The true drivers of national economic prosperity are not derived from economic strategy alone but flow from an array of factors, many of which are social and environmental in origin, says Michael Clanchy.
ECONOMIC PRODUCTIVITY and national prosperity are topics of perennial interest, not just during election campaigns.
Dr Jeffrey Sachs, economics professor at Columbia University in the U.S., has spent a lifetime studying the forces behind high productivity and prosperity within the world’s nations. He is most interested in isolating the deep drivers, or primary causation, of national prosperity, rather than second or third order factors, which sometimes dominate daily business and finance columns.
In his 2011 book, The Price of Civilisation: Reawakening of American Virtue and Prosperity, Sachs concludes that the deep drivers of economic productivity and prosperity mostly originate in and flow from the public or political domain of nations.
In the Australian context, Dr Sachs would undoubtedly identify the following publicly-sponsored activities and investments as the critical engines to our national economic prosperity:
From primary prevention, early intervention and treatment to rehabilitation. These services reduce death and disability rates and promote vitality and well-being in the paid workforce, as well as releasing the productive potential of would-be family carers.
In all its forms, as the fountainhead of human capital formation and adaptability. Included here are quality child care, pre-school, primary and secondary schooling, universities, vocational training, research and development institutes and governmental research and development financial support to the private sector.
The development of public infrastructure, which renders our cities and regional areas functional — the built edifice upon which the diverse array of transport, communications, utilities and trade operates.
Law and order
A system of law and order — legislature, courts, police, mediation and conciliation services and so on — to defend person and property, assure free enterprise and establish commercial certainty.
Protection and management of our naturally endowed resources — promoting clean air and clean water, healthy forests, soils, seas, fauna and flora, natural energy sources and access to our valuable sovereign minerals.
Income maintenance and workforce re-connection services for those excluded, for whatever reason, from paid work.
Credible defence and deterrence capacity, including governmental foreign diplomatic and trade initiatives.
Civil and recreational resources
Community amenity and civil society resources — parks and gardens, libraries, cultural, social and recreational facilities.
By now you will be asking about the role of the market in wealth creation. The market constitutes private activity, outside of government and is obviously pivotal to the creation of national wealth.
Yet, economics professor and Nobel Laureate, Joseph Stiglitz, demonstrates that economic markets never exist in a vacuum: they always emerge from the broader public context of politics and power.
In his recent book, Rewriting the Rules of the American Economy; An Agenda for Growth and Shared Prosperity, Stiglitz outlines how government and associated power elites invariably write the rules and dynamics of any particular market — 'labour laws, corporate governance, financial regulation, trade agreements, codified discrimination, monetary policy and taxation'.
Stiglitz’s analysis also points out the important distinction between strategies of deep value creation and self-serving, extractive strategies by power elites. These extractive strategies, such as tax gaming, cartel activity, externalising costs and corruption, diminish national prosperity.
Economics can be a truly miserable and narrow science when it does not recognise the broader macro-social and environmental contexts and disciplines, of which it is a subset. Top economists are only too aware of the natural limitations of their science. They know that our world is indeed complex and that national prosperity arises from a matrix of inter-dependencies.
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