Politicizing the Economy

shutterstock_166744244-300x200The pertinent question that has always been poised whenever politicians discuss about the economy is whether, on one hand, the reigns of the economy should be held by the political hands, whereby it’s upon the state to prioritize needs and wants of a nation then subsequently mobilize resources to satisfy those needs and wants and on the other hand, if the same needs and wants should be prioritized by the private sector and subsequently be left upon them to mobilize resources while being motivated by their private interest.

Government intervention has normally been resisted by capitalists by claiming such intervention come with negative effects. Such negative impacts result in; reduced product innovation and competition, reduced hard work amongst the workers, decreased foreign investment, reduced market efficiency, a decreased variety of consumer goods and services.

On the other end, Marxists advocate for an increase in government intervention and a decreased market economy in order to check the ever widening economic inequality between the bourgeoisies and proletariats, reduced social benefits and welfare, environmental degradation, disproportional political influence by bourgeoisies, exploitation of proletariats by capital owners, distorted investment priorities. Such defects can only be cured through politicizing the economy in order to cure the shortcomings of market economies.

Democracy would dictate that either a system of political intervention or private control or a mixture of both should carry the day as long as the system enhances the satisfaction of the needs of a nation.

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Chinese Foreign Aid Policy to Africa- Is It A Messiah or a Monster?

Recently, China’s economic presence has been felt in Africa. After registering exponential growth within its borders, China has been looking for opportunities to invest. It has turned to Africa and found opportunities in different sectors including infrastructure, agriculture, education, health, communications, and trade. Notably, the Chinese investment grew from 210 million dollars in 2000 to 3.17 billion dollars in 2011. With such funding, Africa has been able to channel the money towards development. Even so, economists and some members of the political class have raised concerns about the goal and the nature of Chinese funding in Africa. These questions have sparked a debate among the policy makers as to whether the aid is a messiah or a monster.

Generally, China provides eight different types of foreign aid. These are complete projects, technical cooperation, human resource development cooperation, medical assistance, goods and materials, emergency humanitarian aid, debt relief and volunteer programs. In this light, one may look at a close range and ask-does China really provide foreign aid? Well, it can be argued that the Chinese government defines foreign aid differently. The Organization for Economic Co-Operation and Development (OECD) defines aid as the type of financial help offered to developing countries and multilateral institutions for the purpose of promoting welfare and development in the recipient country. Since China is not a member of OECD, it is possible that it defines foreign aid differently. It may well be that the bulk financing falls under the category of development financing rather than on aid. It is actually established that some of the money channeled towards Africa by the country is offered as long-term loan. Such loans are then paid with little interest, which means that the Chinese government will in long-run benefit from the aid it offers to Africa. In November 2013, a risk analyst from export-import bank of China indicated that at least 1 trillion U.S dollars will be offered to Africa; they will be in terms of direct investment, soft loans and commercial loans. The question is- who will be real beneficiary of this funding?

Economically and politically, it can be argued that the biggest issue is with China’s financial funding is adoption of a mixed strategy. Government agencies as well as commercial entities in the country are known to mix and combine foreign aid with other aspects such as direct investment, labor cooperation, service contracts and foreign trade. Though the country is able to maximize feasibility and flexibility of its projects, it is completely difficult to point at the portion of finances that can be categorized as aid. Further still, even when the Chinese government does not require interest for its loan on infrastructural projects, only the Chinese companies are involved in the constructions. Thus, the employment opportunities are not created for the receipting countries and still, technology is not also shared with them. In the long-run, Africa may become dependent on the Chinese government for development and economic growth. Still, the Chinese service contractors are able to secure sustainable and profitable businesses in Africa; they are able to secure the natural resources in the process of construction and development and may use them to advance their country. Though this is the case, it is still important to acknowledge the fact that Africa has continued to grow exponentially after receiving economic aid from China. This still leaves analysts with the question of- is China a messiah or a monster to Africa?

The Economical Impact of the Syrian Civil War

In March 2011, the Syrian crisis began after the anti-government demonstrations commenced. The peaceful protests were interrupted by a violent crackdown by the government, which informed the decisions of the rebels to fight back. Since then, more than 11 million people have been forced to flee with their homes while others have been killed. The humanitarian crisis caused by the refugees has got many organizations and governments worried, with the United Nations indicating that it will take close to 8.4 billion dollars to meet the needs of the vulnerable  Syrian population. The most affected people have been travelling to Europe, with the hope of finding better opportunities in the new land. Nevertheless, their presence in most European countries is not embraced since many nations have been feeling that they do not have the economic capacity to accommodate them.

