Economics and Mandela

Macroeconomics deals with researching the economy as a whole. It deals with general equilibrium theory, national income, output, the unemployment rate, inflation (which are aggregates), and sub aggregates like consumption, investment spending, etc. It also studies the effects of monetary policy and fiscal policy. In macroeconomic analysis, people research the growth of national income. There are investigations on technological change and labor force growth. Economic growth deals with the increase in output per capita of a country over a long period of time. There are many factors that tell the differences in the level of output per capita between nations (in why some countries grow faster than others and whether countries converge at the same rates of growth). These factors include the rate of investment, population growth, and technological change. These are represented in theoretical and empirical forms (as in the neoclassical and endogenous growth models) and in growth accounting. In macroeconomics, there is the study of the business cycle. There are many theories on whether to do something or nothing in dealing with the business cycle. John Maynard Keynes wrote a book during the 1930’s called, “The General Theory of Employment, Interest, and Money.” This book came out during the Great Depression. In the book, he believed that the aggregate demand for goods might not be sufficient during economic downturns. This caused high unemployment and losses of potential output. He wanted the public sector like monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle. This is Keynesian economics in wanting the government to move forward (via strong intervention in the market) towards full employment. The business cycle involves the different stages of an economy. There is the expansion, then the boom, the recession, and the depression. Later, the business cycle comes about back again with expansion.

Friedman’s permanent income hypothesis dealt with this issue too. The neoclassical synthesis refers to the reconciliation of Keynesian economics with neoclassical economics, stating that Keynesianism is correct in the short run but qualified by neoclassical-like considerations in the intermediate and long run. There are the new classicals assume that prices and wages adjust automatically to attain full employment, whereas the new Keynesians see full employment as being automatically achieved only in the long run, and hence government and central-bank policies are needed because the "long run" may be very long. To find the amount of unemployment in an economy is about measuring the unemployment rate, and the percentage of workers without jobs in the labor force. The labor force includes only people actively looking for jobs.  People who are retired, pursuing education, or discouraged from seeking work by a lack of job prospects are excluded from the labor force. Unemployment can be generally broken down into several types that are related to different causes. Unemployment can happen when wages are too high for employers to be willing to hire more workers. Structural unemployment deals with skills, etc. While some types of unemployment may occur regardless of the condition of the economy, cyclical unemployment occurs when growth stagnates. Okun's law represents the empirical relationship between unemployment and economic growth. The original version of Okun's law states that a 3% increase in output would lead to a 1% decrease in unemployment. Government using fiscal policies definitely deals with macroeconomics. Some fiscal policies involve adjusting spending and taxation policies to change aggregate demand. When aggregate demand falls below the potential output of the economy, there is an output gap where some productive capacity is left unemployed. Governments increase spending and cut taxes to boost aggregate demand. Resources that have been idled can be used by the government.


For example, unemployed home builders can be hired to expand highways. Tax cuts allow consumers to increase their spending, which boosts aggregate demand. Both tax cuts and spending have multiplier effects where the initial increase in demand from the policy percolates through the economy and generates additional economic activity. Some fiscal policy can be limited by crowding out when the economy is producing at full capacity. That is when there are no excess productive resources. Some people believe in a Ricardian equivalence (which is a hypothesis) or people must save money, reduce consumption, and future tax increases must exist in order for an increase in debt to be paid for. Chris Carroll, James Poetrba, and Lawrence Summers disagree with the Ricardian equivalence hypothesis. The government readily provides certain goods and services that individuals and businesses acting alone can’t provide efficiently. The government provides these benefits to many simultaneously. They wouldn’t be in massive supply if individuals had to provide them. These services include interstate highways, postal service, and national defense. The government pays for public and services by tax revenues, borrowed funds, and by fees (like tolls and park entrance fees). The government taxes, borrows, and spends its influence to promote economic activity. The government tax increases can reduce the funds available for individuals and business spending. Tax decreases increase funds for some corporate businesses. The government can reduce or increase funds available for borrowing by individuals or businesses. More government spending can increase demand which can increase employment and production. The decrease of government spending can have the opposite effect or a slowing of the economy. Increasing government spending can increase taxes while decreased government spending may result in lower taxes. The 16th Amendment of the Constitution authorizes Congress to tax personal and business incomes. The Federal Reserve Bank maintains the value of the national currency or the dollar. It regulates banks, and manages the money in the economy in dealing with inflation. Some have called it the nation’s central bank.

When I think of Nelson Mandela, I think of a hero (as he was one). Yesterday, it was Madiba's Birthday. No words can eloquently describe his courage and his ebullient spirit. Yet, he followed a path of love and of hope. He desired black people and the rest of the human race to be free from injustice and oppression. Nelson's sacrosanct wisdom taught all about perseverance and never wavering in the midst of tyranny. Nelson Mandela was born in 1918 to a strong Xhosa family in South Africa. He was a brilliant man intellectually and he was highly educated. Later, he was in the legal field and an early opponent of the vicious system of apartheid. Apartheid is not only evil and racist. It restricted the human rights of black people and forced black people to be denied of basic economic rights. Nelson Mandela worked with a diversity of people in trying to eliminate apartheid. He worked with communists, socialists, black nationalists, liberals, and others. They differed on many issues, but they agreed with the principle that apartheid is incompatible with equality and that a new South Africa must be instituted in order for South Africans to exist in a land filled with true freedom. The 1955 Freedom Charter, as advocated by Nelson Mandela and others, wanted economic equality, justice, and an end to oppression. He worked in the ANC and other groups. Walter Sisulu, Oliver Tambo, and other heroes were his close friends.

The Sharpeville Massacre of the early 1960's when when mostly black peaceful protesters were murdered by apartheid forces. Lilian Ngoyi and other women were leaders in the anti-apartheid movement too. Mandela was monitored by the apartheid government and by the CIA. He was captured by authorities in June of 1963. He was imprisoned for a long time in Robben Island including Pollsmoor Prison. In prison, he worked long hours. Letters, sent to him, were censored by prison authorities. He was mistreated, but he never lost the faith. Meanwhile, the anti-apartheid movement globally existed. Black youth was murdered in the Soweto massacre during the 1970's. Steve Biko was assassinated. Boycotts against South African corporations transpired. So, the movement for change continued. Nelson Mandela was released from prison in 1990. It was a time of jubilation. He used his abilities to find common ground to end apartheid and to be elected as the first black President of South Africa in 1994. He lived in the age of globalization and a more international world. Yet, he did the right thing to oppose the Iraq War, to stand up for the rights of minorities, and to believe in compassion for humanity. He passed away in 2013. I was 29 years old when he passed. It was very close to my 30th birthday. He was 95. He lived a long life of service and of commitment to our people. For that, I send great honor and appreciation to his heroic memory. Today, South Africans are still fighting racism, xenophobia, economic inequality, and other issues, but we stand firm to promote liberation. That is our goal and that is our right.
Rest in Power Brother Nelson Mandela.


By Timothy