Nigeria's economic survival - will it depend on free enterprise system
By Charles A. Ikokwu
The current economic situation in Nigeria and the military's efforts to restructure the system continues to be a topic for discussion in international fora. Below is the text of a paper presented to the annual conference of the African-American Institute's Educators to Africa Association held at Temple University, Philadelphia, Pennsylvania.The combination of recession, huge foreign and domestic debts, falling price of raw materials, declining foreign aid and trade, rising populations, an unprecedented mismanagement of public funds has our country's infrastructure on the verge of total collapse. Or has it collapsed? On assumption of office as Head of State, General Mohammed Buhari in January declared: "My own measure of our economic development will be based on the availability of the essentials of life... at prices within reach of the lowest income-earner in the country."
The government has since then embarked methodically on various measures aimed at achieving the goal of our leader. It is so noble a goal that time has come for us to re-examine the means and apparatuses with which the nation has been equipped for these twenty-four years since independence. There is nothing wrong with our people - our people are hard working and have always distinguished themselves when in competition with people of other races and nationalities.
There has never been a doubt as to the good intentions of our leaders, beginning with the administration of Alhaji Tafawa Balewa through all the military administrations to the Shehu Shagari government and definitely up to the present regime.
Having said all this, one must answer the central question: Are we better today than twenty years ago? Are our men, women and children more hopeful of a prosperous tomorrow than we were at the time of Independence?
Is the quality of life today better than it was twenty years ago? I do not know what the majority response will be; but I recall that growing up as a child of the fifties in Port Harcourt, Rivers States, seldom were we victimized by (1) poor water supply; (2) endless blackouts - as a matter of fact, I recall that every light out was preceded by a warning to alert users; (3) telephone service was reliable; (4) there was night life, and citizens knew their homes were safe; (5) poor sanitation; (6) inadequate and unsafe road network. One can go on recounting the disappearance of relative optimism amongst our people within the last two decades. Our country is faced with untold social problems, whose scope and complexity defy characterization. Our leaders in the past have paid lip service to our nation's malady while our nation progressively deteriorated in value both at home and abroad. We can no longer hold our colonial masters responsible for our problems, nor can every regime be the beginning of a new dawn.
"My prescription will be for our leaders to immediately set in motion a high-intensity re-alignment aimed at gradually surrendering most of our economic control to the market place. Too much government, too much social engineering and not enough reliance on a market that has crippled economies of developing nations."
For the first time, however, it is clear to all who love our nation that we are systems. at the crossroad of our task of nation- building. It is particularly painful when one looks around and immediately realizes that we are blessed with HUMAN and MATERIAL RE- SOURCES. What then is our problem? MISMANAGEMENT. Various analyses will emerge, but I am convinced that all social ills which eat into the fabric of our nation are precipitated by a fundamental failure to manage properly.
I am convinced that time has come to overhaul our ENTIRE ECONOMIC SYSTEM. The government by definit- ion is not a profit-oriented enterprise. The government must begin a gradual process of removing herself from the economic environment, Government should collect taxes and spend money. Government should regulate business, create an environment which will guarantee political stability, and in turn attract foreign investments which will create jobs and improve the welfare of our people. Let us surrender our fortunes to the workings of the Free Enterprise System. One dichotomy among economic systems is between those systems loosely characterized as "capitalism" and those covered by the broad label "socialism", including in the latter Communist economies as well.
Neither system exists anywhere as a pure type. Each nation's domestic economic system contains admixtures of other systems, borrowed from other countries, retained from their own past, or just inconsistently included in their basic economic operations.
In Nigeria, we have destroyed all ingredients of known economic systems, producing overnight millionaires, thousands of freeloaders who depended on their friends or relations in public offices for pieces of the national cake, a cake which now seems to have only crumbs according to the diagnosis of our economic health. Let us take a good quick look at both
Capitalism usually means private ownership not only of direct consumer goods but also the means of production, including investment channels, and a system in which the allocation of resources responds to prices on a profit-maximization principle. Socialism typically implies national collective ownership of the means of production, including investment channels, and resource allocation according to priorities established by a political process.
Our nation has operated more closely towards "market socialism" whereby governmentally determined priorities are endorsed indirectly by arranging personal income distribution in whatever way was considered desirable, and by special taxes and subsidies on goods whose outputs or import is given special restriction or eccourage- ment with the market more or less allowed to function along profit maximization lines.
Consequently, our government continues to get involved in areas beyond the immediate scope of the official designated to regulate and operate. What has emerged as a result is that our country has produced a recession which may stay with us until a carefully planned economic programme is implemented. We need a major re- examination of our entire system. We must expand our gross national product and the earning capacity of our people. Patriotism must replace despotism."
Our country cannot for long remain a consumption and service economy without much traditional manufact- uring. The assumption here is that it is very hard to improve productivity in non-machinery labour-intensive busi- nesses. It is true that in 1983, manufacturing employment generated only about 33% of the USA's gross national product while services accounted for 67%, employing 70% of working Americans; but this is a country being re-industrialized, and manufacturing is being transformed by the new electronic information- processing technologies.
