Election-induced economic growth!

Tom Sangala March 27, 2018

259 2 minutes read

Elections always perk up the economy in Malawi. The 2019 elections will not be any different. These elections are one important factor that drives analysts’ expectations that next year’s growth in our Gross Domestic Product (GDP) will match or exceed the four percent estimated for 2018. A quick scan of GDP growth data since 1994 would readily show that election years tend to be marked by higher than the previous year’s economic growth.

In 1998, Malawi’s economy grew by 1.1 percent and, by 1999, the election year, the economy more than tripled its growth rate to 3.5 percent. Although the figures for 2003 and 2004 would buck the trend since the economy grew by 5.7 percent in 2003 and only 5.5 percent in 2004, the difference was negligible. This trend of economic growth in the election year exceeding the previous year continued in 2009 when the economy grew by 8.3 percent versus a growth of 7.6 percent in 2008. The figures show a consistent trend since, by the time Malawians voted in 2014, the trend did not change. The economy in 2014 had grown by 5.7 percent, which was higher than the 2013 growth rate of 5.2 percent. While there are surely many other determinants of economic growth, the above data seem to suggest that elections have a substantial growth-inducing effect on the economy, pushing growth upwards during an election year. How does one explain the sources of additional growth in the election year? Is there an economic explanation?

It is not a secret that a lot of money goes around the economy in election periods. Much of the money comes into circulation out of bank accounts being held here and abroad, hidden or unhidden. It also comes out of government coffers or from underneath mattresses and treasure chests or even from illegal means. The point is that, somehow, people spend money more than they normally do during the campaign period leading to an election. All those campaign posters, streamers and tarps, radio, television and newspaper ads, transport services for candidates and their entourage, hotel and other accommodations, T-shirts and caps emblazoned with candidates’ names require some monetary expenses. This is money that, otherwise, would not have been spent if there was no election.

On the government side, the Malawi Electoral Commission requires additional funding to conduct elections that meet international standards of democracy. Government, at both national and local levels, also has the tendency to boost infrastructure spending in the run-up to elections for obvious reasons. How much additional spending can be directly attributable to the elections? A precise estimate is nearly impossible to make. Based on economic theory alone, it can be argued that the impact of additional spending is huge. Its total impact on the economy’s income for the year should also account for the so-called multiplier effect as that direct spending leads to subsequent cycles of income and spending as the money reverberates throughout the economy.

But who are the major beneficiaries of the increased spending towards and during elections? Are the benefits broad-based? The positive impacts of an election-induced economic growth are not broad-based. The ordinary Malawian, apart from a few chitenjes, T-shirts and some K500 notes once in a while, does not partake in this feast of wanton spending which sometimes reached proportions beyond rational thinking. It can be argued that a big chunk of this extra cash and the associated output/income effect accrues to the private sector players which include broadcast and print media.

The few ordinary folks include the hundreds of teachers and others who will be employed as election staff across the thousands of polling stations in the country, the police officers who will cherish the chance to get allowances for protecting ballot boxes, not forgetting the money that changes hands when people realise that they can sell their votes to the highest bidder.

Despite all this issue, the real impact on the economic growth of Malawi will rest in the quality of leaders that will be elected into office in 2019. And, on this, it is not so much the election itself but how we will all exercise our electoral duty in 2019 that would make the difference. So, please, vote wisely in 2019. Vote for low inflation, stable exchange rates, low interest rates and sustained and inclusive economic growth for all years not only the election years.