eBusiness Weekly
Clifford Shambare
In this life there are things that we take for granted, so we hardly take time to think deeply of what they mean or imply to us. Growth is one of them.
But of course, we are involved in the workings of this phenomenon everyday; growing babies, children, cattle, crops, trees and so forth. But to my mind, when it comes to bigger issues, we lose our way in that realm.
This is largely because, in most cases, we do not have the capacity—the sophistication of mind—to ‘see the bigger picture’, as the adage goes.
So in order to make any headway in this discourse, let me first explain this phenomenon of growth.
As in most cases, here I do not want to use a dictionary definition since it might add more confusion to a phenomenon that is already complex.
In life there are several forms of growth but the main ones are physical or material growth, also known as organic growth, in which the subject grows from a small (physical) size to bigger one. Then there is growth in complexity and/or sophistication.
Then there is spiritual growth—a much more difficult phenomenon to comprehend since it involves forces of a higher order that most of us mortals do not understand. This is because it involves an invisible phenomenon—that is, the spirit.
So as you can already appreciate, growth can be considered in many contexts. And the world of business and economics is one of these. In that world, we often come across the term ‘economic growth’. And depending on our background and therefore, orientation, we either assume that we understand what this term means; or [else] we get confused.
In the latter case, we often take the position that we do not have to worry ourselves too much about such issues since there are experts out there to take care of our concerns on the matter.
And economists are such people. As can be expected, the latter are naturally, at home in this field where they talk of such terms as economic growth, and so forth.
So now it becomes necessary to be more specific so that we do not lose our way. Here we have to zero in on what thing or phenomenon is [said to be] growing. And remember, as in most situations of that nature, growth is always accompanied by its opposite—that is, shrinkage.
In order to keep our matter simple so that it becomes easier to understand, let us go back to the phenomenon of systems.
In doing this we find that an economy is a system. And as we may already be aware, almost every system has its own sub systems. At the same time, let us remember that systems are living phenomena, that is why they grow or shrink—or even die—as it were.
For growth to come about, the subject of that process has to consume ‘food’—literally or metaphorically. Otherwise nothing grows from nothing.
However, this aspect of the matter is not as simple as it may sound here, so we shall leave it at that for now.
So in the case of an economy how do we measure growth? The easiest way of doing this is to start from measuring the growth of the different components that make it up, then aggregate the lot.
And as I have always emphasized, the manufacturing industry and process is the most reliable measure of economic growth because it is the engine of growth—real and tangible growth, never mind any other claims to the contrary.
(But paradoxically, in some cases, some forms of growth may even be poisonous to the economy. Money supply growth is one such an example).
Therefore, it stands to reason that if there is growth in the manufacturing industry, growth in the other components of the economy naturally follows.
It also follows that any growth in any part of the economy that is not supported by manufacturing may not be sustainable in the long run. But of course, there are exceptions to this rule.
At this point, let us go deeper into this matter. In order to be able to measure growth, one has to have a base or benchmark to start from. This is why there are such measures as annual, quarterly and year on year growth, that are all measured from some point in time.
Here annual (economic) growth is a measure of the difference between the previous year’s GDP and the current one, whereas quarterly growth is the difference between one quarter (of the year) and the next. Month on month growth is measured from one month to the next.
In most, if not all, cases, economists use GDP growth as a measure of economic performance. But this method only works if we have the GDP figure for the previous period, usually the year before.
However, beware! Growth is relative. It depends on what you are measuring the growth of, as well as the size of same. In order to appreciate this kind of reasoning better, consider a sheep and an ox.
Here let us assume that a sheep weighs about 30 kg while an ox weighs about 400kg. This effectively means that if the former’s growth rate is 5 percent it will have gained 1.5kg within the period concerned. On the other hand, at the same growth rate, and the same period an ox gains 20 kg. But 1.5 is only 7.5 percent of 20.
Now, take this case to the international level and compare the growth rates of the GDPs of the USA and Zimbabwe for example, and you can easily appreciate how statistics can fool you.
Here the GDP of the USA is US$18 trillion while that of Zimbabwe is only US$35 billion. Let us suppose that the American GDP grows at 2.5 percent, the current forecast and that of Zimbabwe at the current forecast of 3.7 percent.
When measured in absolute terms, at that rate, that of the USA will grow by US$450 billion while that of Zimbabwe will grow by US$1.3 billion.
But here you may try to reason that the USA’s economy much bigger than that of Zimbabwe, so there is no justification or basis, for comparing the two.
