Keynesian
economic principles have been the secret behind developed countries’
unending economic growth and job creation. Always increasing system
liquidity either by borrowing or by printing money, and reducing
interest rates so that businesses can borrow cheaply and invest cheaply,
western economies have always avoided economic redundancy that has
always resulted from illiquid and high interest rate economy.
It
is little wonder in every economic crisis, western economies by
resorting to excessive government stimulus package and quantitative
easing to once again boost real sector investment and growth with the
goal of growing the economy with jobs.
But
while western economic powers continue to pursue pro-growth and
pro-investment economic policies, they always mobilise neoliberal
prudent economics to developing countries who insist that developing
countries shouldn’t also pursue the same stimulus economic development
principles.
The hidden agenda here is the fear that allowing
these developing countries pursue the same pro-Keynesian policies, would
make them become industrial powers too. This should spell competitive
doom for developed economies who have to rely on both developing
countries’ industrial raw materials and huge consumer markets to
continue to promote and protect developed countries’ growth and jobs.
So,
imposing anti-Keynesian tight monetary policy along with anti-deficit
fiscal spending agenda on developing countries has remained a matter of
life-and-death for western economic powers especially in an effort to
constantly keep developing economies as their economic slaves in
perpetuity.
Who else could promote anti-Keynesian macroeconomic
policies across developing countries than local neoliberal economists
and those educated and nurtured in western controlled multilateral
imperialist institutions like IMF and the World Bank? In developing
countries, they are falsely nicknamed technocrats even though in reality
they are economic hit men and women, sent to these countries to do the
bidding of the West.
Enjoying bloated media mentions, these men
and women have had little or no difficulty pursuing, developing and
adopting anti-investment, anti-growth and anti-jobs policies, impeding
developing economies’ chances of joining western economies as industrial
economic powerhouses.
No wonder, with economic indirect rule,
neoliberalism is celebrated in most developing countries. With such open
insistence on central banks’ independence, leading to tight system
liquidity, has led to foreign portfolio investors from western financial
capitals like New York and London to fill the liquidity gap, exploiting
the unheard-of arbitrage encouraged by currency exchange stability in
the presence overvalued national currency.
It’s this anti-real
sector high interest rate policy regime that causes the current rise in
economic financialisation in developing countries. And with central
banks engaged in blind fighting of inflation along with double-digit
interest rates, developing economies like ours have been forced to
remain import dependent economies.
But insisting on the
“prudential regulations” as mandated by the Bank for International
Settlement under Basel II which imposes draconian high capital adequacy
ratio on banks, supposedly the major source of funding for real sector
firms, has created illiquid economies in most developing countries to
the extent of rendering their real sector economies completely redundant
and anti-jobs. Little wonder, while the financial sector grows by
declaring double-digit profits year-in-year-out, the real sector economy
tends to remain year-in-year-out comatose.
In the meantime,
based on the neoliberal insistence on fiscal prudence at all costs,
including denying government the free will of printing local currency to
meet its growing gaps caused by the inability of the government to
internally generated revenues, government is forced to borrow at such
cut-throat interest rates because rather than borrow externally in the
internationally competitive money market, these neoliberals insist that
government borrows domestically when the money it is borrowing at such
exorbitant interest rates is imported from the same international money
markets. It is no wonder the real beneficiaries of these disjointed
macroeconomic policies are the foreign portfolio speculators along with
local banks and members of the economic management team in connivance.
In
this their trade, it is understandable why borrowing to fix critical
infrastructure which is important in reducing cost of doing business is
always refused by the managers of the economy. The sheer refusal of such
policies in developing countries by both the West and their economic
foot soldiers in developing countries is because that would amount to
both shooting themselves in the foot as well as putting developing
countries on the same competitive edge and level playing field.
Understandably,
neoliberal imperialists are fiercely opposed to borrowing the same way
they are opposed to developing countries running high budget deficits
like their western counterparts who do so mostly by printing more money
or borrowing cheaply. This is seen as a capital sin never to be allowed
in developing countries.
During her last four years in Nigeria,
the Minister of Finance, Dr. Ngozi Okonjo-Iweala, without apology, has
led the country’s economy on the principles of neoliberalism. And as
someone whose education and career life took place in the US, should she
be opposed to what she has lived and practised all her life? Should it,
therefore, be surprising that she has always insisted on Nigeria
adopting a macroeconomic austerity policy stance as being professed by
Washington for developing countries like ours?
Like every other
neoliberal policy, drastic reduction in capital spending, while pushing
recurrent to the roof shouldn’t be surprising. Also, like most
neoliberal activists, she too should be allergic to borrowing cheaply to
invest in upgrading and expanding the country’s infrastructure, as
without such an aggressive infrastructure investment, there is no way
the country’s cost of doing business should have been lowered to the
level of local products being competitive like foreign ones.
That
notwithstanding Nigeria’s infrastructure spending at 1.3 per cent in
proportion to GDP (far below developing world’s 5.1 per cent average)
during the past four years, the finance minister insistence that the
country should pursue neoliberal fiscal austerity measures, clearly
shows how allergic she is to either spending or borrowing to invest in
infrastructure. But that did not stop her from borrowing to keep
expensive big government unchallenged that this year alone Nigeria
should be spending unheard-of N943bn (far higher than what it spends on
capital projects) in domestic debt service which is today as high as N12
trillion. This is money if borrowed both for capital spending and
externally would not only have grown the economy but also would have
cost a fraction to service.
As the coordinating minster of the
economy, another important neoliberal casualty was development planning.
Broad-based road-mapping has always been the secret today’s newly
developed countries like China and India have exploited. Of course, as
finance minister, Okonjo-Iweala, is fully aware that without economic
developing planning, there is no way our country can come up with
sector-by-sector development agenda that is rigorously realistic and
time-bound, financial-bound, and execution-bound.
That is why in
the forthcoming post-neoliberal economy of Nigeria under Muhammadu
Buhari’s government, economic planning should be the focus, with
aggressive investment in infrastructure, including roads, railroads,
airports, urban renewals, and even whole new industrial and service
cities.
Realising this should require the next government to
besides aggressively pursuing conventional revenue generation,
unconventional revenue streams should be the secret to getting the badly
needed revenue to embark on massive infrastructure development.
In
government’s efforts to truly address the current over $300bn
infrastructure deficit, my advice is that this should go hand-in-hand
with the use of some portion of our oil reserves as strategic collateral
to borrow from China’s $3.9trillion foreign reserves seeking foreign
investments.
Also, rather than continuing to service our highly
unsustainable domestic debt, which during the past four years cost the
country as high as N3bn, government should immediate pay off the debt by
printing its equivalent in the name of quantitative easing. Or else,
domestic debt service would continue to create a big hole in
government’s financial balance sheet.
This measure should be
accompanied with high import tariff policy so that rather than the
quantitative easing leading to a run on the naira, it should force
foreign product dumpers to relocate their factories to Nigeria should
they too want to benefit from the country’s over 170 million consumer
market.
- Odilim Enwegbara is a development economist based in Abuja.
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