The global economy and Nigeria, by Cheta Nwanze
For Nigeria to grow, the writer says, we must try and work in the interest of our own population, and take our own circumstance into consideration
It took centuries before capitalism’s survival and future growth depended on an increase of the standards of living among the general population. This was reflected in the living standards of the people in the capitalist West. They were dirt poor as recently as the 1930s. From the early 20th century, and until the 1990s, the world was immersed in a struggle between Capitalism and Socialism. While one of these systems, capitalism, serves the interests of the bourgeois, socialism, aims to serve the proletariat.
This can best be described in the following: “In bourgeois terms, it was a war between the Allies and Germany, in Bolshevik terms, it was a war between the Allied and German upper classes,” – Yevgraf Zhivago, from Boris Pasternak’s novel, Dr. Zhivago.
Unfortunately, a perversion of socialism, called Communism, and eventually, Stalinism, achieved prominence and eventually failed.
Today’s piece is about economic systems, the World Bank and the IMF, and whether they have they helped Nigeria or not. The reason I chose this particular topic for today is because of our new economic standing as Africa’s “biggest” economy.
The World Bank and IMF were created at the Bretton Woods Conference in 1944. Present at the conference were the 44 allies of World War II. The United States attended in its own right. Remember that the US was the only country which emerged from World War 2 richer than it was before the war. Britain, also a victor from WW2 attended in its own right. But being the owner of a lot of dominions, including Nigeria at the time, it represented those dominions. The main aims of the Bretton Woods Conference were to develop a post-war economic order that will survive the test of time. However, the discussions were dominated by both the US and Britain, represented by Harry White and John Keynes respectively.
Keynes was dead set against the idea of currency liquidity across national boundaries that thing which we call “globalisation”. Both White and Keynes, were among the greatest economists ever, Keynesian theory is still the bedrock of most teachings till today. At this point, I must note that some of Keynes’s ideas have been discarded. By the time of the Bretton Woods meeting, Keynes was a dying man. He died two years later in 1946.
With people such as Keynes and White, it is no surprise that the outcome of the negotiations heavily favoured, in economic terms, the Western Allies.
Both bodies, the World Bank and the IMF, have in the 70 years since, done their bit to preserve the world order as defined in 1944. Given their very structure, both bodies are very much beholden to the existing world order, and will fight to save it. After WW2, in the capitalist societies of Europe, there was a ready market to exploit. People, devastated by the war, were dirt poor and had not much choice but to do what capitalist wanted in order to put bread on their tables. But the capitalists had their reasons, unlike in previous generations, for letting wealth be more equitably distributed. At the time, capitalist societies were engaged with the Stalinist Soviet Union in ideological warfare, so they needed to prove to the world that their system was better. Which is why living standards rose dramatically in the West post WW2.
This ended in the mid-1970s when growth stagnated, profits plummeted, and the social structures built after WW2 fell apart. To maintain the bubble of increasing prosperity, countries of the global south began to look more attractive as a source of cheap labour. Prior to that, the global south had always been a source of cheap resources, but their newly “independent status” was a threat to that mode of doing business.
Make no mistakes about it, the world has returned to the predatory laissez-faire capitalism that immiserated millions before the 20th century. This return began during the reigns of Ronald Regan in the US, and Meg Thatcher in the UK with regulations passed that unduly favoured capitalists and their businesses. Can someone explain to me, in real terms, what “deregulation” really is?
Since the world had started to change towards the tail end of the 1980s, and force, the preferred means of enforcing will had become a last resort, sponsoring a coup, as was done in Brazil and Chile in the 1960s and 1970s would no longer work as effectively as before. So, from the middle of the 1980s, a novel idea was developed, and that has been refined and perfected ever since. Debt bondage.
Debt bondage was initially pushed through via methods such as “structural adjustment”, ergo Babangida in Nigeria, in the 1980s. But as awareness has increased among previously ignorant populations, it has become increasingly difficult to impose. So the new method, which I must admit, is proving quite effective, of imposing debt bondage, is to get the countries to impose “structural adjustment” on themselves.
