BY DARLINGTON
How do you explain value in relation to money? The two are not the same; if they were, each country would only allow its own currency to be traded within its borders as a preservation of that value.
Furthermore, issues such as inflation and exchange rates would not be central economic matters, per se. Admittedly, money and value are similar because they both respond to perception in one respect and, in another, to tangibility. At its cruellest, if money, or value, is not related to anything of consensual value such as gold or diamonds, it becomes useless. In other words, value is lost.
Money itself can loosely be defined as a store of value typically reflected by the coins and notes that are tradeable within given locations, nations and online platforms in modern times. Interestingly, having a lot of paper money circulating in any economy does not mean that the economy or its currency are high value. The opposite is also true, that having too little money in circulation does not equate to having a successful economy. What matters is transactional value: in other words, the perception of stored or inherent value within that currency and how much of that value is transferable and retained overtime.
While it is true that value is also a matter of perception, the inherent worth of a currency must ultimately be backed by tangible value, as briefed in the introduction. Prior to 1972, for example, currencies were pegged to actual gold so that the value of the paper, or coin, was directly related to the country’s actual gold holdings. This could explain why some developed European countries like Britain and France still have the most gold reserves without having a single gold mine in their countries. Value is a matter of economic and political survival worth enslaving and colonizing other peoples with rationalizations and false justifications.
The conundrum here, is that nations bestowed with natural gold deposits do not necessarily qualify as developed and their currencies may not be the classic store of value. Angola and the Democratic Republic of Congo, for example. Incidentally, these two nations happen to be most socially depressed, economically stale and politically unstable. None of this, by the way, is an internal design of either nation by its natives. Left on their own, their natural resources alone would turn around their economic value manifold if they dictated the value of their own resources. Alas, external interests have deliberately helped to restrict any internal resource exploitation and sound economic programs that would otherwise transform these countries.
Since the value of currencies is not anymore tied directly to national gold reserves, the perception of value becomes intangible. In other words, the worth of currencies becomes a matter of pure perception reliant on a series of numbers which, themselves depend on those who are meant to interpret those numbers. These numbers, overtime, have been synchronized in order to make comparisons between nations much easier. So, while the gold standard system before 1972 relied on tangible value to assess the worth of currencies, the floating system introduced after 1972 leans towards perception and interpretation of data, which action may be a subject of human error or selective bias.
In this respect, if we collect the same information about two different countries, we can discern which nation has greater value. This transition also speaks to the new challenges of leadership. For example, at the time of independence Zambia was a thriving economy until 1972 when a command economy was introduced. Unfortunately, the economy was dependent on copper whose value to global industries dropped in the 1970s, subsequently leading to a slump in the value of the local Kwacha. Between 1972 and 1991, Zambia had no economic solution – its key statistical data such as inflation or exchange rate were less than impressive. Cross border trade was all but absent.
After 1991, with great difficulty, the economy was decentralized so that each sector could be commercialized and liberalized to its full potential. Agriculture alone became a central contributor to economic value, second to copper because private sector participation was permissible. The commercialization of the health sector led to a booming insurance industry, which had also been liberalized. At central government, a revenue authority was created to maximize government revenue collection. All these factors, overtime, including debt forgiveness and re-writing changed the perception of the country. Overtime, the currency regained its value as inflation -which is a measure of the value of a currency – fell from over 180% to around 20%.
In an interconnected globe, that change in perception leads to Foreign Direct and Indirect Investments that add to economic value. That value, in a world led by perception transfers to the currency. In the current scenario where Zambia has won debt restructure, the renewed confidence has a transferable value to the currency. The movement in perception and opinion influences the conversion value of the currency. In other words, what creditors and money markets think about Zambia determines the price of the Kwacha against another currency. This interplay between information and a currency, brings about the concept of the efficient market hypothesis (EMH) – a subject of discussion for another day.
During two periods in the history of Zambia, the economic value of the country was determined by creditors because the country had borrowed excessively. The fact that excessive local currency was needed to pay foreign debt made our own currency a slave to debt repayment. Until such a time that a larger portion of our currency is being utilized for domestic trade and savings, the currency will be subject to external perception, shocks and possible manipulation. In almost every scenario, the politics of self-preservation, of monuments and statues which create personal value for the leader always devalue an economy. Value must always be transferred to the economy through selfless execution, policy implementation, human capital utilization and sound delivery with little selfnuances.
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