Economics of the campaign period
It is campaign time for the May 20 Tripartite Election. Politicians are busy criss-crossing the country and their respective constituencies or wards to woo voters to put them into office.
This is also the time when economics enters the political arena and, in well established democracies, dictates the course. Ever heard the mantra “good economics makes good politics?”
Essentially, politics and economics are intertwined such that they ought to be fixed simultaneously. In fact, there is a very thin line separating the two. They say no one eats politics, it is economics that brings food on people’s tables.
To succeed on the political front, a politician needs to have practical and successful policies on the economic side. Poor or unpopular economic policies have brought down governments elsewhere.
Nevertheless, it is also important to acknowledge the fact that sometimes politicians take huge risks in economic management that can make or break their political stamina. For example, in April 2012, President Joyce Banda and her People’s Party (PP) administration, upon assuming office after the death of former president the late Bingu wa Mutharika, came under fire from some sections of society for introducing “painful reforms” that increased the cost of living for Malawians, pushing most basic needs beyond their reach. Her decisions made economic sense, but were politically suicidal at the same time.
In the run-up to the May 20 Tripartite Elections, nearly every party is talking about “fixing the economy”. However, no one is saying how they will do this. For example, I would expect critics of Banda’s policies to tell the voters how they will manage the kwacha exchange rate, automatic pricing mechanism (APM) for fuel as well as automatic tariff adjustment for electricity.
This is the time when those seeking to be employed as president, member of Parliament (MP) and councillor to tell the voters what is in store in terms of policies as well as showcasing the brains to implement such policies. The electorate needs to know if they can be trusted. Sadly, in our political set-up, the political parties tend to be one-man-shows where many of our presidents are literally “founders”, “owners” and spokespersons on finance, the economy and all.
Talking about election campaign and economics, I was disturbed this week to hear the Reserve Bank of Malawi (RBM) announcing that during the next Monetary Policy Committee (MPC) meeting, it will “revise” the bank rate. Really? Will this not distort some fundamentals ahead of that as players “speculate” on whether the central bank will revise downwards or upwards?
Personally, I felt there was no need for RBM to make such an announcement. It should have simply waited and analysed the situation at an appropriate time then make a decision. Simple!
Then there is the pricing of fuel which since April 2012 has been determined by market fundamentals, notably changes in the kwacha exchange rate and inflation rate, among other factors. Ideally, everytime there is a change by more than five percent in the fundamentals, prices are expected to be adjusted either upwards or downwards.
However, in February this year, fuel prices went up despite the kwacha gaining in strength. The kwacha has been gaining since then but fuel prices at the pump have remained static.
Economists say that prices are sticky going downwards. But, in the case of fuel and the interest rates, I see politics at play. By the time you are reading this entry, the Malawi Energy Regulatory Authority (Mera) board will have met to review developments in the month of April and review fuel prices. With elections around the corner, I will not be surprised to see pump prices going down only to be hiked weeks or months after the vote.
This is the time for those seeking to “lead” Malawians from May 20 to engage the voters on what needs to be done to improve their welfare, their economy not wasting time on petty politicking.
