The economics of “printing money” is one of the reasons economics is often referred to as a “dismal science”
Much of the loans and grants Africa receives annually amounting to billions of dollars from western donors were printed out of thin air. But under the tutelage of the IMF, African Nations cannot and should not print money because they would say, “printing more money and injecting it into the economy only leads to inflation”.
The dictum that printing more money without increasing the productive base of the economy only leads to rising prices has been the conventional narrative of modern economic theory after Bretton woods.
The antithesis to that one might be tempted to ask is whether printing more money and injecting it into the economy as fiscal stimulus does actually boost the productive base of the economy and incubates economic activity by directly impacting on aggregate demand or not?
Another question one might be tempted to ask is whether or not inflation cannot be neutralized by a policy tool often referred to as ” good deflation” where aggregate supply is induced to increase faster than aggregate demand by boosting technological advances and improved productivity resulting in falling prices.
The narrative has been that printing more money only leads to inflation which is bad and instead, expanding the productive base is what increases growth which is good. But wait a minute, isn’t it money that incubates the productive base through funding entrepreneurship and productive sectors?. Isn’t it money that gives rise to technological advances through funding R&D? Isn’t it money that increases the purchasing power to make business brisk? Isn’t it money that builds the critical infrastructure ideal for growth? Isn’t it money that does all economics teach us will increase the productive base? Yet we are made to believe that injecting more money into the system is a bad thing. In fact, mild inflation is not a bad thing, but that is another topic.
African Treasury Departments and Central Banks must create an Initiative for New Economic Thinking to look into the economics of “printing money”. This initiative could be the thing that will set Africa free from the clutches of neo-liberal economic theory!
By Sulayman Gaye.