People & Money

In defence of neoliberal economics

What is difficult to grok is the argument that Nigeria’s current woes are the result of such prescriptions (core solutions from the neoliberal economic playbook) forming the core of our organisation of the state.

what makes the attempt to blame Nigeria’s woes on neoliberal economics well-nigh impossible to come to terms with, is more because there is no history of a Nigerian government willingly committing to neoliberal policies. Even Ibrahim Babangida’s much-talked about (if not much-derided) structural adjustment programme (SAP) was forced on him by the poor circumstances of an economy that had arrived, then, at the same cul-de-sac that the economy has reached today.

You would not tell from listening to debates where the noun phrase is used that at heart, “neoliberal economics” is all about increasing private sector supply responses in any economy. Yes. It consequently argues for a smaller state, but its opponents often wield the phrase as one would an epithet directed at an unconscionable foe. In this telling, neoliberal economists are anything from “cradle-snatchers” to “old vampires fighting against everything good for the younger generation”. As might be expected, given the association in emerging and frontier economies facing balance of payments problems of neoliberal economic ideas with the notion of “austerity”. Take Nigeria’s current situation, for example. It is impossible to conceive of a reform platform designed by the incoming government whose central planks will not include spending cuts or higher taxes ― maybe both even.

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Even before including the debt burden that the Buhari administration leaves behind in any conversation on ways to fix the economy, most experts long concluded that the public sector, at the federal level at least, is as cumbersome as it has become unproductive. The ratio of workers in the public sector to the economy’s size, or, for that matter, to the population that must be served might be no higher than norms elsewhere. But the duplication of public agencies that drives our bloat drives up the government’s balance sheet, while constraining domestic efficiency. This was the driving idea behind the “Presidential Committee on Restructuring and Rationalisation of Federal Government Parastatals, Commissions and Agencies”, under the chairmanship of Steve Oronsaye, set up in 2011 by the Goodluck Jonathan administration.

Now, add the circa N77 trillion public debt that the next government will inherit, top it up with the possibility that the federal government’s debt service charges this year might exceed its revenue, and discussions of the economy’s reform outlook readily expand to embrace sales of some government-owned enterprises, in order to balance government’s books; deregulation of even more sectors of the economy, to bring business costs down; and fiscal discipline (you do not have to follow Milton Friedman to understand why the practice of government spending hand over fist is not necessarily a good thing in the Nigerian example).

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…what is difficult to grok is the argument that Nigeria’s current woes are the result of such prescriptions (core solutions from the neoliberal economic playbook) forming the core of our organisation of the state. And this is not just because this would be insulting Mr Muhammadu Buhari, whose eight years in government was built around prioritising government provision of goods/services over provision by a private sector that he loathes (at worst) and struggles to get (at best).

If one can understand resistance to this portmanteau of solutions to our current economic problems ― most of the discomforts arising from their implementation are immediate, while the gains trickle in over much lengthier timeframes ― what is difficult to grok is the argument that Nigeria’s current woes are the result of such prescriptions (core solutions from the neoliberal economic playbook) forming the core of our organisation of the state. And this is not just because this would be insulting Mr Muhammadu Buhari, whose eight years in government was built around prioritising government provision of goods/services over provision by a private sector that he loathes (at worst) and struggles to get (at best). Arguably, much of the failures of the Buhari government’s economics has derived from wanting to describe a path different from that prescribed by neo-liberal economics. In the monetary policy space, for instance, it has adverted attention to its exasperation with orthodox thinking and its embrace of a new ― if intellectually wonky ― heterodoxy. Again, rather than build rail lines and rolling stock whose tickets are then priced below cost, common sense (and neoliberal economics) would suggest removing the risks to the private sector’s participation in the sector, and instituting a regulatory regime that then protects consumer welfare. It is scant surprise that one of the single biggest investment in this economy till date ― the one that birthed the GSM revolution ― had little government money involved in it.

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But what makes the attempt to blame Nigeria’s woes on neoliberal economics well-nigh impossible to come to terms with, is more because there is no history of a Nigerian government willingly committing to neoliberal policies. Even Ibrahim Babangida’s much-talked about (if not much-derided) structural adjustment programme (SAP) was forced on him by the poor circumstances of an economy that had arrived, then, at the same cul-de-sac that the economy has reached today. In the end, the Babangida administration’s “home-grown” variant of the SAP reform was an orphan variety ― it had scant relationship to the original reform agenda and as much relevance to the economy’s broader requirements. What our economic history teaches us, instead, is that as soon as global economic conditions conduce to higher oil prices (and the now infamous “accretion” of export earnings to the nation’s gross external reserves), our governments nearly always abandon their reform agenda.

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