Tuesday, February 7, 2012
Big Spender -thrifts gone with the wind.
Must we become a big spender before becoming a high income nation? Can thrift be thrown to the wind when you want to become a high income nation? Are we not spending more than our current productivity allows us? Are we not living beyond our means like some western countries and heading for a financial crisis?
I asked those questions to a friend who had just abandoned his thrifty way of life and joined the big spenders' league. He made the change after getting a hefty contract from the government.
"Who cares about being thrifty when money abounds," he replied with a huge smile. "i used to spend peanuts and got monkeys. Now I splash out and the big fishes came into my net."
"Where do you get the money to splash around?"
"Our banks are flush with money. You must know the right people to back you up and there's no limit to the loan you can get. Big names earn big money. But of course you must give them a big share. That's how wealth is created."
" I thought wealth is created through productivity and shrewd investment.."
" Yes, shrewd investment in the right people..."
" Doesn't productivity count?"
" How do you measure productivity in the provision of services? It's not like running a factory or doing construction work where physical output can be measured or counted. In providing services if the power that be is happy with what they get, you're good. Since the services are essential, if you run into financial problem the government will come to rescue you. So what's the problem?"
The NKRA people all say that our national productivity level is good and increasing. The planners say that our GDP is growing at a healthy rate and those who say that the country will go backrupt by 2019 or 2020 are talking through their rear end. But Che Det is his latest blog entry sounds a cold warning that our productivity is not increasing to support a high income nation style of life. We could be living beyond our means and may end up like the wealthy nations with debts running into trillions. The US and UK resorted to printing more money to pay for the loans but if we do that people will say we are bankrupt.
So, what say our big operators in the service sector, especially the government linked companies (GLCs) where productivity is not easily measured and the costs of operations are not strictly controlled by the government or fund providers. Is thrift just a matter of keeping the share of the fund providers at a happy level and the old principles of being thrifty can be thrown to the wind? Is big spending the only way to get big returns. To whom? The public or the operators and the fund managers who seem to be doing very very well and who can laugh all the way to the banks?