Since the Reagan-Thatcher tango in the 1980s, the dominant world order, has been what is known as neoliberalism. But before we go on, what is Neoliberalism? It is both a political philosophy and an economic philosophy. It advocates support free trade and open markets, privatization, deregulation, and private sector dominance. And these buzzwords, are what make it rather easy to convince client countries to impose it on their populace.
So, how do you get client countries to go ahead & impose neoliberalism on themselves? That’s where IMF and World Bank come in. Ukraine, for example is in trouble. Starting from Yushecko, then Tymoshenko, then Yanukovich, their leaders have been crooks. When you consider the fact that they have a huge neighbour that supplies almost all their energy needs, they need money. So, the IMF comes in, with the money, but with killer conditions, which in the long term will destroy the country, but will make a lot of people in the bourgeois stupendously rich. Oh, and a lot of people on the other side of the planet.
That’s just one example. And that example involves the IMF. What about the World Bank? Since 2003, the World Bank has published the Ease of doing business Index which ranks countries based on the “ease of doing business” in them. This Index is now the World Bank’s most influential publication and has driven 25% of all economic policy changes since it started. It measures how easy it is to start a business in a country, deal with construction permits, get electricity, register property, get credit, protect investors, pay tax, trade across borders, enforce contracts and resolve insolvency in various countries
It is on these 10 subsets that the index ostensibly relies, but the question is “how” does it rely on them?
The “pay tax” indicator as an example, punishes countries for having all sorts of tax, which to be honest are the best way governments to raise money. This will in a roundabout way, encourage more countries to become aberrations like Nigeria, where the government does not depend on the people for income. In my view, tax is needed to be government’s main source of income, so it will force the issue of accountability. Since this “pay tax” indicator became a part of the Index, more countries have become tax havens, making it easier for the elite to hide money.
The “protect investors” indicator, ostensibly means to protect people who put their money in your economy. But it does nothing to prevent them from making money from your economy, and leaving you high and dry. Hence, most of the “foreign investment” that comes to Nigeria as an example since we started taking part in the jamborees simply stops in one location: Our stock market. Once they make a profit, or once there is a sign of trouble, they carry their money and go. Simply put, we are not attracting the right kind of foreign investment, we are attracting “fly-by-night investors” who are not here for the long term.
The “get credit” indicator sounds good on paper. As an entrepreneur of sorts, I can tell you that it’s best to use credit for business. But this indicator in reality rewards countries that make it easier to liquidate defaulters and punishes countries that try to protect people who have gone bankrupt. It also rewards countries that publishes more information about their citizens’ credit histories. A fine way to make people more subservient since all their time will be spent trying to stay financially solvent.
The “trade across borders” indicator punishes countries which try to protect their growing markets. This is why as good a policy as trying to protect our farmers may be, it will always be met with resistance because we are being protectionist. Witness how the rice wars in Ghana are still being fought, with the Ghanaians losing (http://bit.ly/1fXKo5E)
It is always interesting to see how we, the South, are expected to take all IMF recommendations, hook, line, sinker and hand. But countries of the North are free to reject those they feel like rejecting, and no, when I say north, I don’t mean Greece. As an example, in April 2012, the IMF warned George Osborne that he was “playing with fire” when the UK rejected its recommendations. Only the same IMF, six months later, to tone down its rhetoric, and double its growth forecast for the UK to 1.4%. UK growth rates in fact went up to 1.9%, which serves as a lesson to banana republics such as Nigeria.
For our country to grow, we MUST always try and work in the interest of their own population, and take our own circumstance into consideration.
So are “free trade”, “open markets”, “deregulation” the best ways to go for a developing economy such as Nigeria?
For me, the answer to that is a resounding “NO”. Nigeria needs something between a Scandinavian style welfare state, and FDR’s America.
The neoliberalist policies pursued by the World Bank and IMF, by default need markets to exploit, so their policies WILL ALWAYS try to keep us down. The extent to which capitalism is capable of maintaining constant rates of growth remains highly debatable. Bottom line, is if we in the global south ever become truly independent, for the corporations of the global north, there will be no more worlds left to exploit.