No nation has developed on the basis of raw #Globalisation & complete #Privatisation without essential foundations
A rejoinder to Olu Fasan’s claims
By Adewale Stephen
Economics is a slippery subject indeed. Even the great Albert Einstein who is widely presumed as the most intelligent man to have graced the earth, the same Einstein who is the originator of one quaint equation, , which had been driving the successive generations of physicists and mathematicians crazy ever since it was proposed in 1905, once had to give up Economics. According to him, he had difficulties in “reconciling the paradoxes which are so thickly embedded in economics.” They simply drove the professor of professors up the walls. Because, in economics, often times, theory is not a true reflection of reality.
In two consecutive editions of the Guardian newspaper of Monday 25 and Tuesday 26 August, 2014, Dr. Olu Fasan, a London-based political economist, took time to scholarly criticize Dr. Kinsley Moghalu, Nigeria’s Deputy Governor of Central Bank’s recently delivered lecture on Africa’s development. While Dr. Moghalu delivered his lecture entitled “Beyond Africa Rising” at the London School of Economics, Dr. Fasan took to the Guardian for a rejoinder under the caption: “Africa’s development: Fallacy of self-sufficiency”.
While Dr. Moghalu was on a mission to challenge the current orthodoxy about Africa’s development, Dr Fasan brilliantly defended globalization, which according to him, is a reality which “Africa must embrace (irrespective of) the challenges and the opportunities it presents.” Considering the status of both dramatis personae, the positions taken by these two highly placed individuals are profound ideas that can have fundamental effects, and define or re-define the terrain of policy dialogue. Whereas one is the deputy governor at CBN, the other is an erudite political economist and a Visiting Fellow at the London School of Economics. It is for these reasons that we need to critically examine the worldview that Dr. Fasan hypothesized to correct any inaccuracy, just as he had done to Dr. Moghalu’s dissertation.
The fulcrum of Dr. Fasan’s disagreement with Dr. Moghalu is that globalization is not as dangerous as portrayed by the latter. Globalization to him has huge opportunities because it has liberated economies and has also succeeded in launching Nigeria’s economy to become Africa’s largest through its recent rebasing. To him, therefore, “nothing will perpetuate the inequality and marginalization that Africa currently suffers…more than an inward-looking, self-reliant economic policy.” He also submitted that self-sufficiency failed many countries that had practiced it in the time past that they had to abandon it.
Dr. Fasan did not hide his support for the middle class who, according to him “is often the victims of a policy of self-sufficiency”. He rejected the policy of self-sufficiency because it will “force the middle class to exercise frugality or control their tastes and cupidity through restrictions on imports.”
If we may ask, what are the percentages of middle class citizens out of the entire population of Africa? How many people can really afford the price of the luxury things that flow into the continent on a daily basis? Let’s just consider the primary items that appear to be the cheapest of these items. How many citizens can afford the usage of a gas cooker, microwave and other electric cooking appliances in sub-Saharan Africa where, according to the statistics released in 2013 by UN on Global Issue, over 80 percent of the population depends on traditional biomass such as fuel wood, charcoal, wood dust and animal dung to meet their energy needs for cooking? In other statistics released by the same UN, around 27-28 per cent of all children in the developing countries are estimated to be underweight or stunted. Again, sub-Saharan Africa accounts for the bulk of the deficit. Africa’s economic malaise is highly obvious but unfortunately our economics scholars pretend not to see it. Except for few wealthy elite and the more prosperous peoples of South Africa and the Maghreb, Africans have very few consumers. The much-touted middle class are not just there in the first instance as even the best educated ones such as Dr. Fasan often choose to leave the continent for the West or the Persian Gulf in search of a better life.
To Dr. Fasan, globalization has liberated Nigeria’s economy whose activities in the “telecommunication and entertainment” sectors have suddenly made it the largest economy in Africa. But has this so-called economic improvement reflected in the lives of the common man in the street of Lagos, Yola or Owerri? A similar IMF’s pronouncement in Ghana three years ago claimed to have increased its overall GDP by two-thirds and vaulted it into middle-income status. Between then and now, Ghana’s currency has lost more than 30 percent of its value against major trading currencies; cost of living and utility tariffs have risen to an embarrassing limit while inflation has hit a high of 15 percent. Today, hopes of oil riches have dried up as Ghana’s success story descends into disenchantment as its citizens struggle to afford daily bread. And, it is disheartening to note that Ghana is now on its knees begging IMF for the award of another loan of slavery. That is what happens when a country implements the World Bank’s dictation, such as what Dr. Fasan is recommending, hook, line and sinker.
