Tuesday, May 20, 2014

The imploding economy

It has not gone down with a bang, but with a whimper, deflating slowly over the past couple of years, as this report points out.

The Government, is desparately trying to do something to boost it, including promoting pawning. I think pawning is connected with poverty but with such limited demand for credit I suppose they do not have much options.

There are of course some other ways to revive things such us restoring the legal system, reducing corruption, improving transparency and generally allowing a framework in which businesses can work. Limiting the participation of the state, reducing taxes and managing the fiscal deficit will also help.

Naturally, not one of these will even be considered since they go against the very grain, the very foundations of the regime.

Businessmen are slowly waking up to the reality that things are not quite good, although not many have the capacity to connect the dots to see the larger picture. Dreams of a postwar economic boom have faded, the promised boom being as false as the peace on which it was supposedly built.

Meanwhile we can continue to expect rosy pronouncements on how well the country is doing and how great the shiny new buildings and roadways look. That they are all built with debt, probably cost more than they can ever earn back over their life and are, in financial terms, white elephants is not often understood.

I think the good Governor should start hosting his own show, I can even provide him with a title "Cooking with Cabral". At least it would give Nigella Lawson a run for her money.



Liberal One said...

Your biasness is very evident when you say that peace is false.

We had a decade of 6+% growth since 2005. While agreeing that it is not enough specially after a war, have we ever had a better decade considering growth rates?

While agreeing that the government has no will to shrink the state I have to disagree on the fiscal deficit. Fiscal deficit is at a record low and after Ranil's 2002-2004 government this government is the one that constantly worked to reduce the fiscal deficit. That was while not running away from the war responsibility.

Jack Point said...

I agree that they try to reduce the fiscal deficit, although not for altruistic reasons. They do so because its one of the indicators monitored by lenders and if the number looks bad it will become harder to borrow.

The approach to this is simple - keep increasing taxes, use off balance sheet accounting. It is the increasing taxes that have killed personal consumption.