Public expenditure and the economy

Since modern governments were established, there has been tremendous public expenditure on the police, soldiers and civil servants. Public expenditure ballooned in developed countries after World War II with the advent of social welfare systems. In developing countries, public expenditure is sizeable where the State is developmental. That is if the government intervenes and participates in the economy a great deal.

We read recently that the Germany government granted thousands of euros which translates to billions of kwacha’s to the Malawi government. Malawians ought to clap hands and shout dankie schon deutschland and thank you.

Because of the unresolved Cashgate scandal of 2013 and the K251 billion unaccounted for, our Western friends stopped assisting us with grants. We understand the Germany government has granted the money on condition that our authorities declare in advance how they are going to spend it. This is a better conditionality than the previous one where the recipient was given a granted absolute discretion how to handle the grant.

Grants like this recent one from Germany are announced again and again from other countries such as Britain, Japan, and Norway and so on. During colonial and Kamuzu days, the information departments used to publish annual reports on government work in the year just ended. These reports were sold by the Government Press or the Malawi Book Service. I am a frequent visitor to bookshops in Blantyre. I do not see such annual reports and so I am not sure whether reports on expenditures or the grants are publicised.

Public expenditures should have long-lasting good effects on the economic development and social welfare. Those who give the government grants are entitled to disallow certain expenditures if they are not likely to benefit the majority of the people.

Every government spends on security (police) and defence (soldiers). A developmental State gives the next priority to infrastructure as a foundation of the economy. These are roads, bridges, railways, electricity and water. No foreigner who wants to build a factory would go to a country where there is no peace.

Does laying down adequate infrastructure automatically attract investors? Not at all. From 1968 to 1975, former president Hestings Kamuzu Banda built roads from Nsanje to Karonga, extended the railway system and built the Lakeshore Road to attract tourists. By the time he retired from politics in 1994, few industries had been built. Once the infrastructure has been laid down, resources to support industries must be ascertained.

Adequate funds must be given to departments that can explore the country’s natural resources such as the Department of Geological Survey to discover minerals. There must also be adequate expenditure on such social services as health and education. This is called human capital development. I have often advocated the formation of a Council of Economic Advisers to think and reason with politicians and civil servants on economic issues.

A developmental State that wants to see results must generously incur expenditures on the civil service. Without a satisfied, competent and honest civil service, an economy cannot make headway. The civil service is the backbone of everything that goes on the country.

The first thing Margaret Thatcher did to revive the British economy was to reform the civil service. She identified weaknesses and eliminated them without hesitation.