Fallacy of pain before prosperity

03 May, 2019 - 00:05 0 Views
Fallacy of pain  before prosperity Herbert Hoover

eBusiness Weekly

Alfred M. Mthimkhulu
In some distant future, a millennium or three from now, our civilisation may gather in a yet-to-be-discovered galaxy.

There we would reflect on our paths and voyages. Accounts such as Peter Bernstein’s book “Against the gods: the remarkable story of risk” could trigger an emotional nostalgia then.

In the book, the historian narrates how our progress was enhanced so considerably by a simple realisation: that our fate was not at the mercy of the gods but on the extent to which we let our brilliant minds tame whatever odds are against us.

He tells of the times when preachers were philosophers and philosophy had no thematic demarcations of today.

Then, the preacher was often the mathematician, physicist, physician, poet and in many a time, the atheist. Across centuries, such thinkers have made it clear to us that venturing blindly, no matter how bold, is not faith but foolishness; and that our brilliant minds if set free could measure the odds against us and design ways and tools of dwarfing such odds.

The power did not lie elsewhere but in us. Salvation did not come from the mountains. And so began our conquests of the seas, our determination to unearth the earth for treasures and our resolve to touch the stars. That was the dawn of Science. We prospered because we freed our minds from the clenches of superstitions, of fallacies and dictates from the only literate man on the pulpit. Okay, enough of this!

Back home, in February, the Minister of Finance and Economic Development Professor Mthuli Ncube shared an opinion piece titled “No Prosperity Without Pain”.

In it, he summarised Government’s work since they took charge. That pain must come before prosperity is a key theme in the administration. It is an assertion that sounds like a timeless truth. There is another truth though, that one can work hard and the crop fail. This makes it necessary to be methodical in making decisions and not be swayed by some truisms.

Nations make come-backs when they invent or adopt tools that dwarf the odds of failure. Such tools are usually embedded in the causes of meltdowns themselves. A quick look at the 1930s Great Depression may expound on this observation.

In March 1929, Herbert Hoover became President of the United States. Seven months later, he was very unpopular. That October, the stock market crashed marking the beginning of the Depression. The unemployment rate rose from 3 percent to 23 percent. Bank lending dropped. People with cash hoarded it. A believer in letting market run their course with minimal intervention, his administration did exactly that. Anger and frustration surged. Carson Robinson’s song “Prosperity is just around the corner’ which juxtaposed what government was saying to the feeling in the streets, captures the mood of the time:

“Prosperity is just around the corner!

What we’d like to know is which corner?

We’ve turned so many corners now we’re dizzy.”

Expectedly, Franklin D. Roosevelt thumped President Hoover in the 1932 elections. The new President embraced state intervention. Government undertook a series of public works and social protection programmes and pumped a lot of money into the economy. Its focus was local, local and local. It took about a decade for the country to shrug-off the grip of the Depression.

A lot has been written on the extent to which policies of the likes of John M. Keynes contributed to the resurgence of the economy.

However, to focus on policies during the depression without considering its triggers misses an important story. Recall that the 1920s are often referred to as the roaring 20s because of the upbeat mood in the economy.

More and more motor vehicles than horse wagons were getting on the roads. The aviation industry was taking-off. Many inventions were coming on stream: radios, televisions, shavers and so on. Industry was deepening and the typical pre-First World War household was receding into history.

While this bred over-confidence as seen in rising debt levels which triggered the Depression, it is important to realise that these very Depression triggers were seeds of future prosperity. The pre-War way of life was being replaced. Creative destruction was in full swing. Indeed, Professor Irving Fisher of Yale University argued that the main reason for an optimistic outlook even in the thaws of the Depression was that “we in America were applying science and inventions to industry as we had never applied them before”.  As people were spending less, industry was improving their production technologies thus ensuring both product affordability and viability of firms.

The Great Depression is loaded with lessons for economic policies. We have since lived through several less severe incarnations of the 1930s. When we study all closely, we learn that economic crises also tell of our latent characteristic i.e. over excitement at the dawn of something new which in itself is often the main trigger of a crisis.

The trigger of the meltdown in Zimbabwe is a global secret. How productive is the land today? What informs incentives to boost its productivity especially in the face of the realities of climate change? Science, the urge to innovate, delivers prosperity. Without that society-wide urge to innovate, humanity or any other civilisation is trapped in a recurring state of pain.

Alfred M. Mthimkhulu Senior Lecturer, Graduate School of Business, NUST Email: [email protected]  Twitter: @mthimz


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