Managing an economy, whether it be large and closed or small and open, is a major exercise in the application of the principles of economics in a setting which is as complex as it is unpredictable.
Let there be no mistaking the importance of getting the basic foundational guidelines right, but economics is not some branch of an exact science in which we know that every time we pour boiling water into a bowl of cold water, the result is that the water in the bowl becomes warmer.
Economics is rather about choice, scarce resources and the behaviour of human beings who will exercise their choices in buying services and products that some enterprising entrepreneur believes he/she can induce them to purchase with their limited amounts of money. Therefore those aspects of life that move our people to act in particular ways become critical to any government anywhere in a democracy.
For example, the birth last week of Prince George of Cambridge has been said to be a boost to the British economy. True, the event is a private matter affecting the public interest, but it is the human perspective and reaction which has given rise to the economic impact. No wonder that the late Sir Richard Haynes was moved to remind us that impressions matter, even though he never ignored the fact of the truth.
We anticipate that in shaping his upcoming Budget, the Minister of Finance will deal with some of the harsh realities of the local, regional and international economies. He must do this if he is to have any hope of breaking out of the current difficulties facing our country.
Human beings are moved by logic and also by psychology, and a careful mixture of these principles must come to the fore in the minister’s presentation because if reason dictates what must be done, then the way in which it is done may matter more in the present climate than the cold letter of the proposals themselves.
Confidence is one of those intangible but very important aspects of the psychology of managing an economy, and of investment and economic growth since few entrepreneurs will risk their money or monies which they manage for others if they have no confidence in the economy in which they are investing.
The minister will therefore need to reinforce the message of the Central Bank governor that the people of this country have the ability to pull out of the current problems. Confidence must energize that ability, and we expect that the minister, who has shown the capacity to sell the Government’s policies to the people, will be aware of this responsibility.
The recent Standard & Poor’s report will not make for good reading and will create further problems in this respect, since it changes the outlook to negative which may have implications for higher interest rates of any loans we may go to the market and borrow for budgetary purposes.
Yet in all of this, the Government has to take the public into its confidence and tackle the situation in a frank manner, and put policies in place to deal with the major issue at hand which is the fiscal deficit, a matter within our control. But it is minutes to midnight and the clock is ticking.
