The cause of economic crisis has always remained thorny among academics and other experts in economics because of the complexities involved and the heart of the issue- human beings.
The problem is, in most cases, the “experts” go about their search for answers by trying to force the world to be what they want it to be rather than interpreting what it actually is. In so doing, key points are missed, and the mess continues as we become unreasonable with our actions. Excess borrowing is a case in point.
Let us now take a step back into history to understand the dynamics of economics and possibly why predictably, boom follows bust, and bust followed boom. The world economy has always had challenges and in the extreme, serious financial crisis.
After September 1939 for example, the miseries of the Great Depression changed into the miseries of the Second World War; another mess, another unreasonable behaviour.
In fact, 1939 is a long time ago so the numbers of those who remember the Great Depression are steadily decreasing, but there are still books and films of that time that reinforce the fear of economic meltdown.
Some of the ills during the 1930s, when the economic downturn was at its peak were the number of the unemployed.
History has it that at the height of the crisis in the 30s, the unemployed numbered some 14 million in the USA, six million in Germany and three million in the UK. That was indeed highly significant.
So, as the crisis softened, the United Nations Monetary and Financial Conference, known as the Bretton Woods Conference, took place in July 1944. At the time, representatives of 44 nations attended, and were led in discussions by a band of economists, notably John Maynard Keynes from the UK and Harry White from the USA. They promised a plan to deliver a better world!
The question now is, have they? The jury is still out! In this 21st Century, we still have the same human behaviour and therefore similar problems.
This week, a group of economists from the International Monetary Fund (IMF), one of the Bretton Woods Institutions, is holding discussions with the Government of Ghana, to possibly plan a better future for the people of Ghana.
Just as it happened in the years behind, the expectation is that once you have had an encounter with the Bretton Woods, you should rest assured that there will be no more poverty, no more ill health and an economically secure country.
But treating the ills of an economy is not easy as a doctor treating a common cold. It can be extremely tough.
“The Bretton Woods designers began with a cracked world and painted on it their own hyper rational construction, abstracted from the messy unreasonableness of ordinary living…..they really wanted their machine to work. Their plan had no technical flaws. Unfortunately the world had many”, Jack D. Schwager, wrote in the HarperBusiness, New York, in 1989.
Indeed, as ideas like “socialism” or “free trade” have different meanings for different generations, prescriptions by the IMF, in this particular context, could have different meanings to even the same group!
As the real economics is what plays out on the street, it is important for the planners of the economy to note the significant role places like Agbogbloshie market play in the Ghanaian economy.
In a market like that at Agbogbloshie, there are always signs pointing to either an economic boom or a downturn. It shows the direction of consumption, often reflected in the purchases that people make, and indicates employment levels by using market demand as a gauge.
Above all, it also shows market supply by giving a price that is indicative of whether the supply conditions are stable or uncertain to meet demand that is the equilibrium point.
Market watchers that track commodity prices in the various markets across the country are able to give an indication as to what the future price trend will be. And the best way of gauging this is by looking at the behaviour of traders.
They do not employ any scientific or mathematical models to perform any complex calculations; they only go about their normal activities and that create the waves in the market.
As Einstein explained, “As far as the laws of mathematics refer to reality, they are not certain; and as far as they are not certain, they do not refer to reality”.
Indeed, the answers we give to life’s questions are part of what Xenophanes, the ancient Greek philosopher, called “a woven web of guesses”.
Why is inflation at a record high in four years? Why is there high graduate unemployment? Why is cost of borrowing so high? Why is government borrowing almost half the net worth of the country?
These are some of the questions that the Bretton Woods would try to provide the “Absolute Truth”, just as every religion lays claim to a clutch of absolute truths.
So aside the guesstimates, the economic players must realise that Agbogbloshie could hold significant truths also.
We must certainly test our economic theories against what is actually happening.
