The tale of the Golden Goose

hqdefaultOnce there was a poor farmer. He had no money to buy inputs, so his yields were low. He had no food, no money to pay school fees for his children, no money to maintain his house. Somehow, he got hold of a goose. This was a big treasure for him, but it turned out for him even better: when the goose laid an egg, it was made of gold! The farmer sold the egg, and he bought food. The next week the goose laid another golden egg, so they named it the Golden Goose. golden-eggThe farmer paid school fees and bought school uniforms. The next week the Golden Goose laid a golden egg again. This time the farmer bought farm inputs for the year. But then he got impatient. He had to wait a full week for the next golden egg. He thought: the golden eggs come from the Golden Goose, so all I need to do is slaughter it and find all golden eggs at once. He slaughtered the Golden Goose, but no golden eggs had grown inside yet. So he lost his treasure and pretty soon he was back to being poor again.

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Once there was a government of a poor country. Because it was poor the country got support from donors. The donors financed development projects. But the government of the poor country did not want to wait for the development to pay off, they wanted money immediately. So they started paying themselves allowances and giving themselves lucrative but dishonest deals. And they simply took cash from state coffers in their car boots. The donors did not like this: they wanted to finance development but not self-enrichment. So they put a stop to financing corrupt government officials and financed development projects directly. The government looked for other sources to pay allowances and perks and luxury cars and lucrative dishonest deals. And they pushed up revenue collection: they taxed more products, they slapped fees on all kinds of things, like more permits for transport. They pushed up prices of public utilities such as water and electricity. They hiked university fees up to 400%. And they kept on collecting allowances and lucrative deals, while they lowered the quantity and quality of services offered to the population. Police did not get enough budget to function, so security deteriorated.b4116110ef1574aa2c15df81a90de096

All these costs made it difficult for the population and businesses to thrive. They could not make money, so they paid less taxes. There was less money around for allowances and lucrative dishonest deals. So the government borrowed money, lots of money. This crowded out the private sector and pushed up interest rates, as well as caused run-away inflation. All this made it even more difficult for the population and businesses to make money. So the government income kept shrinking until it reached rock bottom.

What is the connection between the two stories?

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