As a matter of policy, growth and inequality must exist in harmony. Dr Ian Khama has made clear where his priorities lie as President: in so many words, growth, growth and more growth. Of course, potential is there ÔÇô but whether that translates to wins for the good of the nation is another thing entirely.
Khama and the minister of finance and development planning, Kenneth Matambo, have on different occasions admitted that the key issues facing the Government “all relate to economic growth”. However, the quest to ensure that we are “more productive”, so that we have higher living standards, is going to require a lot of reform, a lot of leadership, a lot of confidence, a lot of optimism, a lot of innovation.
It matters, whether you believe the important thing is that society should be fairer or that the economy should be more efficient or both.
In his 50th Independence address at the national stadium, President Khama said “While we have come a long way over the years in achieving higher middle income status, with dramatically reduced poverty and greater social wellbeing, we cannot afford to rest on our laurels.”
Fair enough. Economic growth has lifted millions around the world out of poverty, Botswana being a good spectacular example. But the idea that it can be best delivered by providing other benefits to those at the top has been thoroughly discredited.
Research published by the OECD in May concluded that income inequality has a significant impact on economic growth. It calculated that, in 19 countries, the increase in inequality reduced growth by an average 4.7 percentage points in the 20 years to 2010.
The effects were much larger in some countries: 10 percentage points lower growth in Mexico and New Zealand, nearly nine points in Britain, Finland and Norway and between six and seven points in the US, Italy and Sweden. The OECD report argues that one part of the solution lies in measures to redistribute income. This includes improving tax compliance, reducing tax deductions that benefit high income earners disproportionately, and reassessing the taxation of wealth.
But the OECD also argues that even more important are measures focused on the bottom 40 per cent of income earners, including health, housing and particularly education. Richer people are better able to take advantage of economic opportunities. Poorer families may be unable to keep children in education or to afford high quality education, harming their future earnings power:
The evidence strongly indicates that high inequality hinders the ability of individuals from low economic backgrounds to invest in their human capital in terms of both the level of education but even more importantly the quality of education. This would imply that education policy should focus on improving access by low income groups, whose educational outcomes are not only worse on average from those of middle and top income groups but also more sensitive to increases in inequality.
Education should be a logical and essential part of Khama’s pitch on innovation and the new economy. In early childhood education, which studies argue produces the greatest returns to society, we do not seem to be doing well on that front.
Several reports have also shown that lowering the cost of education, particularly at the tertiary level, may not be enough to tackle inequality. Under-investment in education by lower income families also is due to factors such as less parental involvement in education and the lack of good schools in poorer neighbourhoods. It advocates more emphasis on job-related training and education, and better access to formal education during working lives.
As we speak, the gap in living standards between the richest and the poorest, taking into account changes in both disposable incomes and the cost of living, is steadily growing and is likely to widen in the next decade if there are no structures put in place to address this problem. Such a trend is not inevitable but it is the road we have been heading down for a long time.
By now the Khama government should understand that economic growth is important but inequality is ignored at governments’ peril. If Khama wants to make his government look fairer, as well as promoting faster economic growth, then he has two reasons for addressing rising inequality.
Thus, so much expectation is based on government’s current determination to address lapses in inequality. But there appears to be a subtle feeling in the polity that the President would not be able to stem some of these problems let alone fight against other problems bedeviling the country. These last few years are definitely the defining moment for the President to transform himself and engrave his name in gold.
