ravages left by recent natural disasters in Indonesia, and
Louisiana bring sharply into focus, the sociological adage:
the vicious cycle of poverty.
This construct supports a view that poverty is self perpetuating,
and an entrapment, within which developing nations are doomed
But escape is possible along two tangents. They are education,
and a savings discipline. But there is another window of
opportunity, it is government.
A cursory view of development in places such as Dubai, Doha,
and Kuwait, shows spiralling growth and development, and
stories of rags to riches, funnelled by progressive governments
who have discovered the real bargaining power of their natural
And while that is happening, too may of us will look back
and ask a foolish question What happen? when
it done happen.
Economists believe that the gamut of problems funnelling
vicious poverty in developing countries reside in six areas.
The first is a scarcity of capital formation (money) in
savings, the second is improper human resource management,
the third is a cowardly entrepreneurial spirit, the fourth
is a lack of social overhead capital, the fifth is a chronic
dependency on First World nations, and the sixth is corrupt
It is possible that this scarcity of capital is the result
of inadequate incentives for citizens to save from their
earnings, to save from taxation, and to make long term investments
in a well regulated business environment, and a secure political
In addition capital flight is a disease from
which we suffer, characterised by acute onset in cycles
too short for the overall good.
Capital flight occurs when savings, in terms of accumulated
dollars as well as resources of human expertise leave our
shores in search of better and safer opportunity for earnings
and investment, in other countries.
Often that flight is initiated by active recruiting from
the developed countries, which place a higher value on human
capital, without prejudice of race and religion.
As was so evident in New Orleans, only those who had the
means of transportation and health could leave.
A poor workforce is likely to be unhealthy, and disease
is a leading threat to development in many developing nations.
The human resource has to trained, and retained, and education
ought to be big ticket expenditure, and all our schools
should be open for all our children, on time, every time.
There is absolutely no excuse for that failure.
Social overhead capital refers to basic infrastructure,
built with revenue from the resource utilisation and taxpayers.
It includes support systems such as schools, water supply,
police and defence, electricity, pest control and telephone
In a 1974 World Bank publication, it was concluded that
growth and development may not be the same thing. In fact
growth may be rapid, but if one third of the population
reap no benefit, it is not development.
More and more our social insurances: old age pension, disability
benefits, NIS, and aid for widows and orphans are being
questioned as programmes without long term viability from
the actuarial perspective.
In addition, is the role of government, to provide a safety
net or is it to manage all our resources in such a
way that prosperity is visible and redounds to all?
If governments fail to fairly administer those large scale
programmes that engender social capital development, which
are in fact too large for private enterprise to undertake,
the question then arises: what is the role of personal savings,
beyond capital formation, in and of itself? Is it fuelling
some other vicious cycle?
(Continued next week)