Posted by By Uchenna Nwankwo on
Since the publication of my article, “On Socioeconomic Model for Nigeria”, (Vanguard, 30 Nov. 2005). I have been inundated with calls to also summarise and publish the recommended centrist elixir for the upliftment and stabilization of our economic and political system, for the attention of the general public.
Since the publication of my article, “On Socioeconomic Model for Nigeria”, (Vanguard, 30 Nov. 2005). I have been inundated with calls to also summarise and publish the recommended centrist elixir for the upliftment and stabilization of our economic and political system, for the attention of the general public. I was initially appalled at the daunting task of reducing a detailed work of hundreds of pages into a newspaper article. Nevertheless, given the level of interest generated by that apparent preamble, I realize that it is incumbent on me to publish a follow-up, to do a recap. In this regard, I shall hereunder try to deal with both the socioeconomic and sociopolitical dimensions of the problem.
It is now widely acknowledged that the movement of individualism which economic laissez-faire embodies inevitably leads to concentration and lopsided distribution of wealth and incomes. This was poignantly demonstrated by developments in the Western economies, especially in the first quarter of the 20th century. In the United States, for instance, technological increases in productivity throughout the 1920s (up 43% per factory man-hour) were not matched by increases in wages and thus in the public”s capacity to consume (factory pay rose less than 20%). This meant that the fruits of industry were being increasingly appropriated by the owners of the means of production, at the expense of the working class. This disparity, the steadily declining cumulative percentage returns to wage-earners meant that the aggregate disposable income of the masses and therefore their capacity to purchase goods and services fell drastically, leading to a stockpile of unsold inventory in factory warehouses across America. The attempt to cutback on production in order to forestall further accumulation of unsold goods brought about massive retrenchments, pushing unemployment to an all-time high of 25%. In turn, the development further lowered the purchasing power of the masses and the public”s capacity to consume or buy goods. It was this persistent and cumulative fall in consumption demand that produced a recession that eventually led to the Stock Market crash of 1929 and the severe Great Depression of 1929-1939. That, by the way, signalled the collapse of classical capitalism. It undermined faith in the orthodox philosophy of laissez-faire, according to which the disequilibrium of the market would eventually be restored to a new equilibrium without interference from outside.
Taming America”s Great Depression
It is now history that it took the application of President F. D. Roosevelt”s New Deal to evolve a new pluralistic economy, now dubbed modern capitalism, and to rescue the US from the Great Depression. The New Deal, starting with the first term of President Franklin Roosevelt in 1933 was principally aimed at putting a little more cash into the hands of the masses in order to increase their aggregate disposable income, increase consumption and hence increase production and employment, to revitalize the economy. It involved the Agricultural Amendment Act (May, 1933) that introduced subsidy in agricultural production and generally raised the incomes of farmers; the National Labour Relations Act or the Wagner Act (July, 1935) that empowered labour unions and encouraged the principle of collective bargaining between labour and management, to achieve better salaries and wages in work and industry; and the Social Security Act (August, 1935) which provided handouts or financial benefits for the unemployed, aimed at assuring its citizens of some protection against want and insecurity. Apart from its humanitarian motivation, Social Security also has important economic effects since such payments provide people a minimum purchasing power, which contributes to the stability of the economy.
The Social Security Act was to be expanded into all manner of subsidy and insurance in the Health, Education and other sectors, all aimed at providing relief to the downtrodden, increasing the aggregate purchasing power of the masses, promoting consumption, high productivity and therefore employment. The principle of progressive taxation, by which high income earners surrender greater percentages of their incomes as income taxes, was employed and used as a mechanism for the mobilization of funds for Social Security and of course for bringing about greater equality and the redistribution of incomes. Furthermore, the Hire-purchase system, that provided the privilege of buy-today-and-pay-later, was equally used to increase consumption and therefore to sustain a commensurate degree of productivity and employment. These efforts in the final analysis helped put the American economy on the path of recovery and boom. The assiduous application of these principles extricated America from the Great Depression and put that sad experience permanently behind her.
Oh yes, business cycles, that is, fluctuations in the level of economic activity, still persist in America, but since the 1940s the swings, the phases of the business cycle, have become more gentle and short-lived. The scenario today is that whenever labour-share of national income dips significantly and a recession sets in, the strong organized labour unions move in to negotiate new (higher) collective wages which in turn restores the aggregate purchasing power of the masses to new highs thereby complementing government”s investment stimulation strategies and welfare to bring about immediate recovery. So, as can be discerned from the above, it is in the interest of all classes that the aggregate disposable income of the masses does not slip below certain levels; for it is a recipe for sustaining the health and vibrancy of the economy. America”s approach to tackling the Great Depression and restoring vibrancy to its economy should be contrasted with steps so far taken to rescue Nigeria from its own “Great Depression” which set in about 1983 and has ravaged the country for over 20 years.
The Buhari / Idiagbon Years
The desperate economic situation resulting from the Great Depression in the West produced two solutions: Roosevelt”s New Deal and Hitler”s Fascism. Notwithstanding its totalitarian nature, Hitler”s fascism did revamp the German economy, and indeed elevated German industry, albeit at the expense of individual liberty. The Buhari-Idiagbon regime tried to some extent to employ fascist methods in the management of Nigeria”s depressed economy and the society. Although its attempt to foist a command-economy was too short-lived for results, it nevertheless made great strides in the area of instilling discipline, strong work ethics and fervent nationalism among Nigerians, and in the war against corruption.
The Babangida Era
The Babangida Era brought the Structural Adjustment Programme, SAP, which commenced the process of economic deregulation, privatization and liberalization in Nigeria, though in reality Babangida did not manage to private up to 5% of what was slated for privatization. Through the instruments of naira devaluation, the abolition of the Commodity Boards, import prohibition and price incentive strategies, etc, Babangida”s SAP produced some relief and marginal growth in output especially of agricultural cash crops like cocoa, rubber, etc. However, the relief was short-lived. Two main factors accounted for this somewhat immediate decline. One, there was no improvement in the aggregate disposable income of the masses. Two, Babangida”s personal style reversed the modest gains made by the Buhari / Idiagbon regime in the areas of social cohesion and discipline, nationalistic favour and group consciousness, which in my opinion, are dear ingredients for the building of viable and respectable human community. Babangida inadvertently promoted undue individualism and avarice, and hence, apathy and cynicism among Nigerians. This state of affairs lowered morale and led to the emigration of many of the nation”s best skilled and unskilled manpower. In the end, these developments largely swamped the modest flowering in the economy and returned it to recession and depression.
Sometimes we trifle with and pay lip service to the serious damage done to national well being by corruption in high and low places. But when we stop to think of our subsisting poor air safety & control standards, our pothole-riddled airport runways, our deteriorating road networks that have all contributed to disastrous accidents in the country; that these occurrences have their roots in corruption, in the propensity with which those in authority divert huge chunks of funds voted for public works and administration into private and other uses, or receive gratification to sabotage and overlook established rules and standards, then perhaps we begin to understand and shudder. Ditto for our collapsing public utilities, health, educational, judicial and other institutions and standards that have turned Nigeria into a mess. It is certain that should Nigeria continue to travel on the trajectory emanating from the grave standards of corruption established under Babangida, then the nation will plummet into oblivion in no distant future.
To be continued
Nwankwo is National Coordinator, Association of Nigerian Centrists, ANC.
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