Turning crisis into opportunity

2008-01-24 00:00

There are many laments that frequent load shedding over the next five years, until Eskom can fire up new power plants, is going to be bad for business and severely hinder the expansion of industrialisation and accompanying foreign investment and that this will impact on unemployment, poverty reduction, Accelerated and Shared Growth Initiative — South Africa (AsgiSA) and that supposedly hallowed measure of how the country is prospering, the gross domestic product, GDP. Let us examine some of these assumptions and also ask if there is a way by which the present calamity could be overturned.

There is no doubt that revenue that arises from human use plays a major role in driving an economy. The trouble is that natural resources are not infinite. If production uses up resources faster than they can naturally restore themselves, then, in business terms, one is eating into the “capital base” of that which helps create a country’s wealth. So although GDP might be showing growth, this might not be sustainable for any length of time if the country is fast using up reserves of natural resources that drive that growth. If production of any sort is of the kind that results in irreversible loss of natural or other resources without producers being billed for the cost of those losses, then in the long term the country is not getting richer but poorer, by the long-term “capital base” of the country being eroded. If production both degrades the natural resources base of the country and the benefits from that accrue to only a few, GDP can show positive growth (for a time) while the country as a whole gets poorer. So GDP is not a very accurate or useful indicator of how well a country is doing as far as managing long-term and widespread prosperity. Aiming for an ever-increasing economy through increasing industrialisation without thinking how this impacts on the “limits of resources” that a country has, is tantamount to selling up all a company’s capital stocks in order to show a fast profit to shareholders; a course that eventually leads to ruin.

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