Who is in Charge? Market or Government?

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THE HORIZON BY KAYODE KOMOLAFE,   kayode.komolafe@thisdaylive.com

THE HORIZON BY KAYODE KOMOLAFE         kayode.komolafe@thisdaylive.com

The theme of the 24th National Economic Summit, “Poverty to Prosperity: Making Governance and Institutions Work,” is indicative of a trend which is both theoretical and practical at once. Although the economic summit ended yesterday in Abuja, the political question implicit in the theme should continue to be of interest in this season of electioneering.

This is because of the fact that increasingly there is the realisation that in significantly tackling poverty, purposeful governance has a central role to play. The interplay of market forces alone will not lift the people out of poverty in their millions. Again, the primacy of political leadership has come to the fore. At least, this is what the universally acclaimed success stories of China, in the east, and Brazil, in the west, have eminently shown.

In the previous 23 summits, the Nigerian Economic Summit Group (NESG), an important advocacy platform, has made rich submissions on how to develop a “private sector-led economy.” The group has been influential in drawing the various “visions” for Nigeria. This self-assigned task has been performed with unmistakable resilience. In fact, there was once a “vision” prepared when a military regime was in power and the civilian administration that succeeded the regime never touched the “vision” because anything concerning the previous regime was a sore point to the succeeding administration.

Yet, in almost a quarter of century, members of the group have commendably played the role of a think tank investing immense energy, time, resources and passion in the process. Year after year, great ideas have been harvested on this private sector platform. However, there remains a huge political question about the application of the ideas. That question still remains unanswered. It would appear that the theme of this year’s summit is a good effort to answer the question. Besides, there is an ideological problem about the way the question has been posed in the first place in Nigeria. Capitalist development is often misconstrued as a pure market process.

By the way, the emergence of the NESG coincided with the period in the 1990s when there was a lot of buzz about globalisation. In public discussions about economic policy direction, little attention is given to the fact the globalisation is itself riddled with enormous contradictions. All that is important to our technocrats was that the Nigerian economy should respond to the currents of globalisation (or more appropriately global capitalism) and be “competitive as an emerging market.” The global financial crisis that broke out a decade ago, has, however, tempered the mantra of “market is the solution.” The recklessness of some financial capitalists in the west caused what is now referred as to the Great Recession.

The point at issue here is that the discussions that took place at the summit are again essentially part of a global trend. And this should be noted as significant.

Even at the level of theory, not a few scholars are rethinking the respective roles of the market and government in poverty eradication. The question now for even some liberal theorists is how to judiciously allocate the respective roles for market and government.

For instance, the caption of this column today is borrowed from a chapter in a recent book by one of such scholars, Professor Paul De Grauwe of the London School of Economics.

In answering the question of who is in charge of economic development, Grauwe puts the matter like this: “The old discussion as to whether the market is more important than government or vice versa is pointless. The only question worth asking is how the division of labour between market and government can best be organised. This division of labour must start out from the ideas… that both market and government have their limits.” In the book entitled “The Limits of the Market: The Pendulum Between Government and Market,” Grauwe, who is also a former Belgian parliamentarian, proposes a mixture of market and state in the organisation of any economy in which both sides should be sensitive to the swinging of the pendulum.

For clarity, Grauwe’s outlook is far from being socialist, much less Marxist, and his book is definitely not a 2018 version of the “Communist Manifesto.” The professor’s premise is that “centrally planned economy” has not worked and also that “pure market systems do not exist anywhere.” According to him, “neither succeeds in creating material prosperity for a large proportion of the population (in the case of a market economy) or even for the population as a whole (in the case of a centrally planned economy).”

From an undisguised liberal viewpoint, Grauwe demonstrates the ‘limits” of both the government and market in economic management. That is something to think about seriously in the craving for a transition from poverty to prosperity for the people.

It is, therefore, timely that the reputable think tank, NESG, has focussed on governance and institutions as the polity gears up to full-blown campaigns for the next year elections. That is why the debate of issues of the election being advocated in this column should go beyond the appearance of candidates on television for a few hours. Presidential debates are important. But the more rigorous and extensive debates are the ones to take place among public intellectuals, technocrats, experts and others who have policy preferences. In their legitimate support for their preferred candidates public intellectuals should lead in focussing on the issues. This is a role different from that of a rabid party publicist who is mainly preoccupied with the canonisation of his party’s candidate while demonising that of the opposing party. The debate should not be saturated with insults and abuse of political personalities.

In a rigorous debate on how to tackle poverty, you may find that there are even those on the Right of economic reasoning who are now convinced that you cannot simply leave economic management to “market forces.” After all, as the Independent Electoral Commission (INEC) prints the ballot papers for the 2019 elections, it is certain that there will be no political party called “market forces” to be voted for in the election.

So, those saddled with the task of preparing the strategies and manifestoes for the candidates should be cognisant of the global trend. It is not enough anymore to talk of a “private sector-led economy” as an economic strategy. That doesn’t say much in the task of confronting poverty. The logic of the management of a political economy is not the same as that of the operation of a Public Limited Company (PLC). The measurement of success in both tasks is also vastly different.

After all, one purpose of election is to put a government in charge of economic management. Ideally, a president is supposed to be elected having canvassed the efficacy of his economic strategy. The president then puts together a team to operate the institutions for economic management. So, pondering the question of who is in charge of economic management for the purpose of delivering public goods is important.

This year’s theme of NESG should inform the debate. The “wealth creation” role of the private sector can only be optimally performed in an atmosphere of effective governance as experience has shown. To start with, public safety and order is the business of the state.

Besides, in the critical anti-poverty targets such as quality education, universal healthcare, potable water, social housing, mass transit, sanitation etc. public investment is imperative. These are not issues a people-oriented government can afford to leave to market forces to solve. It would be socially and politically irresponsible to do so.

The debate should be diligent and informed. Some of the assumptions on the roles of both the private sector and the state should be clinically interrogated by the experts and public intellectuals taking part in the debate. The record of the Public – Private Partnership (PPP) experiments should be examined to know how efficacious they have been in solving funding problems.

So, let there be fresh ideas on the big issues of the time coming from the political parties and their candidates. It is important that every political party and its candidate should provide a categorical answer to the question: Who is in Charge?

Minimum Wage is a National Issue

By Femi Falana

There is no state government in Nigeria that cannot pay minimum wage if priorities are reordered.

Not too long ago, roads were constructed and maintained by ministries of works while ministries of housing built houses. The houses were sold at commercial rates. Government had extension farms, which produced food in abundance. Books were published by government printing press. Even ministries of justice handled government cases.

But now, contractors and consultants who are billionaires have taken over the business of running our government.

These and many others are the reasons why state government claim they cannot pay minimum wage.

Even in the United States, the bastion of bourgeois democracy and federalism, state governments do not fix minimum wage.

In 2009, the American federal government mandated the payment of a nationwide minimum wage of $7.25 per hour. Since then, no fewer than 29 states have been paying a higher minimum wage than the amount fixed by the federal government.

Under the current democratic dispensation in Nigeria, the National Assembly fixes the minimum wage as labour (including minimum wage) is in the exclusive legislative list.

However, state governments are at liberty to fix allowances payable by them.

Those who want state governments to pay what they can afford conveniently forget that the salaries and allowances of governors and legislators (federal and state) in Nigeria are the same as the Revenue Mobilisation Allocation and Fiscal Commission fixes the pay of these categories of public officers, even though state legislative houses fix their security votes and pension.