Certainly, after four years of civil war, the economy has been affected negatively. The GDP levels have dropped down by more than 1.5% every year. It is even reported that it is impossible to find real statistics on the impact of the Syrian civil war. Before the war, agricultural, tourism and consumer economy were the main sources of income for the nation. The newly liberalized economic structure was also showing a lot of potential in the economy. More so, the influx of the refugee from Iraq was enabling the economy to expand at an exponential rate. Even so, with the rise of the civil war, the economic growth and development has deteriorated. The European council on foreign relations has indicated that the economy has gone back to where it was thirty years ago.

With 57% unemployment rate, the standard of living for the majority still residing in the country is poor. Those who are lucky enough to find jobs are unable to find essential services such as health and education because of the destructive war.  At such a state, the inflationary pressures are high. The leadership has tried to come up with fiscal and monetary policies to deal with the inflation issue to no avail. Specifically, the 2014 price controls policy did not yield the best results for the economy. Moreover, people have resorted to smuggling goods and other illegal activities in the bid to survive.

The political atmosphere in Syria has not shown any signs of solving the crisis, which means that the economy may continue to suffer. It is sad that United Nations has predicted that it will take more than 30 years to re-build the economy. It is even suggested that the destruction that has happened so far is similar to the type that happened during the Second World War in some countries. The exodus of the refugees and poor educational opportunities availed to the young people in the population makes the process of rebuilding the economy in the future even more difficult. This is because labor force may not be available to drive the economy forward. Indeed, the Syrian refugee crisis has impacted the economy negatively and thus, stern measures should be taken to address the political issues in the economy.

What the Paris Terrorism Attack Means to France’s Economy

Terrorism is robbing the world off its wealth! Besides the painful deaths that nations have had to deal with,  their economic growth and development efforts are being crippled. A good example of such a loss is that of the recent November 2015 terrorist attacks in Paris. The French government had just announced that the economy was going to grow again. As people prepared for celebrations, the ISIS- affiliated terrorists struck the nation. The devastation that followed  got the whole world worried about the economic impact of terrorism.

Markets detest the uncertainties caused by the terrorist’s activities. A day after a blast, there is chance the few people will be willing to trade  in the major capital markets of a country. For instance, following the 9/11 attacks in the United States, the S&P 500 fell by approximately 5%. Even though the markets will be resilient enough after a while, constant attacks will eventually have a huge economic impact in an economy. At this point, though it may be early to speculate the full costs of the terrorist attacks in Paris , it is possible that the markets are suffering grievous  losses.

Besides the effects on the markets, terrorist activities prompt governments across the globe to spend highly on the military. For instance, in the United States, immediately after the 9/11 attacks, the government set aside a lot of money to engage in a 13 year war in Afghanistan. Specifically, close to 700 billion dollars were spent fighting in the war. In the process, the numbers of service men lost were more than those involved in the terrorist attack; such individuals would have been useful in re-building the economy after the attacks. In the same way, France may be forced to spend more money on attacking Syria. Already, in the past five year, the government has launched three airstrikes on Syria. In the wake of the recent attack, there is a chance that more money will be spent on such airstrikes, which will cost the country a lot of money. Military spending, though necessary, should always be limited since it can limit the rate of growth and development in a country. Specially, when money meant for investment is diverted towards the military, negative impacts in the economy will be inevitable.

The confidence of the consumers and investors is always jeopardized after war. Terrorist understand the aspect well and will therefore target some of the places where the consumer is likely to visit. In so doing, they are able to affect the growth of major businesses and the economy as a whole. In Paris attack, for instance, the terrorists  targeted areas where nightlife and cultural offerings  existed. The economy of Paris is built on such activities and places. Major restaurants and bars have not been receiving guests due to the fear of another attack. The existence of such fear cripples the growth of Paris economy  in the short-run. More than that, the ability of France to deal with the terrorists will determine whether it will continue to play a major economic role in the Euro zone.