Jump-starting Ailing Economies: The G. Okewih Economic Restoration Model

The resources of various countries of the world, regions, continents as well as the global economy was neither destroyed nor set aside – never to be used again; the effect of the corona virus pandemic only caused a disruption and misalignment in the flow of the economic cycles of these countries and regions. The same can be said for all depressions, there’s always a cause, which either results to a disruption in the flow of the economic cycle of that region, or a transfer of resources and value out of that region.

The global economy is currently faced with looming depression, and according to IMF, ‘probably the worst since the Great depression’. This to a large extent was caused by the corona virus pandemic which nearly led to a total shutdown of global economic activities. However, one thing is certain – resources and value weren’t transferred from the global economy to outer space, they are simply poorly distributed or market forces have gone out of sync with each other.

THE MODEL

The G.Okewih economic restoration model can be said to be a form of hedging the economy of a country or region against itself, by artificially setting the forces of demand and supply in vibrant motion.

The model aims to jumpstart the economies of countries and regions resulting to a rapid realignment of market forces in various economies, which in turn results to global economic revival. This is akin to manually cranking the crankshaft of an Internal Combustion Engine for it to start, prior to the flywheel taking over.

The model is most suitable when movement restrictions have been relaxed, and businesses have been permitted to resume operations to some extent.

Components of the Model

The various components of the chart above include:

1. IMF (International Monetary Fund)
2. Government [Federal, State & Local]
5. Civil and Public servants, Defence, Police and Paramilitary, Pensioners and other government social programs.
6. Products and services from sectors directly affected by Covid-19 and/or the resulting lockdown.
7. Products and services from sectors not directly affected by Covid-19 and/or the resulting lockdown.
8. Staff 1 – People employed on a contract basis by the Pot (4).
9. Staff 2. – People working for (6) prior to Covid-19 lockdown.
10. Staff 3 – People working for (7).
11. Warehouse (Real and Virtual).
12. Informal sector.
13. Dependents

Interactions between Various Components

Cash from Contributors (3) goes into the Pot (4) as ‘economic restoration capital’. The exact amount required is the ‘Pot Value’.

This cash is used to make bulk advance purchases of products and services from companies and organizations directly hit by the corona virus pandemic and/or the resulting lockdown (6), for a specified period of time and agreeable price (about 50-60% of pre Covid-19 value). 70% of staff salaries for companies in (6) will be withheld when making payments for advance purchases.

The purchased products and services are held in the Pot’s warehouse (11) under its direct control.

Withheld salaries for Staff 2 (9) are used to make direct payments to them on a monthly basis from (4), for the time and labour given to (6). These salaries are 30% less than their pre Covid-19 take-home, and still very taxable by the Government (2) – unless it decides otherwise.

Cash from the Pot (4) is also used to make payments to Staff 1 (8) for the time and labour given to it.

Staff 3 (10) render time and labour to their various companies and organizations (7), and are compensated accordingly without any interference from (4), but with some oversight from Government (2) to prevent unnecessary layoffs.

Government continues the regular business of governance, which also includes maintaining its Civil and Public servants, security and paramilitary operatives, pensioners as well as other ongoing social programs (5); while still carrying out oversight functions for the Pot and entire model, which is under the supervision of the IMF (1).

(8), (9) and (10) as well as (5) and the Informal sector (12) all have direct access to purchase products and services in the Pot’s warehouse (11). While Staff 2 can get an approximately 30% discount (pre Covid-19 prices) on all products and services from (11), Staffs 1 and 3 as well as (5) and (12) would get them at discounted prices of approximately 20%. During the lifespan of this intervention program, all products and services rendered from (6) are controlled and disbursed by (4).

(8), (9) and (10) as well as (5) and (12) would access and purchase products and services from (7) under prevailing market forces of demand and supply without any interference from (4). These market forces to some extent should be positively influenced by the intervention program.

As was the case prior to the corona virus pandemic, the Informal sector (12) generally thrived on transactional interactions with (8), (9) and (10) as well as (5) guided by market forces. Owing to the very informal nature of their operations, this relationship would remain unchanged.

Dependents (13) both young and elderly not under any government program are catered for by previous support structures prior to Covid-19.

At the expiration of the intervention program in a given country or region as determined by (1) and (2), cash collected in (11) for the sale of products and services gotten from (6) is transferred to (4), which in turn transfers it to (3) as principal contribution plus accrued interest less facilitation fees, royalties and tax.

Dissecting the Various Components

1. IMF (International Monetary Fund)

The G.Okewih economic restoration model would achieve optimal deployment if adopted as an IMF (1) program for interested member nations. Direct supervision by IMF would boost contributors’ confidence to a large extent and as such encourage contributions. IMF also brings along a high level of professionalism, know-how, credibility and much needed integrity in implementing the model. There also could be unique countries and regions that could be better served by different variations and alterations of the model, having a single supervisor helps in identifying necessary variations to be made.

