Is the economy important?

I have been having an on-going debate with a number of people on the economy. Debate on this subject tends to include the war, because it is a very important factor in any discussion on the subject, but as a result the discussion tends to get unnecessarily heated and taken off track. This is not helped by the fact that the subject is complex and terminology obscure. Because of this economic policy tends to be viewed by some as an abstract, distant and unreal.

Is this really so? And does the man on the Galle Road or traveling in the 138 bus have no interest in the matter?

At the outset let me state that I am no economist. I have done some rudimentary study of the subject but I am by no means an expert and therefore am quite open to correction.

Returning to the question, what exactly is the economy? In short it is the living standard of people. People fortunate to live in rich countries enjoy a lot of things that those in poor countries do not. They have a far wider selection of goods and services to enjoy. These range from foodstuffs, to entertainment, to recreation, to the arts, to sports, in short to a lifestyle. Not everyone enjoys these equally and there is plenty of poverty and misery in rich countries but a majority of people are able to lead better lives.

There is legitimate debate on the quality of life, that more does not necessarily mean better but man is a base creature and the satisfaction of base cravings will bring pleasure, even for a while. There is also the important factor of choice. There are many different paths that the people of rich world may tread. They may chose the the path of the ascetic, live simple frugal lives on wholesome organic produce in idyllic rural settings. They may chose the path of gluttony and greed, gorging themselves on cheap junk food that leads them to obesity, ill health and an untimely death.

The important thing is the choice is actually there to be made. One is not locked into a single rutted grind of constant poverty.

Look back to the 1970's in Sri Lanka when living standards were far lower, when there was no television, when a radio or an electric fan were considered luxuries. A time when imported goods of any description were very scare and travel abroad was a rare luxury. A time when almost everything was rationed from cloth to basic foodstuffs and shortages were rife. Produce was bought largely at the co-operative shop, on the production of a ration card and people grew as much vegetables at home so that they would have something to eat.

A friend related an incident from the time. There had been a shortage of soap. (since foreign exchange was strictly controlled imports were difficult and factories were forever short of raw materials, scarcities were common). His father had known someone working at the (now defunct) British Ceylon Corporation (BCC). They produced soap under the such delightful brands as Night & Day, Sno-Wite and most famously Sovereign Bar soap, which was a washing soap that was a about two feet long. My friends father had managed to obtain a number of cakes of soap which they had stuffed into a cardboard box and they were taking it home. On the way the box broke and the soap was scattered around the bus and their fellow passengers had been exclaiming "soap", "soap" almost as if it were manna from heaven.

That was poverty, of 25% unemployment of shortages, of a GDP of US$200 or US$300. In a strange way society was slightly better because inequality was not a big problem. The majority of the people were struggling, the rich were a tiny fragment of society and even they were not so rich and in anycase they faced much the same struggle with daily necessities.

That was what was left behind by growth and that is why the economy is important. Compared to the drudgery of the 1970's, people of today enjoy vastly better standards of living.

That was in the past. Now things are better, so what is the problem? The danger is that things can slip back. Stagnation will lead to increased unemployment which will cause a lot more stress than in the old days. People who enjoy a certain standard of living will feel their lifestyles changing, their quality of life degrading, their choices diminishing. This is made worse all the glitter of the things that are flashed before their faces and which they cannot have, but which they once might have had, at least occasionally. They also see a select few enjoy much much higher living standards. This will cause of resentment, discontent and possibly social unrest. The Banlieues of France did not erupt for nothing.

But surely all this is far-fetched I hear the critics say? We've left this behind, there is a temporary dip but as soon as the war is won we will be alright.

Unfortunately it is not so simple. The problems of the economy are deep seated and fundamental. The makers of policy have dug a pit so deep that it will be extremely difficult to get out of it.

I keep looking with horror, to Zimbabwe. Once the breadbasket of Africa, now a basked case (in the words of no less a person than Desmond Tutu) in the span of twenty-odd year. This is the most extreme example, but there are plenty of others; Pakistan for instance or in many other places in Africa or Latin America where similar short-sighted policies have wracked havoc with the lives of people raining, misery, poverty and destruction on millions.

That is why the economy is important. It is what life is largely about.