By Lazarus Nyagumbo.
When the macroeconomic challenges are pressing, the workers facing income erosion may start to demand higher wages which ultimately lead to inflation causing inflation or unemployment causing unemployment.
What should be done?
Increase taxes to raise govts revenues to afford higher civil servants wages?
How is it possible to raise taxes during a recession??
A deliberate active expansionary or loose fiscal stimulus is the most plausible way to bring an end to the macroeconomic downward spiral.
To implement a fiscal stimulus package , where does the govt get the money from ?
From issuing treasury bills, borrowing from the market, international capital markets (but here comes sanctions and Biti begging for financial blockade).
We need answers, here now ?
•Supply side rigidities.
I keep saying the only solution is producing production production of goods and services required to satisfy basic needs as per Maslow Hierarchy of Needs.
Increase aggregate supply, what did I say about GNU forlon bubble?
The domestic economic agents spend spend spend spend spend spend and spend spend spend spend then spend spend on what the available USD could buy during dollarisation?
Was it spent on capital goods imports to boost longrun aggregate supply through enhanced productive efficiency, technical efficiency, technology imports???
Or it was spend spend spend on immediate consumption gratifications eg any other dead capital or consumption imports USD can buy from any part of this beautiful world??
Now how is the kind of consumption sustainable in the longrun. The longrun of 2009-13 dollarisation spending is now, today , tomorrow unless and if only if the import poverty cycle trap is ruthlessly broken into pieces and replaced with a deliberate import substitution, export led economic recovery growth and development. It is a painful arduous choice , it gotta be done if by 2023 you want to be talking about economic hardship as historical events in the past.
Together We Can
®️TLN Economics, 2007
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