2. Government [Federal, State & Local]

The role of Government (2) would be to carryout oversight functions and assist the smooth running of the program, continue in the business of governance, as well as make contributions to the Pot as a Contributor (3) should the need arise.

Government could also grant conditional tax holidays to (3) and (7), so as to encourage contributions from (3) and prevent or minimize employee layoffs, as well as incentivise the operations of (7).

3. Contributors:

This refers to the various categories of people, companies and organizations funding the Pot within a specific country or region. These include and should be limited to:

• The IMF (International Monetary Fund)
• Federal Government
• Central or Reserve banks
• State Governments
• Local Governments
• Banks and other financial institutions within the country or region
• Corporate organizations operating within the country or region
• High and Ultra High Net Worth Individuals (H & UHNWIs)
• Other individuals excluding H & UHNWIs
• Foreign Organizations besides the IMF.

The percentage of ‘Pot Value’ allocated to each group of Contributors is to a large extent determined by the level of maturity of the economy and the direction economic planners desire the economy to take upon recovery.

For optimal economic reawakening and realignment, contributions in the form of ‘cash at hand’ and mid to long term ‘cash savings’ from f, g, h and i only should be appropriate, with input from a, b, c, d and e as a backup measure only. The acceptance of contributions from j should be taken as an extreme measure only.

As an incentive, tax holidays could be granted to some categories of Contributors.

4. Pot

The virtual safe or account where all the monies contributed by Contributors are paid and domiciled is called the Pot.

The amount required to be injected into the economic cycle of that country or region to initiate a jumpstart is the ‘Pot Value’.

The Pot Value of an economy is relative to the size of that economy with respect to its GDP. An over-injection of liquid cash into any economy could lead to hyper-inflation.

Broadly speaking, Contributors (3) invest money into the Pot (4) and get a return on their investments at the expiration of the restoration program. As an incentive, the Government (2) could forego taxes expected from accrued interests.

While being under the direct supervision of IMF (1) and overseen by Government (2), the Pot (4) could be managed by the central or reserve bank of that country. 

5. Civil and Public servants, Defence, Police and Paramilitary, Pensioners and other Government social programs.

This group of people work directly for the government, and as such are on its payroll. Nonetheless, as an extra source of income, some of them could still be engaged in businesses, trades or professions that could fall under (12), (6) or (7), depending on the provisions of the civil and public service laws of that country.

These people could also be Contributors to the Pot under category ‘i’.

6. Products and services from sectors directly affected by Covid-19.

This refers to the products and services offered by ‘for profit’ companies and organizations from economic subsectors that have been directly impacted negatively by the Covid-19 pandemic.

Employing the economics of scale, these products and services are purchased and pre-purchased by the Pot in large quantities from the companies at discounted prices of up to 50%, depending largely on the particular company and the industry in which it operates, the product itself, the degree of impact of the pandemic on the company, the quantity being pre-purchased and other factors.

All output (pre-purchased products and services) from these companies are placed under the direct supervision of the Pot.

Companies affected by the pandemic that would be permitted into (6) must have their products and services verifiable, quantifiable and can be monitored by Staff of the Pot (8); otherwise they’ll be labelled as (7). During the program, no additional unit of product or extra service shall be rendered by these companies; all their operations shall be centred on fulfilling the demands of customers of (11).

7. Products and services from sectors NOT directly affected by Covid-19.

While every sector in an economy would be affected one way or the other by the economic downturn caused by the Covid-19 pandemic, some wouldn’t feel the impact directly. Businesses manufacturing and retailing essential household consumer items are an example of companies within this sector. Broadly speaking, such businesses still have sufficient room to recover from the economic downturn without massive staff layoff or requiring a jumpstart; as such they would not be listed in (6). Notwithstanding, the effect of the economic jumpstart on (6) should indirectly impact businesses in (7) positively. As such, the Government could put incentives or restrictions in place to avoid unnecessary layoffs by (7).

Furthermore, those with sufficient capacity can become Contributors to the Pot in category f or g.

8. Staff 1 – People employed on a contract basis by the Pot (4)

These would largely comprise of IMF and Government staff deploying, implementing and overseeing the program, with other contract staff employed for the duration of the program for the purpose of categorizing, vetting and monitoring (6), managing the disbursement of (11) and a host of other activities including preparing salaries for (9).

Staff 1 should be people of high integrity to avoid systemic fraud or any boycott of the program by (6).

