Who will save Malawi 2?

The Reserve Bank of Malawi knew that with devaluation and flotation of the kwacha, inflation might skyrocket if interest rates remain low.

Low interest rates encourage borrowing from commercial banks. This results in excessive liquidity and demand-pull inflation.

In the theory of macro economies, as it was understood when Keynesian economics was challenged, it was noted that as you invest in an economy, economic growth, employment and prices go in the same direction.

When the economy has reached its maximum growth potential and there is full employment, further investment generates inflation.

In conditions of unemployment, there was no inflation. But these days, we find that inflation remains around even when the economy has stagnated and there is high unemployment. Why? Because there are rigidities in society which prevent prices and wages from falling during recession.

Monopolistic businesses prevent prices from falling while powerful trade unions prevent wages from falling despite grave unemployment.

Possibly Malawi is suffering from stagflation; stagnant economy plus inflation.

Solution

The solution lies in a suitable approach to the supply side of economics. It is true that high interest rates as they exist at present deter borrowing and investment by business.

However, our main crop maize is produced by millions of smallholder farmers who do not depend on banks for their working capital.

The high interest rates now prevailing do not affect smallholder farming to a greater extent. Rather it is rain, access to farm inputs such as fertiliser and price expectations.

The Ministry of Agriculture and other people dealing with smallholder farmers should do right things to ensure that the next rainy season will be followed by a bumper crop and a decline in inflation.

There can be no extra supply of goods and services in an economy besieged by strikes.

Strikes by those earning middle income salaries are particularly deplorable. It is said that without pain there is no gain.

If the middle income class functionaries are not prepared to give up a few luxuries who should do so?

Whenever economic development has taken place the elite of society have abstained from immediate gratification, ploughed their earnings back into the economy and they or their children have reaped the fruits of their labour and entrepreneurship thereafter.

If it is true that President Joyce Banda is planning to hold an indaba of all those who are demanding pay rises this must be welcomed.

To this indaba must be invited members of civil society with knowledge of economics, business and politics.

Let these third parties join the indaba and contribute their knowledge, fears and hopes. Has it not been said that whatever happens here will affect us all.

It is true that it will. The wealth of a country consists of goods and services. When the economy is growing slowly wide hikes of salaries will only mean a multiplications of banknotes entering the economy to chase few goods.

Third parties at the indaba should ensure that Banda is not being stampeded to make concessions which will damage the economy.

As she is looking forward to 2014 presidential and parliamentary elections, she may be inclined to accommodate demands which will be detrimental to the economy.

The second class people that is leading the economy of Malawi to misery is made up of uneducated or semi-educated people who destroy fauna and forests.

A few months ago, an investigative journalist belonging to Nation Publications Limited (NPL) went to Chikangawa in Mzimba and published news about wanton cutting down of trees in that artificial forest that was once the pride of the nation.

In the Malawi News of September 1 to 7 2012, there is a story on poachers destroying animals in Liwonde National Park. The sad part of this is that the poachers partner with some game scouts to whom the government has entrusted the responsibility of protecting wildlife.

There is a picture of the apprehended poacher, handicapped wearing green shirt. On his feet is an animal he killed while above this photo is a waterbuck trapped and dead.

Poverty is no excuse for destroying the environment on the part of the poacher or accepting bribes by officials. I have no tips to offer except to say stump out corruption whenever it rears its head.