Christmas and the economics of irrational exuberance

At some stage in childhood, the truth about Father Christmas must be revealed. Expectations are for gifts, new clothes, and / or a time of plenty. Unfortunately, Father Christmas is revealed to be parents or caregivers, and the blessings, we discover, come at a cost, don’t materialize or are only applicable to others.

The same is true of apparent economic booms which promise a future of wealth and jobs. In 1996, Alan Greenspan gave form to the concept by coining the term ‘irrational exuberance’ to describe boom periods in which over-optimism leads to unrealistic hopes, risky investments and unsustainable spending.

Namibia is not immune to irrational exuberance. Of late, green hydrogen has promised a more prosperous future for all, including hundreds of thousands of jobs. However, the spread of projects in other territories and countries has shrunk the likely offset area to the sub-Saharan region. This is further complicated by the dawning understanding that infrastructure will be a big-ticket item.

Before green hydrogen, it was gas which, decades on, has yet to deliver on its own promises. Oil, the shady cousin of the new, sustainable energy industry, appears to be most likely to deliver significant revenue, but if the wealthy climate protestors have their way, that might be medium term only.

The truth lies in the threats of risky investments, unsustainable spending and stranded assets. The national cost of the outlay should also be assessed in terms of where it might be spent elsewhere on development.

One feasible method to mitigate will be to shift expenditure to the hands of the private sector and cream off a portion of the new revenue streams through policy. That leads to questions about how the national revenue will be invested and how the Welwitschia Fund will translate it into material socio-economic benefits for those who need them most.

Whatever the case, evolution of any economy is tenuous at the outset and a failed hope might just as easily be described as a source of despair. Best then to dial back on the exuberant statements, and match the hope with policy, hard work and calculated thinking.

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Something I thought of

Cliches work. Kindness is its own reward, not just helping the recipient but also rewarding the giver with a personal sense of value. As long as the kindness doesn't seek glory for the giver.