Pro-Growth Policies on Death Bed?

 

By U AC

Ten years ago, government leaders of almost every country were talking about growth. Growth through trade, growth through liberaliza­tion, growth through globaliza­tion, and through investments. Yet, nowadays everybody politi­cian seems to have fallen out of love with growth.

Now we talk about protec­tion. We advocate self-sufficiency. We favour regulations and re­strictions. We want ‘out’, instead of being ‘in’ trade organizations. We close our borders for every little incident. The rich coun­tries are now anti-immigration. The US government introduced 12,000 new regulations in 2021 alone. From 2010 to 2020, rich countries’ tariff restrictions on imports doubled. The UK voted for Brexit, to keep the country white among other motives. In 2007, nearly six million people have migrated to rich countries. In 2019, the number was down to four million.

Anti-growth strategies may have less to do with doing what is good for the country and more to do with the flavour of the day for the politicians to win votes. Trump won the elections mainly based on this agenda. As rich countries become fully devel­oped, the growth rates are now hovering around three per cent. Even the great China, which has achieved growth rates of around 10 per cent over the last three decades, has lower expectations of growth at around five per cent in 2023. Pushing the growth rate beyond five per cent for devel­oped countries is only feasible, with significant investments in new technology and products. These countries are no longer in the catch-up game.

As with all potential gains, the country has to suffer pains first. Investments into the future come with opportunity costs. In a world where an ageing popu­lation is growing especially in developed countries, it means sacrificing budget items such as social welfare or healthcare. Any slightest hint of cutting down on these is definitely going to affect the elderly votes, a hugely sig­nificant percentage of total vote counts, especially since the youth naturally do not turn up to vote anyway. Thus, politicians dare not venture into these areas. See what happened to Liz Truss and her pro-growth plans for Britain. In a time when the general pop­ulation is facing pressures from inflation, higher energy bills, increased medical expenses, unemployment and difficulties in meeting daily needs, asking them to make further sacrifices now, so that future generations would enjoy better times ahead, seems impractical at best and against human nature at worst. “Why would I want to sacrifice now, for the things that I might not have a chance to enjoy?”, is the usual rhetoric from elderly voters across the western world.

Hence pro-growth policies are now on the back burner. It just suits the politicians and civil servants perfectly, most of them at least. They are good at spending, using up the budgets and claiming entitlements. Pro-growth policies require them to work hard, make tough choices and meet targets. Spending to appease people, be it healthcare, social security or other payouts, put them in favourable publicity and help them win votes. So why bother with something that may not translate directly into votes! Case in point: President Thein Sein’s administration got a lot of flak doing the reforms and implementing many pro-growth policies and strategies. Yet what Su Kyi did was just sitting on the throne, spending the budget and brainwashing people with her baloney speeches. Her admin­istration got significantly lesser hostility than the former’s, albeit achieving seriously worse eco­nomic performance. Myanmar did become the poorest in ASE­AN during her administration!

Such spending-at-will con­cepts have led many rich coun­tries to accumulate debts from continuous budget deficits. High levels of debt have now con­strained many policymakers’ room for manoeuvre. Across the G7, private debt has risen to 30 per cent of GDP since 2000. Even small declines in cash flows could make the servicing of the debt harder. Investors’ sensi­tivity towards additional debt accumulation has also swelled. Liz Truss’ growth plan through additional borrowing resulted in significant falls in Stirling Pound and an alarming increase in gov­ernment borrowing rates.

In a world of accumulating high debts, acting on populism by Western democracies and rising tensions between global powers, even Ray Dalio, who runs the world’s largest hedge fund, was worried that the stage could be set for a situation like the great depression of the 30s, where you may experience a complete de­struction of wealth as we know it!

So, what is the Antidote?

Let the world issues be dealt with by the rich countries, IMF, WB, etc.

For Myanmar, we cannot fol­low the same path and forget the pro-growth policies altogether. The truth may be bitter, but the fact that we become the poorest in ASEAN around 2017 is real. Our GDP per capita is lower than any of our neighbouring states, including hyper-populat­ed Bangladesh. First, we have to accept and agree on that as the starting point. Then we can all acknowledge that we need growth to catch up. We need in­vestments, we need exports, we need innovation, we need tech­nologies to reach where we want to be. Since our income is limited, it may mean sacrificing some budget items to allocate more towards pro-growth initiatives.

Self-sufficiency drives are all good, but these alone would amount to nothing. History has already proven that through the years of Mao Zedong in China and our very own Ne Win. No hecatomb should be spared to promote GDP growth in conjunc­tion with self-sufficiency, in order to wriggle our way out of the deep poverty trap.

In a world where respect is earned only based on $ and military might, we have to plant seeds of growth for our country now, so that the whole population could have shade from uncorrob­orated attacks and accusations from unfriendly foreign countries in the foreseeable future. That sacrifice would be remarkably better than having to defend, deny, dispute, disagree or reject all the unfounded accusations from the UN and the West. Un­fortunately, et tu, ASEAN!