While salaries of (8) would come directly from the Pot’s (4) operating costs at full value for their services, they would be able to purchase products and services from (11) at about 20% less than their pre Covid-19 prices. Their interactions with (7) and (12) would remain governed by prevailing market forces.

Members of (8) could still be Contributors (2) to the Pot (4), provided they are citizens of that country or region, and made such contributions before becoming (8) or prior to the commencement of operations by the Pot (4).

9. Staff 2 – People working for (6) prior to Covid-19 lockdown

These comprise of the workforce of companies and organizations in (6), immediately prior to when lockdown was initiated in that country or region, excluding staff contracting for (6) under different corporate organizations.

A precondition for companies in (6) would be no staff layoffs several months after the expiration of the program. 70% of total staff salaries that was withheld from payments made to (6) during purchase, would be paid directly to (9); thereby implying a 30% salary reduction.

(9) would be able to purchase products and services from (11) at 30% less than their pre Covid-19 prices – 10% less than (8) can get them for. Their interactions with (7) and (12) would remain governed by prevailing market forces.

10. Staff 3 – People working for (7)

These comprise of people working for (7), neither them nor the companies they work for are under the Pot (4). Their post Covid-19 salaries are still determined by their employers, and they stand the risk of being downsized. However, Federal government tax deduction incentives could be given to companies that refrain from downsizing staff.

(10) would be able to purchase products and services from (11) at 20% less than their pre Covid-19 prices, and their interactions with (7) and (12) would remain governed by prevailing market forces.

They would also be able to serve as Contributors (2) to the Pot (4) in category i if they have the capacity and desire.

11. Warehouse (Real and Virtual)

The Warehouse (11) shall be in real and virtual forms. The virtual warehouse is basically an online platform which shall have all products and services displayed on it with detailed descriptions and prices. Services and intangible items, including those that can be represented electronically would be sold from the virtual warehouse and transferred directly to the clients, stating redemption centres for services; products on the other hand must be delivered to client or picked up by client from real warehouse. Storage spaces used by companies for the storage of products prior to the Covid-19 crisis would remain in use to serve as real warehouses, but under the control of the Pot (4).

12. Informal sector

This sector comprises of unrecognized income sources from unincorporated enterprises and other activities not monitored by government. While some have grown to structured business entities, most remain unstructured. As a result, most government social economic programs are unable to directly cater for the interests of this sector. To a large extent, (12) thrives on transactional interactions with (5), (8), (9) and (10).

While (12) would be able to purchase products and services from (11) at 20% less than pre Covid-19 prices, its interaction with (7) would be governed by prevailing market forces.

While it should not be entirely ruled out, it will be difficult accepting contributions to the Pot from (12), so as not to promote money laundering by people and organizations without verifiable income sources.

13. Dependents

Dependents (13) both young and elderly not under any government program are catered for by previous support structures prior to Covid-19. 

NOTES, SUGGESTIONS AND CONCLUSION

1. Certain aspects of the model are determined by the economic outlook of the country or region it’s to be deployed in, and as such these would vary from country to country.
2. Percentage deductions stated above are largely suggestive and should be determined in actuality by a combination of (1), (2) and (8) operating in that country or region, relative to its peculiarity.
3. A clear definition of the cause(s) of the depression should be stated so as to determine the degree to which each economic sector and subsector is affected. This would help to accurately place products and services of companies in either category (6) or (7).
4. Each company or organization categorized under (6) should be uniquely scrutinized and labelled by (8), not as a one-size-fits-all.
5. An adoption of the model in a country or region can boost short to midterm investors’ confidence in the stocks of publicly listed companies under (6), further aiding the companies directly and the market in general.
6. The products and services pre-purchased from (6) by (4) should exclude finished products imported from outside that country or region after the commencement of the program.
7. After broadly examining the viability of the model, the goal is to carry-out a research (preferably postdoctoral) on the workability of the model in a sample country or independent state within a country, prior to any large scale rollout. This research can be spearheaded by the International Monetary Fund (IMF) directly, a reputable academic institution, The World Economic Forum (WEF) or the Government of the participating country or state.

8. Though the model can be individually adopted and deployed by countries under the supervision of existing Governments without the IMF; it however will achieve higher participation and better efficiency under IMF.
9. As an alternative to being adopted by IMF, the model could be adopted as a for-profit business by investors, organizations and/or governments.
10. There exist deeper dimensions to the model.
11. The author is not an economist.

In conclusion, while fiscal and monetary policies are useful economic restoration measures, they may not be entirely sufficient during demand and supply disruptions. The G.Okewih Economic Restoration Model which ‘enhances supply’ and ‘incentivises demand’ could be used in conjunction with existing economic restoration measures for optimal resuscitation of a nation’s ailing economy.