline in purchasing power when it was limited to 31 percent and then 14 percent for the Japanese Yen. At the same time, the currency’s purchasing power fell by more than 99 percent in Mexico, Turkey, and in many countries of the former Soviet Union.

Gold and precious metals enjoy a lasting credibility because these commodities are difficult to manipulate. Precious metals have also provided an effective hedge against inflation and other monetary turpitudes throughout history. Gold is still a reserve currency of choice for central banks.

Finally, a new form of currency has recently emerged: the cryptographic currencies among which Bitcoin is undoubtedly the most famous. Bitcoin appeared in 2009, at the height of the subprime crisis and bank bailouts by the taxpayers. If they have often aroused disbelief in their infancy, these cryptocurrencies now enjoy a combined capitalization largely exceeding $100 billion.

More fundamentally, cryptocurrencies are the perfect illustration of the competitive bidding of private currencies. This is similar to what was proposed by Friedrich Hayek in his book “The Denationalization of Money.” 

Since the use of these currencies is free, their value fluctuates according to the interest they generate and the resulting demand. Their course is closely linked to the services they can provide, as a means of payment, and their credibility, as a store of value. The proliferation of these cryptographic currencies is a full-scale laboratory experiment for the future of money.

Money Guarantees a Free Society

Money, even more so than democracy, embodies the essence of the social contract. Its legitimacy comes from its acceptance, freely chosen by all users. 

The fundamental role of money in exchange explains its catalytic action in the seeding of the development of human societies, long before the emergence of democratic institutions. Finally, currency manipulation inevitably causes the decline of a society,as democratic as it may be.

Nothing better sums up money that Ayn Rand’s quote:

“Money is the barometer of a society’s virtue.”

Money is a tremendous source of emancipation for the society. It promotes cooperation and peaceful exchanges between humans, no matter their views, gender, origin or preferences. It is the conductor that imperceptibly regulates the human action.

Conversely, anyone who aims to suppress money should be prepared to substitute it by a planned economy with cohorts of bureaucrats who impose by force. Anyone who denounces the dictatorship of money should recall that the worst tyrannies are those where citizens were deprived of their currency. And if money is regularly accused of being the root of all evil, it is all too often the victim of those who control it. Rather than blaming the money, let’s blame those who corrupt it.

Perfect currencies do not exist. As the brainchild of fallible humans, monies are bound to constantly face primal temptations. Failing to find such an illusory ideal, the freedom to choose currencies is the best guarantee of having sound money in a free society.

 

Republished from FEE.org

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IMANI: Update on Efficiency in Ghanaian Ports – A Discussion with Stakeholders & Vice President Bawumia’s Commendable Efforts

IMANI Centre for Policy and Education has been studying the challenges – both current and potential – that negatively impact trade in Ghana. These challenges have been analysed under two major areas: 1) trade competitiveness and diversification, and, 2) trade facilitation and port efficiency.


IMANI published its first major report in June 2017. The paper, titled ‘’IMANI’s ‘Efficiency’ Report on Operations at Ghana’s Tema Sea Port; More Needs Doing’’ can be assessed @ http://www.imaniafrica.org/2017/06/27/imanis-efficiency-report-operations-ghanas-tema-sea-port-needs/

This article provides a summary of the research that has been undertaken into port efficiency and performance in Ghana, which includes discussions with and the perspectives of various stakeholders such as the Ghana Ports and Harbours Authority (GPHA), Meridian Port Services (MPS) Ltd., the Ghana Institute of Freight Forwarders (GIFF), and a and a shipping line executive.

The importance of an efficient port for trade, development and economic growth cannot be understated. Efficient ports facilitate trade competitiveness and greatly increase revenue mobilisation. The appropriate question to pose now is what makes Ghanaian ports inefficient, and what are the salient challenges they face? One pertinent issue that was mentioned by nearly all stakeholders involved the inefficiencies within the cargo clearing process. These include 1) long cargo clearing and processing times, 2) the multiplicity of agents in the inspection and customs processes, 3) the absence of paperless processes throughout.

