Whose Job is Economic Management?

BY KAYODE KOMOLAFE

THE HORIZON

0805 500 1974

In the light of the grave problems of the Nigerian economy, all the presidential candidates should be saluted for their audacity to seek power for the purpose of resolving the crisis. That is assuming that they are conscious of the fact that the tasks ahead will be extremely challenging for the government that would be in power seven months from now. Already, some people say they don’t envy whoever would emerge the next president. Well, a president will be elected and his government would be expected to provide solutions to the economic problems.

Yet, from the rhetoric of candidates and their experts on what is to be done about the economy, an observer could have the wrong impression that the 2023 elections would be about the private sector. Virtually, all the parties are promising a “private sector-led economy.”

The rhetoric is, of course, an old one. Even in the Second Republic some political parties sang the same policy tune. Since 1999, politicians in and out of power and their experts have also made a sing-song of a “private sector- led economy.” Experts also sold the idea of a market-led economy to the military rulers. The most profound articulation of this economic idea by any government in the last 40 years has been the Structural Adjustment Programme (SAP) of the military regime of President Ibrahim Babangida. The resonance of the consequences of that economic experiment still lingers. Since then no other economic thought that is fundamentally different has influenced policies of any government in Nigeria. However, if economy is the issue, the purpose of 2023 politics should, therefore, be to elect a government that could summon the required competence in economic management to solve the problems.

The economy is so central to things that other crucial issues of the election such as insecurity, social underdevelopment and infrastructural deficits are all dialectically linked to the economy.

The huge role of the market in the economy shouldn’t make politicians to shift the burden of economic management to the private sector. After all, even in the developed western capitalist countries the idea of a reformist approach has been developed since the 2008 financial crisis. The crux of the positions of these reformist thinkers is that the pendulum has been swinging between the market and the government in terms of their respective roles in the economy. A mixture of the role of the government and that of the market would be important to drawing up economic agendas. That is a veritable lesson of economic history. The various experts who draw up the economic programmes and policies for the political parties should pay attention to this trend in economic thoughts.

The success of the government that would be in charge of Nigeria from 2023 to 2027 would largely be determined by the competence displayed in the realm of economic management.

In view of the magnitude of the problems of the economy, it is important to ask political parties and their candidates questions about the underlying philosophy of their proposed economic programmes and policies. The economic thoughts should provide the anchor for the implementation of programmes and policies if a party and its candidate get into power.

This point could be illustrated with a few policy elements which are common to virtually all the manifestoes so far released by political parties and their candidates.

The formulation of the economic philosophy of a party should be informed by the fact that both the government and the market have their limits regarding the roles they could play in the economy. That’s, perhaps, a pragmatic thing to do in the Nigerian circumstance by any government that would manage the economy in the light of the intimidating challenges. Experts are wont to point to the structural problems that could inhibit the public sector from playing its role in the economy. Indeed, many of these problems are real and undeniable. They include inefficiency, waste, corruption, lack of capacity and low productivity. They are the manifestations of the errors of the statist approach to economy which some right-wing experts mistake for socialism. No, state capitalism is different from socialism. Of course, this does not detract from the valid criticisms of the public sector.

However, the experts ignore the many problems of the private sector. The issues in the private sector also include profiteering, incompetence, corruption, poor management etc. The standard counter- argument is that the market would punish the economic players who commit these errors. The costs of the errors and deficiencies of the private sector to the larger economic larger do not feature as prominently as the problems of the public sector in discussions. Depending on the area of the economy in which roles are to be assigned, the relative strengths and weaknesses of both the state and the market should be rationally considered. As observed on this page some time ago, this position is well argued by Professor Paul De Grauwe of the London School of Economics in his liberal book, The Limits of the Market: The Pendulum Between Government and Market. The implication of acknowledging the limits of both the market and the state in the economy is obvious: as a matter of policy the capacity of the public sector should be developed for it to play its role effectively. It is not helpful for experts to merely dismiss the public sector as inefficient and good for nothing in terms of its roles in the economy.

Some of the candidates are also promising privatisation as the solution to problems in certain sectors of the economy. They present the idea of privatisation as if it is a new invention in economic thinking. Well, privatisation is not a new story in Nigeria’s economic management. Nigeria has actually embraced privatisation since the military government of Babangida set up 36 years ago the Technical Committee on Privatisation headed by Alhaji Hamza Zayyad. Now, you wonder else is there for government to sell! Instead of dangling privatisation before the voters as a silver bullet to the economic problems, the privatisation of some public assets ought to be properly audited by competent and patriotic experts. Some of the “private sector” buyers of the public assets only embarked on asset-stripping even before the ink on the paper backing the deals got dried. The much – talked – about introduction of technology and expertise in some privatised companies never happened. In some other enterprises, the promise of the flow of capital turned a mirage. Indeed, in some cases the enterprises have been run down. And this is a clear negation of the proposition of a superior management of things by the private sector.

If a proper audit of privatisation were done, future policies would be scientifically guided on that score. This is because for some politicians, when privatisation goes awry the solution is to apply more privatisation. The aspects of generation and distribution in the power sector are privatised. The outcomes have not been satisfactory to the consumers of electricity. Yet the solution embodied in the manifestoes of some political parties is to privatise the transmission of power, which is the only aspect that is yet to be privatised.

In a condition of mass poverty and gross inequality, the role of government will include the provision of public goods and ensuring redistributive justice. In the present condition, the market on its own cannot ensure socio-economic justice for the majority of the people who are poor. For socio-economic justice, the poor should have access to basic education, universal health care, food security, social housing, mass transit and other public goods.

The government also has the role of providing a strong regulatory frameworks in all sectors of the economy. This is one area that cannot be “private sector-led”. For instance, ecological issues have assumed immense economic dimensions. The role of designing the regulation and providing policy direction in tackling this crisis that confronts the whole of humanity is strictly that of the government. In moments of profound crisis as witnessed during the 2008 financial meltdown the government should be prepared to play the economic role of rescuing the market when it fails.

Adam Smith in 2023 Nigeria

To be sure, the debate about the role of the state in th economy is as old as the economic science itself. Even Adam Smith, the father of economics and a great exponent of the market, conceded that there should be government regulation and formulation of policies to improve market efficiency. Smith was also mindful of the social importance of public goods. For instance, he advocated spending on education. He believed that the responsibility for shaping the structure of the economy was that of the government. Smith’s thoughts were not only about free trade and the merchants, he also wrote about the common man. The government’s role in the economy includes the protection of the weak. These ideas of Smith are embodied in his more philosophical work, The Theory of Moral Sentiment. This book , however, is not as popular as The Wealth of Nations.

When politicians talk of a “private sector-led” economy, they may not be saying much about the fundamental question: whose business is it really to manage the economy? The answer is simply that economic management is squarely the business of government. So, as a matter of policy, a government should develop the capacity to perform this role competently in the public interest. That’s why candidates are currently busy on the hustings seeking power to govern. The power cannot be ceded to the private sector consciously or otherwise.