The antics of the agents of globalization such as World Bank, IMF and their funding countries, who have long cultivated the diplomatic habit of churning out encouraging figures to deceive the African leaders, is not a new phenomenon. They often mention the fictional productivity of Africa just when the issues touch the mainstream. The risk is that a few citizens and some African scholars are bought into this false sense of hope; thereby assisting these agents of domination in spreading the misleading impression that appropriate route is being taken.
Indeed, Dr. Fasan is right about the development of telecommunication across the African continent. But he forgets to, or deliberately decides not to, talk of many African countries where radios, televisions, and automobiles are rare luxuries till date. No one is canvassing for a total break away from the global world as Dr. Fasan assumed. Even an unlettered man in the remote part of the continent knows that he needs his neighbour to survive the rigours of this age. What everyone is saying is that such relationship must be based on principles. After all, the ‘Asian Tiger’ countries did not withdraw from global economic institutions or flout their rules before they developed to the point where they are today.
No nation has ever developed on the basis of raw globalisation and complete privatisation, as being canvassed by Dr. Fasan, without putting in place the essential foundations such as domestic infrastructure. The theory of raw globalisation as the only prerequisite for immaculate development as posited by him, was founded on a considerable ignorance of the history of economic development among the developed countries, the United States inclusive. In the first 70 years of its own history, American government had played a relatively active role in building the turnpikes, canals, harbours, railroads and schools which made its subsequent economic expansion possible. When what economists unhappily termed ‘social overhead capital’ such as the provision of transportation, electricity, good roads, and food is the great need, public investment becomes a necessity, since foreign investors or private capital will not go into these areas of low return.
One of the most distinguished 20th Century American historians, Professor Arthur M. Schlesinger Jr. in his book, ‘A Thousand Days: John F. Kennedy in the White House’, described the United States’ attitude of forcing down globalisation on the Cuba’s throat as “a trifle unseemly on the part of a nation who had financed so much of its own development by inward economic expansion, inflation, wildcat paper money and state bonds sold to foreign investors and subsequently repudiated. If the criteria of the IMF had governed the United States in the nineteenth century, our own economic development would have taken a good deal longer. In preaching fiscal orthodoxy to developing nations, America is somewhat in the position of the prostitute who, having retired on her earnings, believes that public virtue requires the closing down of the red-light district.”
Even China, which Dr. Fasan made a glowing reference of, solidified its domestic economy before opening up its market. Long before it emerged as an economic powerhouse, China has always been careful to ensure that its domestic economic development was not compromised in any way. Unlike what he would want us to believe, internal events have always influenced China’s foreign policy. It was not a sheer oversight or economic difficulties that forced China not to play any role in the African affairs during the Cold War, particularly in the 1970s, but a calculated attempt to solidify its domestic economic base before joining the fray. Despite the fact that African votes in the United Nations General Assembly made a weighty contribution to the accession of the People’s Republic of China into the UN Security Council in October 1971, China preferred managing its domestic reform to returning Africa’s gesture. Following the end of the Cultural Revolution after the death of Mao Zedong in September 1975, the launch of the economic reform programme ensued at the 11th Party Congress of the Chinese Communist Party in December 1978. Even with this entrenchment of reform, market opening and trade liberalisation, Chinese state-owned firms enjoyed, and still enjoy, access to capital from the so-called policy banks most notably China Export – Import Bank and China Development Bank.
In a nutshell, the point is that while China’s unleashing of economic market forces in the late 1970s resulted in the erosion of ideological leanings of the Chinese leadership and society as a whole, it had solidified its domestic economic structures before embarking on that adventure. It is this kind of economic policy that enabled Chinese firms and citizens to look outward and establish an international footprint over the course of decades. Till date, the bulk of Chinese outward bound investment originates from state-owned enterprises. According to the statistics published by China’s Ministry of Commerce in March 2014, 84 percent of China’s outward Foreign Direct Investment (including stocks and portfolio investments) has come from SOE’s.
While Fasan agreed that Africa is yet to build such viable public sectors, he also frowned at this kind of state capitalism on the basis that it would deny Africa a “market economy status (MES) in the World Trade Organisation”. He blamed Moghalu for recommending inward-looking economic policy; rejected state capitalism and criticized crony capitalism. He is convinced that “if globalisation is evil, self-sufficiency is a greater evil; and if market-based capitalism is bad, state capitalism and crony capitalism are even worse. And, as the saying goes, of two evils choose the lesser”. The lesser, in Fasan’s scholarly view, is what he termed “entrepreneurial capitalism” where government would have nothing to do with business but would rather leave everything in the hands of sized medium enterprises (SMEs).