Long cargo clearing and processing times

During IMANI’s interview with a shipping line executive, the lengthy cargo clearing processes at the ports was highlighted as a serious issue. Most importers are unable to clear their containers within the 7-day demurrage-free time. This observation was also noted by GIFF. In addition, GIFF stated that in an ideal and efficient situation, it should take approximately 5 days for goods to be cleared at customs. However, this is not the case in reality. It can even take more than a fortnight for goods to clear. The unnecessary delays affect both the ability of importers to quickly distribute their goods, and tend to lock up much needed capital for other business operations. Importers are required to pay container detention fees and demurrage deposits to shipping lines prior to a container being cleared from the port. Container deposit fees serve as a guarantee that importers will return containers back to the shipping line in time, once their contents have been emptied. GPHA estimate that shippers pay over $100 million in container demurrage annually to the government, in ports throughout the country. The longer the cargo clearing and processing time, the longer the funds sit with the shipping lines, and the fewer funds are made available for the importer’s business. This challenge is compounded as the repayment of container detention fees often takes a while to come into effect.

Multiplicity of regulatory agents in the inspection and customs process

Multiplicity of regulatory agents and the duplication of roles during the physical examination is also a serious inhibitor of efficiency at the Port of Tema. Custom Examination Officers physically examine container, alongside about 18 agents from different Ministries, Departments and Agencies (MDAs) – sometimes more – which is highly unnecessary, allows room for corrupt activities, and lengthens the whole inspection and customs process. As GIFF so adequately described, ‘the more layers you have, the more corrupt the port is’. This issue was also brought up by MPS, who mentioned that the inspection and customs processes were duplicated. Other stakeholders including the Ghana National Chamber of Commerce and the GPHA have also decried the challenge of multiple regulatory agencies and their impact on efficiency at the port.

mandatory joint inspection has been announced by Vice President Dr Bawumia to address this challenge. This policy is expected to take effect from 1 September, 2017. Under this policy, not all containers will be inspected, only those with a certain risk level. A risk engine will be introduced, which will assign risk levels to importers depending on the level of their compliance. Further, if an inspection is necessary, only the agencies required for the inspection will be informed, and they will have to sign in electronically to confirm their participation.

The absence of paperless processes

The lack of paperless processes at the Ports is another significant inhibitor of efficiency. However, MPS Terminal is the only terminal operator at the ports that has implemented a paperless system, which has allowed it to become a leader in port efficiency.

As of Monday 7 August 2017, Ghana Community Network (GCNet) began to pilot paperless processes at the Tema Port. This is one part of the three highly commendable policy ideas put forward by the Vice President. The policy ensures that by 1 September 2017, all transactions at Ghanaian ports will be 100 per cent paperless, enabled by an electronic system, which will be powered by GCNet. It will also ensure that the processes and players along the value chain from exporters, cargo tracking, warehousing, freight forwarding, payment systems, free zones, regulatory bodies and shippers all operate on an electronic basis.[1] These will greatly improve trade facilitation, revenue mobilisation and port efficiency and has significant impacts for economic development across the nation. Moreover, the introduction of paperless systems will also make multiple inspections and the role of superfluous agents and MDAs redundant.

Additional measures to improve port efficiency

Additional measures taken by Vice President Bawumia, to be put into effect by 1 September, 2017, also include the removal of internal customs barriers. This means that duties will be paid on goods that are destined for re-export, and no vehicles will be able to leave the ports without paying their duties, as a new automated gate opening system will be linked to the risk engine for inspections. Consequently, these new measures will expedite the inspection process and ensure that duties are paid where they are due. Moreover, the resultant decline in the complexity of inspection and control procedures will lead to a decline in costs, delays and minimise corrupt and informal payments which would have been used to speed up processes, and even make government agents and importers compliant to such unlawful situations.

Commendable efforts

Vice President Dr Bawumia and the NPP Government must be commended on the practical measures that are currently being put into place to improve port efficiency in Ghana, and ensure that the nation becomes one of the most competitive ports within the sub-region, and in the long-term, even globally. These measures are necessary to stimulate national economic development, increase tax revenues and minimise the corrupt practices among importers, customs officers and clearing agents. With these measures in place, and the active participation of key stakeholders, the nation will see positive and sustainable improvements in the realm of trade and economic development.

 

Republished from IMANI Ghana

This update was compiled by Ms. Anita Nkrumah and  Ms. Nana Dei-Anang with IMANI’s Centre for Economic Governance and Political Affairs. For interviews please call 0554309966 or 0302972939.