So, let us look at the matter from another paradigm, that of GDP growth per capita. Here the former, [with] a GDP per capita of US$57 000, will grow by US$1429 while that of the later will grow by a mere US$86.33. But in practice such a small figure can easily be wiped away by exigencies that are common in real life.
Such a situation presents us with a kind of illusion that is ironically, brought about by statistics, a practice that is supposed to shed more light to a situation. In most cases, one finds African economies growing by rates as high as 10 percent but [they] have remained largely poor. On the other hand, such growth rates are hardly—if ever—found in the developed [and] rich economies.
Now, let us go back to the manufacturing industry. Here the phenomenon of growth is usually measured in material and financial terms. It uses [raw] materials most, if not all, of them, derived from natural resources; these being minerals from soil and/or rock, vegetation, water and air. But here we must not forget energy, an item that is both a material and a phenomenon.
While energy, water and air are ubiquitous on and around the planet Earth and beyond, minerals are not. This means that they have to be first extracted, then conveyed from source to the factory site. In most cases, especially today, these are often complex and expensive processes.
They need capital in the form of machinery, money and technology. And Africans currently have very little of any of these. This is the reason why they are poor in this day and age.
A close scrutiny of this situation presents us with a scary scenario as Africans. But why make such an alarming claim, you may now be asking?
You see, if you look at the globe holistically, you can see that there is a continual transfer of [raw] materials from one part of the earth to other parts—those that possess the above attributes. And China’s current strategy of literally gobbling up these resources from those parts of the planet that allows it to do so, serves as a good example of this reality (see my article, Big versus small thinking).
Logically therefore, the outcome of this process is the enrichment of the latter at the expense of the former. And the former is mainly Africa, a continent which invariably, ends up being impoverished in the process.
Sadly, most Africans seem not to be aware of this state of affairs. Or if they are at all, they are acquiescing to it. Today, instead of finding their way in the international economic maze, Africans and their economists seem to be getting lost therein. This state of affairs has the effect of making them oblivious to a process that threatens to render their race extinct in the not so distant future.
The reasons for this state of affairs are not easy to decipher, but with due respect to them, let me hazard an explanation here. One reason is the silo mentality that prevents us from thinking outside the box. The other is failure to see and appreciate the bigger picture. Interestingly but sadly, the two are related in a rather subtle manner.
The other is the thinking that we are part of the whole system, so nothing to worry about here.
And yet the other, no less important reason, has to do with the educational institutions that we went to.
So why and how, have these institutions damaged our mentality; you may be asking yourself or even me. Here is why and how: One thing to note here is the fact that, while these ideas were being contemplated and implemented by those involved, Africans were never [made] part of that scenario. If they were at all, they were only tools therein.
The phenomenon of slavery only confirms this assertion. This also implies that, in order to get out of it, you literally have to wriggle out [of it] starting with your mentality.
Here we have the example of Booker T. Washington who strove from a position of slavery to that of an inventor, a leader and builder of institutions that have stood the test of time.
But unfortunately for him [and us], he achieved all these feats within the system created by his enslavers. So in the end, he was again, indirectly enslaved by the same system. This is why today, we hardly hear of him and his fellow inventors in the form of Granville T. Adams.
Again, this case underscores the criticality of creating own systems instead of continuing to use those built by, and for, others (See my article on systems in this publication dated 17, June, 2022).
The other reason why we—as African economic advisors to our governments—seem unable to devise our own systems, changing or modifying the way they function in order [for them] to suit our situations—emanates from the systems in which we were trained.
Here, let me give an example. While learning in those institutions, we are often taught that inflation is a result of too much money chasing too few goods in the market place. But we are not taught how to create, or even to be beneficially involved [as own systems] in those markets, in the first place. Nor are we taught how to found economies that eventually create or partake in those markets.
If we care to look critically at the matter, we can begin to see that Zimbabwe is one country in which these weaknesses are showing up in a most poignant way today.
As a result, for example, we are struggling to get the manufacturing industry working again. In the same vein, we are depriving ourselves of the capacity to create and manage our own currency because of a mentality that makes us see the world through the eyes of those in whose we were institutions trained.
To me, it is obvious that, if you do not have your own currency, you cannot control your money [growth] system and therefore, you cannot make your economy grow.
Under normal conditions, any growth in the economy should be synchronized with the money supply growth, otherwise challenges associated with inflation will become problematic therein. I believe this is one of the reasons why we are dogged by our current challenges.
◆ Shambare is an agriculture economists and is reachable on 0774960937.
