Felix Oladeji
Sir: Despite the fancy, alphabet-themed shapes being peddled by eggheads across the world on the possible trajectories of recovery after the current pandemic, different economies are going to emerge from this crisis in their own way.
China’s emergence as the world’s contract manufacturer was not always the liability it seems today. In an alternate reality, it enabled mass production of goods and parts thereof on its territory, and just-in-time production in more advanced economies. It brought down prices across the board. Laptops, flatscreen television sets, cars all became affordable to more people. At a point, one of the strongest arguments against the trade wars initiated by the U.S. against China involved reminding the world that were the iPhone to be manufactured solely in the U.S., higher labour costs there would have put it beyond the reach of the many who now tout it as a fashion accessory. Such was the strength of this argument that in raising his multiple tariffs against imports from China, Donald Trump, the U.S. president, took pains to exclude Bluetooth-enabled devices.
But that was such a long time ago, now. In a couple of months, the strategic challenge before companies with a link to global supply chains will be to organise their processes to reduce the dependence on suppliers elsewhere. So, they will keep more inventory. They will move suppliers closer ¯ preferably opting for those located as close to them as possible. If the advances in global freight and logistics was a key part of the broadening of the idea of nearness to raw materials and supplies as a key consideration in the siting of industries in the old days, the reduction of vulnerabilities from exposure to one main, albeit low-cost supplier to the world, will help redesign global freight and logistics businesses going forward.
Airlines and the hospitality business have taken a hit from the lockdowns imposed by governments worldwide to try and tame the virus behind the COVID-19 pandemic. It is a fair bet that they will hurt more as global production rules change. And global prices will rise. Final demand will be crimped everywhere. And hopefully, economies will become that much inefficient, if not smaller, even. Worse, for frontier and emerging economies, a major part of their development storyline will change radically. The bit about emerging economies moving into the production value chain that China abandons as it moves up the product quality log, will no longer be available.
How to spur growth and development in such economies will become a new field for study. Using foreign exchange from the export of crude oil will certainly play no part in the new narrative. Indeed, except for the likes of Norway, and to a lesser extent, Australia, this part of the development dynamics for commodity exporting countries was always a myth.
So, what is an economy like ours to do? Put differently, what are our chances of emerging in decent fettle from this crisis? And of making a decent fist of the post-COVID-19 world? Slim. And slimmer. Yet, there is agreement that we improve our chances by reforming the economy. The Buhari administration’s biggest conceit is to advertise itself as a reforming government. But even before this pandemic, it had superintended over what might arguably be the biggest enlargement of government as a player in the economy in recent times.
We will need to do more by way of reforms if our economy is to live up to our sundry aspirations for it. For instance, we do not even know how many businesses have been bankrupted by the recent lockdown. How many employees have lost their jobs? Or how many of the latter are temporary. Consequently, it is improbable that the size of official intervention in support of all of these would be significant enough to push the economy’s envelope. Simply by having data that reflect, as faithfully as possible, the conditions of the economy, we indicate our preparedness to better plan for our people.
- Felix Oladeji, Lagos.
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