I had to critically read through his teatise to see his examples of countries who have successfully practiced such but to my uttermost dismay, his only reference is a 2009 Eurostat figure, which submitted that “SME’s accounted for 53 percent of the UK’s goods exports.” And, because of this figure that has never been subjected to rigorous test to prove its effectiveness, Fasan is challenging the Africa to jettison the building of domestic structures but open its domestic economy to foreign economic invaders and global fiscal hitmen through what he called ‘globalisation.’
Dr. Fasan concluded by reminding Africa of the reality of globalisation. To him, “we must embrace both the challenges and the opportunities it presents.” Globalization, as he brilliantly conceived it, actually spells disaster for the third world, particularly the nations of Africa. For a continent that is far from being self-reliant, for a continent which has little or nothing to sell, there is no justifiable reason for keeping our borders open so that the industrialized world can inundate our markets with their goods – even those we can easily do without or produce by ourselves.
Africa is surely not going to develop by solely relying on the products of other nations. We shall become self-reliant only by making the sacrifices which these other nations made to produce those luxuries. I disagree with the position of scholars like Dr. Fasan who professes, against all the available realities, that ‘globalisation without regulation’ is the only way that leads to the promised land; that Africa should only “create the enabling environment for businesses to produce”, then totally hands off its business to the western powers, and goes to sleep because its economic renaissance will be sorted out by the countries of Europe, US, or China. This is a blatant fallacy as no state has ever worked out the rejuvenation of another. On the contrary, whenever a people have fallen into sleep, they have woken up in chains. The nations which colonised us before will colonise us again, if we give them a chance. Globalization is yet another form of colonization – this time not by nations or governments, but by multinationals with the active support and encouragement of their governments. Globalization is not a social thing. It is an economic thing. It is not about humanism. It is about wealth and power. In the face of this monster, if we do not set to work immediately to repair years of damage to our country and economy, if we do not unite and make the sacrifices that need to be made, above all if we do not give up our greed and corruption, it will not be long before we are assimilated by the rest of the world.
It is ironic that the borders of those nations which advocate globalization are shut, not only to our own men and women, but also to our goods. If we are going to be able to eliminate corruption and violence, we must first solve the problem of unemployment. We cannot solve the problem of unemployment until we begin to strengthen our state-owned enterprises and create new jobs. What made Africa to lag behind is not because of the failure of state-owned enterprises but the awful corrupt practices. A public enterprise can be managed exactly like a private enterprise with the exception that while a private commercial enterprise aims at profit maximization, a public commercial enterprise aims at either full cost recovery or a satisfactory profit. Because, the public enterprise is not too heavily tilted towards profit making, it ends up providing more employment than its counterparts in the private sector and its environment is healthier and less competitive.
A typical example today is the Nigerian Security Printing and Minting Company (MINT); with majority government ownership and the CBN Governor as Board chairman it is managed under a first class private sector model and makes satisfactory returns to government. The Bank of Industry (BOI) owned fully by government is another successful public enterprise that is doing Nigeria proud.
It is not true that corruption, nepotism and embezzlement only occur in public enterprises. The 2008-2009 experience with very big Nigerian banks and manufacturing companies in the private sector where corruption, poor corporate governance practices and mindless acquisition of personal wealth became the order of the day is an example of the abuses that private enterprises indulge in. The inventory manipulation reported in Lever Brothers Plc and a similar practice in Cadbury Nigeria Plc also some years back are examples of such bad practices in the private sector too.
But these evil tendencies on the part of public enterprises were the same the world over. However, whenever such poor practices were detected among managers of public enterprises in countries like China, India, Brazil, Malaysia or South Korea, they were punished either by death sentence, life imprisonment, amputation, or very long jail terms that were complemented by debilitating fines. David Yonggi Cho, founder of Yoido Full Gospel Church, pastor of the largest Pentecostal churches in South Korea, who was sentenced to three years in prison this year February for embezzling $12 million of his church funds, is one of the examples in this regard.
Finally, in Africa, our inability to enforce rules against corruption and petty theft has been our major undoing and not vice versa. I agree with Dr. Fasan, Africa should open up – but not until we have put all the necessary requirement of development into places.