By Josef Kefas Sheehama
There’s a lot on people’s minds as we get closer to the 2024 presidential and national assembly elections. Voters often focus on the short term benefits that they are likely to receive which causes parties to spend a lot of money trying to look good just before the elections.
The economy plays an important role in presidential and national assembly elections, as voters often determine their satisfaction with the incumbent administration based on perceptions of how well the economy is doing. The campaign spending to help the country obtain the political party that will provide the greatest welfare to the country as a whole subject to some considerations of wealth distribution. We will see political parties massive spending on campaigns. If campaign spending is too low, people may be misinformed and vote in a government that does not maximize the benefit to society. More campaign spending could therefore improve welfare, if it provides a superior government. On the other hand, if the same government could be elected with less campaign spending, then society would obviously prefer to spend resources elsewhere. I suppose one should also consider that campaign spending can also distort the eventually policies of political parties by giving much of the power to groups who are organized and well-funded to the detriment of unrepresented groups. The upcoming 2024 Elections, will stimulate the national economy. I’m convinced that political parties will spend a lot of money, as a result, it will help boost the economy.
Furthermore, the government expect that the economic growth can be maintained at around 3.2 to 5.5 percent. In addition to the fund stimulation allocated in the 2024 National Budget, security issue will also stimulate other sectors. Elections are a time of increased economic activity. There are election rallies, posters and many other campaign-related expenses that are incurred in the run up to polls. It is natural that there will be a need for more manpower during polls to operate the machinery of elections. This substantial increase in the amount of new work is generated due to the business of elections. The same argument can be extended to all other private businesses which stand to gain after elections. In the hope of gaining favours, such business interests will bankroll the elections at the expense of paying their workers, who have to wait to receive their deferred payments until after the elections. The Electoral Commission will hire vehicles from the general public. For the economy, the elections will not effectively put more income into the hands of people and the chances of increasing GDP growth through elections and benefiting from the multiplier effect will remain a dream.
The election period is marked by increased spending by each of the political parties. Every political party spends millions of dollars. A lot of this money is suddenly taken out from bank accounts and unleashed into the market. This is the reason why suddenly there is a lot of money chasing limited amounts of goods. This results in price inflation. Products like food items and drinks also tend to face shortage which leads to an increase in their price. Industrialists and businessmen are known to avoid taking key decisions during an election year. This is because a change in the government may also mean a change in the priorities of the government. Many times the policies of a government entirely change the viability of business. Businessmen want to avoid the risk of their projects becoming redundant thanks to government policies. Hence, they prefer to play the wait and watch game. This obviously has a negative impact on the economy since the economic output, and the jobs which could have been created now are being postponed. Since industrialists and businessmen are undertaking fewer projects, banks do not have to lend out too much money. This slows down the rate of credit growth which affects the economy in a negative manner. In fact, in country like Namibia, an election is the time when businessmen pull their money out of bank accounts and use it finance the election campaign of their preferred political parties. Since the money is pulled out, the amount of bank deposits reduces. Once again, since credit growth is limited by the amount of deposits on hand, it is drastically reduced during the election year.
Furthermore, it is clear that during an election year, neither the government nor the citizens are looking at long term results. They are only concerned about the immediate impact that their policies can create. As a result, the economy completely stops focusing on long term. Instead, the focus is on immediate consumption. Thus long term spending like infrastructure projects takes a hit. This has led to slower economic growth in every election year that the Namibian economy has seen after independence. Not all industries face the negative impact of an election. For some industries, the impact is very positive. For instance, companies which provide rental equipment for organizing events see an increase in business because of political rallies. Similarly, manufacturers of certain types of goods which are used by political parties as handouts also see a sudden spurt in their business. Large scale temporary employment is provided since a lot of event management and security personnel are needed in order to conduct political rallies.
More importantly, the fast implementation of policies that have been set out will help in building confidence and therefore stimulate economic growth and reduce unemployment, especially if combined with improving access and quality of educational outcomes.
Therefore, politicians who know nothing about economics are fond of saying that the economy is fundamentally sound. In fact, it is fundamentally unsound, and will remain so. Don’t Make The Economic Mistake.