The importance of material is being minimized, and fewer human beings are required to produce a given volume of manufactured goods. Most importantly, America is a 900 billion dollar economic giant.
My prescription will be for our leaders to immediately set in motion a high-intensity realignment aimed at gradually surrendering most of our economic control to the marketplace. Too much government, too much social engineering, and not enough reliance on market that has crippled economies of developing nations. There is even a reasonable explanation for this.
At decolonization, trade was foreign controlled. Our new nations wanted control and accelerated government. The result is ineffective bureaucracy characterized by lack of sustained planning. Government at control of economic activity must give way to "mixed economy" in which both public and private institutions exercise economic control; thus, producing a competitive elaborate mechanism for unconscious coordination through a system of prices and markets, a communication device for pooling the knowledge and actions of millions of our diverse hardworking men and women.
There is no better illustration of the profitability of the free enterprise system and the unprofitability of pricing system than Germany after World War 11. In 1946-1947, production and consumption had dropped to a low level. Neither bombing damage nor postwar reparation payments could account for this breakdown.
Paralysis of the price mechanism was clearly to blame: money was worthless; factories closed down for lack of materials; trains could not run for lack of coal; coal could not be mined because miners were hungry; miners were hungry because peasants would not sell food for money, and no industrial goods were available to give them in return.
Prices were legally fixed, but little could be bought at such prices; a black market characterized by fantastically high prices existed. Then in 1948, a "miracle" happened. A thoroughgoing currency reform set the price mechanism into effective operation, and production and consumption soared.
NIGERIA needs a MIRACLE in 1984. Trade must not be restricted in such a manner as to create imperfect competition, allowing a few well- placed individuals to have enough impact on the economy to produce appreciable depressing or elevating effects on market prices. We need a mixed system of government and private enterprise and a mixture of monopoly and competition. Monopoly can be tolerated in those areas of the economy which involve public safety - the utilities like electricity, water supply, the nation's road network, and similar facilities.
However, the government has no business selling beer or controlling and managing communications. Does anyone care how much revenue the government will realize if a private enterprise was contracted to supply telephones to anyone who wants a phone in Nigeria? The incentive of profit will naturally propel the private firm to efficiency and, of course, profitability with appropriate federal and state taxes paid as applicable. This is one clear example of lost revenue because of the unwillingness of previous political leaders to show vision and thorough economic plan- ning. Travelling from Enugu to Lagos last January, I boarded a plane with an entrepreneur who drove all the way from Onitsha on his way to Lagos to make a phone call to a business associate in Europe.
I wondered about how many others travel by road everyday at great expense just to make phone calls. I wondered about how less congested our roads would be if our communication network could be updated to twentieth-century form. I wondered how many deaths could be avoided.
One of the greatest handicaps hindering our economic revival is our unattractive environment to foreign investors. We must attract productive foreign investments. The government must set up a commission or blue ribbon panel to study what laws have to be modified or abrogated to inject foreign capital into our economy.
Despite the belief that "domination" by foreign capital is in some mysterious way the inevitable road to ruin, the wealthiest nation on earth the United States-developed with huge amounts of foreign capital. Foreigners probably own a larger abso- lute value of American industry today than in the early days of the republic, but the rapid growth of the rest of the American economy - in part due to foreign investment - has left the foreign-owned wealth an insignificant share of the total American wealth.
I must add that the scope for "exploitation" is very limited when there are hundreds of investors around the world who are prepared to compete for the right to use a given resource or sell in a new market. An additional compli- cation is that political denunciation of foreign capital and vague threats against such capital are an additional discouragement to foreign investors, who cannot know what anyone really means.
Despite all of the dangers and fears associated with capitalism, and there are many, I am convinced that as we enter the last fifteen years of this century, our best guarantee for economic survival is to release the energies and ingenuity of our people. Break down all the barriers; allow competit- ion to reign; let the doors of free enterprise system, of new capitalism open in which ownership of land and natural wealth, the production, distribution, and exchange of goods, the employment and reward of labour, and the extension, organization and operation of the system itself are entrusted to, and effected by, private enterprise and control under competitive conditions.
We must begin the conquest of scarcity and elimination of poverty. It may take decades to accomplish, but we must begin.
One fundamental difference between the pricing and allocation decisions which emerge from the economic pro- cess and those which emerge from political processes is that economic decisions are marginal decisions, based on cost continuously under review and subject to partial or total reversal by individuals, while political decisions tend to be total decisions, enshrined in laws and regulations which continue automatically in full effect until sufficient force can be built up against them to move the decision-making machinery.
It is important here to emphasize and reiterate that my suggestion is not peculiar to any form of government. Do we have to wait until a democratically elected government assumes power? Obviously not. Form of government, it must be noted, is a means to an end, not an END by itself. In the end, the wealth-producing forces of any economy are its immaterial resources - not oil or gas, cocoa or palm kernel, but rather the intellectual and organizational skills that are the very core of the free enterprise system.
It is no accident that resource-poor island nations like Britain and Japan at various times have become world. economic and political powers, or that postwar Germany and Japan were able to rebuild their broken economies in less than a decade. Let us tap the best minds and get to work if our nation must be saved.
