My ideal approach is to drive in socially reproductive thought solutions from across all demographies across the African continent.
As part of being a columnist for the biggest Business Newspaper in Botswana, I have been privileged enough to be invited to roundtable conversations on the health of business in the national economy. From the conversations I had, I could pick a few structural rigidities in our national economy that were less articulated by those I was conversing with. Rigidities like underdeveloped export potential, fear of obsolete vocational skills and undiversified national economy. Let explain why I have categorised these concerns as structural rigidities.
Structural rigidities can be understood as lasting features that may be caused by a set of institutions which may prevent a market from operating freely. Having rigidities in our economy limits our ability to mobilise factors of production that are important in enabling appropriate responses to be made to changes in world market conditions. Evidence of structural rigidity can be a provision, in general terms, for persistent adverse movements in trade markets and ultimately manifesting itself because of excessive dependence on specific imported commodities. Let me bring it home for a bit.
On one of my radio shows during the festive season, I invited a few economists and a political economist to have a conversation around the most recent fuel hike and how it has affected the lives of Batswana. If you can recall, this was the fifth fuel hike that the country has experienced in 2021. The economists were quick to denounce any controllability the government might had have on global markets, and rightly so. But my argument was that there must be something that could be done to cushion these market shake-ups.
History has taught us that an immediate response to these structural rigidities would be the government to implement economic recovery initiatives to initiate new projects such as the planned solar power farm in the second quarter of the year.
Resources such as guaranteed credit finance lines have been introduced in the past to encourage entrepreneurship and spending as an attempt to stimulate industries like manufacturing and agriculture. One would question, has the negative impact of too much finance been considered before? And is a credit finance threshold structured before credit lines can be guaranteed to hedge the negative impact that too much finance can bring to economic recovery and growth? Well, that’s a Rustic Conversation for another edition. What if we link the influence these structural rigidities can have on human nature or behaviour, economically? And what if this linkage can be detrimental to any effort in economic recovery?
I picked up the term Behavioural Economics, which is a combination of economics and psychology to understand how and why people behave the way they do in the real world. The science investigates what happens in markets in which some of the agents display human limitations and complications. This has been ignored in the standard economic framework formulation, ruling out the cognitive and social psychology of the market.
Here is why I think any attempt by the government to respond to these structural rigidities could be deemed ineffective. When people start to feel the pinch from the structural rigidities, it is human nature to look for any arbitrage opportunities presented by other markets outside their indigenous market. People will find cheaper ways to survive and that would mean importing from cheaper markets for resources that can be sourced locally.
And how do you think any attempt by the government to stimulate sectors such as manufacturing would fair against such arbitrage opportunities which were created by structural rigidities? If what we produce locally does not stand a chance against arbitrage opportunities presented by outside markets, how then can our economy recover? Yes, there are import bans being pushed forth, but history has taught us that restrictions on arbitrage opportunities create market anomalies.
In conclusion, “E etshetlanyana tsala e e running.” The inclusion of human behaviour in standard economic frameworks could be the key to giving birth to a more responsive and less dependent economy, therefore eliminating the excuse of “lack of controllability” and replacing it with “how fast can we respond to these market shakeups and fluctuations”.