The perils of being an economist
The year 2020 was a rather tumultuous one for the world economy. The spread of the novel coronavirus from the provincial city of Wuhan in China to the rest of the world was one of those Black Swan events that appear once in a century. By year’s end 2020, the total number of COVID-19 infections globally stood at over 80 million, with a total figure of 1,770,695 deaths.
As it turns out, the worst cases were in North America and Europe. In comparison to other regions, Africa has been rather lucky. Our continent has registered only 2.7 million cases, with South Africa alone responsible for over a million cases. Nigeria officially registered 89,163 infections and 1,302 deaths. Bill Gates was recently quoted as saying that he remains perplexed as to why the pandemic has not been so devastating in Africa.
The global impact has been unprecedented. International trade and logistics have been crippled. Commodity prices have plummeted. Global oil prices came down to a low of $12 per barrel, before rebounding to the current $48.8 per barrel. Foreign capital flows have been dampened. Capital markets have plummeted. Thousands of firms have gone bellyup. Unemployment figures have swelled across the world. Poverty and misery have deepened, especially in the poorest countries. World output fell by 4.4 per cent during the past year. The Euro land area took the worst hit with -8.3 per cent. China, however, showed some resilience, with a deceleration of 1.9 per cent, with strong prospects of rebounding to 8.2 per cent by year’s end 2021.
With the Irish conservative political philosopher, Edmund Burke, we lament the end of chivalry as we have always known it. Beyond the figures, there has been an atmosphere of subdued fear, panic and gloom. In Europe, the union is undergoing strain, aided by the traumatic and ill-timed shenanigans of Brexit. Central banks have implemented loose monetary policies that are likely to increase national debts while spewing up future financial crises. Advanced industrial countries have cut back on their ODA budgets. Commitment towards the global Sustainable Development Goals has weakened.
Sadly, the Mandarins in Beijing did not behave like the scholar-technocrats that they have been reputed to be since the Ming Dynasty. When they succeeded in taming the monster of COVID-19 in their homeland, they seemed to have turned their back on the world. In the mutual recrimination with Washington, a kind of bitter schadenfreude seemed to hold sway. Meanwhile, they seized the opportunity to gobble up ailing firms in Europe and the Americas with an ungentlemanly, mercantile, mercenary spirit. Such attitudes only serve to further undermine the trust that is sorely needed buildings the trust and moral foundations for international order.
Today, Nigeria is officially in recession. My gentle readers would recall that during 2015-2017, our economy underwent a rather severe recession. The Economic Growth Recovery and Plan was rolled out to relaunch the growth process during the years 2017 – 2020. It is an irony that just as the year 2020 was coming to an end, we have found ourselves in the stranglehold of another recession, this time rather more severe than the preceding. It may not be necessary to list out the catalogue of woes that my gentle readers are already familiar with: inflation, falling naira, dwindling remittances and capital flows, manufacturing doldrums, worsening business climate and a dire geopolitical environment of insecurity, uncertainty and collective anomie.
Nigerians are beginning to distrust the figures being churned out by the National Bureau of Statistics. The annual headline inflation rate has been put at 14.23 per cent while food inflation is said to hover around 17.38 per cent mark. However, the American economist, Steve Hanke, of Johns Hopkins University, has faulted these figures. He believes that annual inflation under the current administration has been hovering way above the 30 per cent mark.
In November last year, it was reported that a staggering 428 Federal Government agencies were unable to pay salaries to civil servants for two months running. This is likely to further weaken aggregate demand and public morale, given the prominence of the public sector in our political economy.
One of the key factors in the current recession is falling agricultural production. Rural banditry, particularly in the Middle Belt, which is incontrovertibly the bread basket of our country, has meant that there are food shortages which are reflected in rising prices and hunger among the poor. Approximately, 70 per cent of our population have agriculture as their primary economic preoccupation. Killings, beheadings, kidnapping, abductions, rape, banditry and rapine are destroying rural food production and livelihoods of rural dwellers. Social capital is being eroded. Millions of defenceless peasants are being assaulted. Many have flooded into the cities and towns while a good number have become IDPs in makeshift camps.
The hard lessons of history make it clear that appeasement never works. As a matter of fact, it provides a system of perverse incentives for terrorists. We were once told that “an attack on Boko Haram is an attack on Islam”. Now that the chickens have come home to roost, the North has become a desert wasteland of poverty, destitution and hopelessness. I hate the idea of negotiating with the insurgents. It has become big business for all key stakeholders in government and the military and security services. That vicious cycle must be broken if we are to make any progress as a country.
I am of the opinion that no exclusively technical economic nostrums – important as they are – will work under the current distemper. This is because the roots of our economic predicaments are deep-rooted and structural. Even with the best economic team in the world, we have no hope of escaping from our collective nightmares unless we address fundamental bottlenecks such as insecurity, decaying public institutions and poor governance.
The distinguished Cambridge economist, Joan Robinson, was a gadfly during her days. A mentee and disciple of the great John Maynard Keynes, she famously noted that the purpose for studying economics “is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists”.
I could not agree more. I began my academic studies as a political scientist. I then veered into economics in order, precisely, to confound the economists at their econometric games. The venerable ancient citadel of learning, University of Oxford, does not offer a single B.Sc. Honours course in Economics. What they offer is a BA in Politics, Philosophy and Economics (PPE). They believe that offering pure economics as a subject to young impressionable minds without equipping them with the tools for political, moral and philosophical analysis is a recipe for disaster. It will turn them into one-eyed monsters who know the price of everything but cannot appreciate the value of anything.
Today, the PPE degree is a highly sought-after qualification, for which competition for admission is rivalled only by Medicine and Law. Former graduates include former British Prime Ministers Harold Wilson and David Cameron; Kukrit Pramoj, a former Prime Minister of Thailand; former Pakistani Prime Ministers, Liaqat Ali Khan, Zulfiqar Ali Bhutto and daughter, Benazir Bhutto; John Kufuor, a former President of Ghana; Malcolm Fraser, a former Prime Minister of Australia; and countless businesspeople, finance ministers and academics from across the world.
A good economist, in my view, must be a leader who knows the price of everything as well as the value of the most important things that matter for humanity and civilisation. Tackling our current malaise requires wide-ranging institutional reforms and renewed state building. It calls for leadership skills of the highest order. Just as war is too important to be left to the generals, the economy is far too important to be left to the economists.
PUNCH
