“The Importance of Long Run Perspectives in Development”

By Paul Sullivan,
Georgetown University

Politicians and others who need to give results within a few hours, days, weeks or years normally focus on the short run to prove that they are doing their jobs correctly and should keep them. However, for a country or a company one of the most important perspectives to have is the long run.
Making decisions based on what can be done in the two, four or six year cycles of elections can weaken a country. They can also lead to short run decisions on war, the environment, energy issues, budgets and more that could end up costing a country massive amounts of its treasurers, blood and people. Such short-term, hurried decision making on some of the most complex and essentially long-term problems can lead to false conclusion, bad policies, and the tyranny of sophistry in public debate.
What is the tyranny of sophistry? It is the power that false logic can take in just about every decision made. It can also lead to not making decisions at all. In the U.S. we call this “kicking the can down the road”. If we can delay a decision on our debts, deficits, paying back our creditors and more for longer and longer things will get better? This is completely wrong.
Kicking the can down the road is not long term thinking and strategizing. It is lazy thinking that increases the overall pain the country will face in the long run, rather than trying to figure out a long run solution that uses near term efforts. One of the obvious long run solutions in the face of massive debt is to have a plan to pay off the national debt in smooth chunks over time while at the same time making reasonable and correct decisions on what to cut back on expenses. Every family at some time or another faces such issues, especially a young family that finally wakes up to the costs of children, education, health and more. Countries are really no different in many ways.
Great leaders see the long run and can develop visions of a better future. Poor leaders look to short term advantage at the cost of the country or of their companies. Surely, every country and company needs to handle the day to day and week to week issues with a certain amount of aplomb and report their victories and successes.
However, it is the country or the company with a long term vision that include how to survive the uncertainties, the valleys of despair, the elation and overspending during the good times and more that will not only still be around in 50 or 100 years, butits people will be much better off.
Research and development, technology change and choice, diffusion of new technologies, creating new ways of thinking and managing things, investing in the right places and closing down the wrong places are some of the ways to create long term prosperity. Creatively developing new policies to handle the uncertainties of the future in the long run can go a long way to evening off the shocks that companies and countries can face.
In the U.S. we have some automatic stabilizers built in to our fiscal systems. They can handle some of the shocks that hit the economy. Examples of this include unemployment insurance, a progressive tax system that reduces taxes to those who lose income over a time period, payments to those who have dropped below certain income lines with “earned income credits” and the like We have many income transfer programs that help soften the blows of bad luck to those who have fallen on hard times. These automatic stabilizers can also help the economy from falling into a worse recession. These stabilizers are not a big chunk of our government spending and can be a great help to those in needs – as long as these programs are not abused for those who want to “game” the system.
The biggest drains on our federal budgets are the lifetime stabilizers, such as Social Security and Medicare. These programs often kick in when our people are older and infirm. In the U.S. the majority of the medical expenses for a person occur in the last couple of years of life. Medicare and Social Security can help.
But there are far fewer workers paying into these lifetime stabilization schemes per person taking out of them than there were when these programs started. American families have fewer children per couple than when these programs started. People are living much longer than when these programs were started.
These lifetime stabilizers need to be reconsidered in the light of our new demographic and economic environments. Rethinking these sorts of programs entails real long term thinking. So far not even short term thinking has arrived to help.
Mongolia and many other developing countries need to think about their budgetary and other priorities in the light of what may be happening with their demographic and economic environments over the long run. That a certain policy may seem right for today does not mean that it will be right for the future.
Mongolia and other countries will also need to take care with how they develop their social contracts between their people and their government. Not developing them with a long term perspective could lead to political instability. Nobody wants that.
Mongolia and other countries could take lessons from the budgetary problems of the U.S. We are facing a fiscal cliff in January. Out budget may be sequestered and there could be massive cuts in government spending. Another part of the fiscal cliff is that overall taxes that will be paid by the American people could almost overnight increase by $650 billion dollars. This fiscal cliff could easily drive the country into an even deeper recession that we have had in recent years.
To be very frank, the fiscal cliff, the looming budget sequestration, the lack of a signed budget and more are the results of the complete lack of long term thinking by many in positions of responsibility in the U.S. government.
Responsibility is also not a short term concept. It is by its nature a long term one.

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Posted by on Aug 29 2012. Filed under Opinion. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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