Much is made of Botswana’s income inequality as if it is the biggest problem facing the country. Those who endlessly beat the drum of Botswana as one of the countries with high levels of income inequality, never bother to explain to us, why incomes have to be equal in the first place. They are just content with merely regurgitating the income inequality cliché ad infinitum as if that on its own is a good thing. The only purpose that this mantra serves though, is to proliferate the politics of envy. It does not after all explain how and why anyone of us is entitled to other people’s money just to achieve income equality. Why we are eligible to the fruits of other people’s labour?
If income equality is so essential, why can’t those who tout it so much to even a point of obsession, just do it? After all, all you need to do is tax the rich even more and redistribute the proceeds to the rest of the population and then we would all be equal and forever happy as far as incomes are concerned. I’m sure they have achieved income inequality in Cuba and North Korea even if it means that they are all equally miserable.
The fact of the matter is that income inequality is not our biggest handicap in the quest to achieve high standards of living and prosperity. Rather, our biggest challenge is anemic economic growth which has been further compounded by the coronavirus related restrictions of movement. This has resulted in GDP growing at 0.7 % in the first quarter of 2021, hardly a rate to create sufficient economic opportunities to lift people out of poverty. To get this into perspective, you have to compare, our 0.7 % to, for example, Singapore’s whooping 14.7% in the same period.
Weak growth therefore means falling incomes which then translates into low consumer spending and loss of jobs. Still under that environment, prospects for people to improve their lot in life are diminished because they also have very limited access to credit.
So despite what politicians, aid agencies and international do-gooders may tell you, a high economic growth rate is king. It is the sine qua non for stability and prosperity. It means that no country can lift people out of poverty with low or negative growth.
What Botswana should do therefore is to focus on our job # 1 of generating positive economic growth. Once again that job # 1 is not income equality. Neither is it climate change nor green energy. Or whatever! In our case we already know that the desired growth rate is a minimum of 6% if we are to lift the majority of people out of poverty.
It is useful therefore to keep our eyes on the key drivers of growth. The starting point is to recognise that individuals are much more productive in spending their money than the government can ever be. Unlike the government, individuals seek value for money whenever they purchase goods or services. The government on the other hardly ever bothers about such petty inconveniences. So every time we send money to the government, we know that it is not going to be spent efficiently.
We therefore have to lower taxes and allow people to keep more money in their pockets. Of course we have to send some money to the government to fund public goods such as the judiciary, police and military. Even though they are also inefficient in how they spend our money, we still have to fund them for the simple reason that we cannot have our own private courts, armies and police forces.
Otherwise the focus should be on rolling back the size of the state and allowing the private sector to grow and create economic opportunities. The state of play at this point, is such that the state crowds out the private sector. That has to change fundamentally, if the private sector is to be engine of growth and opportunity.