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World Youth Day: The Concept of Youth Investment, Peace and Security

By Ugbabe Adagboyi Damian

Every year since 1999, the United Nations has continued to celebrate the youths all over the world. Eighteen years after, the youths have continued to gain increasing recognition as agents of change in the society – since they have very important roles to play in deterring and resolving conflicts, and are key constituents in ensuring the success of both peacekeeping and peace building efforts. Hence, their inclusion in the peace and security agenda of the Sustainable Development Goals (SDGs) of the United Nations. The 2030 Agenda for Sustainable Development committed to fostering peaceful and inclusive societies and affirmed “Sustainable development cannot be realised without peace and security”. Goal 16 aims to ensure responsive, inclusive, participatory and representative decision-making at all levels. The World Programme of Action for Youth, which provides a policy framework and practical guidelines to improve the situation of young people, also encourages “promoting the active involvement of youth in maintaining peace and security”.

For the purpose of achieving the 2030 Sustainable Development agenda, it is considerable to adopt a conventional definition of youth; assess the concept of youth investment and how it can ensure the success of both peacekeeping and peace building; as well as suggest ways the incentives tailored towards youth investment can make meaningful impact on them.

According to Wikipedia, The terms youth, teenager, kid, and young person are interchanged, often meaning the same thing, but they are occasionally differentiated. Youth can be referred to as the time of life when one is young. This involves childhood, and the time of life which is neither childhood nor adulthood, but rather somewhere in between fourteen and twenty-one years of age.

The UN Convention on the Rights of the Child of 1989 defines a child as any human person who has not reached the age of eighteen years.

To bring home the definition, we shall adopt the definition of the African Youth Charter; that a youth is any human person who falls in the age bracket of fifteen and thirty-five. However, the task that lies before us should make us think in line with Robert Kennedy that, “the world demands the qualities of youth: not a time of life but a state of mind, a temper of the will, a quality of imagination, a predominance of courage over timidity, of the appetite for adventure over the life of ease”.

The concept of youth empowerment and youth investment are interchanged, often implying the same thing. On the contrary, youth empowerment is a form of political heart-buy of youths for continuity. Most African politicians and their governments have bastardized the concept and have used it to manoeuvre their immediate social environment. Many of them believe that empowerment mean to purchase and distribute either of, motorcycles, tricycles (popularly called “Keke” in Nigeria), wheelbarrows, hairdryers, Knapsack sprayers, and stipends in form of social transfer benefits, etc. In as much as this is a plus to the society, there are little or no evidence that the beneficiaries expressed any form of predominance of courage over timidity; developed a superior state of mind or have any quality imagination that can spur innovation to permanently lift them out of poverty. It is evident that many of the beneficiaries have no appetite for adventure as they are limited to what they know and do, and are hardly proud of their skills since they remain restless and agitated. They also develop high sense of entitlement and feel marginalized; believing that what they have received can only keep them surviving each moment and not living in each moment.

The concept of youth investment sees beyond tenure. It is a concept that seeks to improve young people’s outcomes through better funding opportunities, programmes and initiatives that build the capability and resilience of young people so they have the skills and confidence to engage positively in, and contribute to, their societies. These outcomes support increased educational achievement, greater employability, improved health and less state intervention. The economic and social landscape of the world is rapidly changing with the developments in technology affecting the way we think, live and work, the young people forming about 70% of the African population need to acquire the digital, entrepreneurial and enterprise skills to be participate and contribute to the social and economic growth of their societies.

 This concept has three key strategies: leadership development, volunteering and mentoring. These can be achieved little or no stress but with the political will power to grow the economy and sustain peace and security.

The following key components of the strategies includes; maximising scarce resources through collaborating with corporate, non-governmental, and other government organization, improving data collection and analysis to enable funding based on knowledge of what works and for which group of young people, a clear mission statement and continuous appraisal of outcomes, and targeting investment to where it will have the most impact.

Therefore, if we intentionally adopt these strategies, guided by its component; and ensuring accountability, integrity, and inclusiveness we can build and shape a peaceful and secured Africa.

 

This piece was originally published in AfricanLiberty.org

Ugbabe Adagboyi Damian

Twitter @ugbabeD

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