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A couple of days ago I responded to the question on the four areas of Public Finance, and well we can as well go deeper with the subject the way we always love to do it. Today we are going to interact with the types of public finance.
We ascertained that Types of public finance are divided into four; Public Expenditure, Public Revenue, Public Debt and Financial Administration; all of which are aimed at achieving one common goal, which is to figure out how government can, create, maintain or intervene in the existing economy.
It so happens the four areas of public finance are also regarded as the types of public finance. Well I would like to bring in a critical perspective, but before I do that I would like to take time to define the two terms that make up our subject matter today.
Public: This is one very interesting term in the English language, which comes in the forms of an adjective and verb. While an adjective, the word again multitasks to either mean of concern to the people as a whole, or existing in open view. As a noun, the word refers to the ordinary people in general.
Finance: On the other hand, finance is also a noun which refers to the management of large sums of money and assets, by big entities. It also exists as a verb referring to providing funds for a certain cause to either a person or institution.
These broken down serve us with the opportunity to derive types of public finance. “Trends are easy to follow and never easy to set” is a saying by a wise man. All theories were invented by man.
How about we make an attempt at digressing from looking at public finance from a limited perspective of revenue in the form of taxes and other revenue generating activities. Here are my first two types of Public Finance and I hope you my beloved readers will endorse them and maybe we will come up with more that will be useful in the field of Public Finance:
Monetary Public Finance.
What are the types of public finance?
This type is the one which covers almost all aspects that we look at in the four areas of Public Finance. If you will agree with my view on the types I speak of, together we are relegating the four areas of Public Finance to mere subtypes of just but one type of the phenomenon, ‘Monetary Public Finance.’
Types of public finance are called Public Expenditure, Public Revenue, Public Debt and Financial Administration for achieving a common goal.
My reason for this relegation is based on the fact that nations, especially in Africa, are worth more than the monetary value placed on them through a borrowed financial system. Let me not preempt my second type and divert you a little bit into looking at the four areas of Public finance as subtypes of the one we have introduced:
1. Public Expenditure
The budgets designed by the financial system in place to use for the development of their bureaucracies to use for the development of their bureaucracies are created in monetary figures. The function of the Public Expenditure arm is to study, but only limited to how this money is consumed in principle.
Typical government expenditures range from, pensions, education, health care, security and infrastructure. Because of the crooked nature of human beings, more attention is paid to public expenditure as compared to the other four parts of the phenomenon. Government authorities, the world over have been accused and arrested for embezzlement, criminal abuse of office among other crimes relating to the abuse of public funds.
It is quite unfortunate these criminal activities by the people who have citizens’ trust given to them for the job they are supposed to take up. This takes us back in time where we look at how governments survived in the past with regards to public finance issues.
While laissez-faire (an economic system where there is little to no intervention on private transactions) philosophies believed the ideal way of running an economy is giving people freedom, an alternative view by John Maynard Keynes came in the 20th century where he emphasized on the aspect of balance through the role played by public expenditure in determining levels of income and distribution in the economy.
2. Public Revenue
Public revenue refers to money earned by government mainly through taxes and other revenue generating activities engaged in by the bureaucracies that follow them. What this basically implies is, Public Revenue is the life blood of government’s financial streams.
The top two areas of public revenue have so much attention paid to them such that they reveal how much value money has been given in the aspect of finance yet it was just supposed to be a token used for the ease of transaction. The extent at which governments get in trying to increase revenue through activities like ‘seignorage,’ where governments opts to deflate its currency which in turn means surplus revenue.
3. Public Debt
The old saying goes, “We are because of others!” I guess this applies to governments too. Everyone gets to a point where they need to borrow and subsequently gets in to debt. Instead of public finance graduates going forth to advocate for thorough researches on public debt and the implications these have on the economy. This century needs those who can come up with solid plans of how these debts will not only repaid, but also implement systematic management of public debt.
4. Financial Administration
In Public Finance this comes as a whole department responsible for the drawing up methods of budget preparation at different levels and aggregating all public funds. This is where analyses of public revenue and public expenditure always hoping for surplus as opposed to deficit. The former refers to when public revenue is more than expenditure while the reverse is true for the latter.
It is quite unfortunate that generations have been deceived into loving and believing money is the most supreme aspect of finance yet it is just a facilitator. With this I will take you through a short ride on my new type of public finance:
Non-Monetary Public Finance: I would love to also call this resource based public finance.
For a very long time resources in Africa have been exploited and unevenly distributed. Whenever they are used, self-pleasure is the order of the day such that they are enjoyed by a limited number of people instead of the public, as the definition says.
I will not delve deeper into this type as it is still a study we need to undress but I want to leave you thinking about human resources and slave trade vs money. Maybe our thoughts as Africans need to realign.