Hard times are well and truly upon us.
Gloom encircles the polity and despondency defines the national mood, all because the economy is in recession. Everyone is feeling the pinch, the privileged to a lesser extent than the average person, and the average person to a lesser degree than the underclass.
A wave of panic is sweeping the country, at a time that calls for cool, focused deliberation and creative thinking. A blame game is in full swing, with one segment of the population, comprising for the most part stragglers of the inept Jonathan administration under which official corruption and fiscal brigandage reached new heights, blaming the nation’s economic woes on President Muhammadu Buhari’s administration. They promised us change, but plunged us into a regression, they have been saying of the APC-led government.
Buhari and the APC answer back that what Dr Jonathan and his team bequeathed to them was a poisoned chalice, a system riddled through and through with dysfunction of the most intractable kind, and that the drift and decay of that era cannot be arrested overnight, to say nothing of getting the economy back to full throttle.
To which the Jonathan people rejoin: You were elected to fix the economy, based on your campaign promise, not to blame your predecessor nor dwell endlessly on the depredations of the recent past, brazen as they were. Get on with it, or make way for someone who can fix it.
They have a point, but it is no more than a debating point.
To fix the economy, it is necessary to understand how the nation came to this troubling pass. Those who fail to examine the past, it has been said, are condemned to relive it. In their wisdom, our elders have it that if you do not know where you are going, you should at least know where you came from.
Buhari can be criticised for his dilatoriness, for not hitting the ground running — pardon the cliché — for taking an inordinately long time to put together his cabinet, and most crucially, an economic team. Timely action on his part might have helped slow the slide into recession, but he cannot be blamed for not fixing the economy in just one year.
A recession does not happen overnight. It develops through a slow accretion of adverse economic indicators. The warning signs can be seen as the process unfolds, but that process usually cannot be arrested in the short term. When all the elements coalesce into a full-blown recession, the task becomes even more difficult.
There is no quick fix to a recession. Japan was mired in a recession for almost a decade. The effort to get the economy humming again resulted in stagflation – stagnant growth with inflation. Europe — take out Germany — has been stuck in recession for some five years, and the United States has just begun to recover from a recession in which it had languished for more than five years.
The Minister of Finance, Kemi Adeosun, may have been trying to calm the public when she said the recession would bottom out by the end of next year. Central Bank Governor Godwin Emefiele probably had the same purpose when he said the worst was already behind us
To which we must say, Amen. But they and other political officials must not raise false hopes and expectations. Failure of their projections can only deepen the frustration and discontent so palpable on the streets and in homes. Even if you come up with the most efficacious measures, they take time to turn the economy around.
Unsettling as it is, a recession is not a strange phenomenon. In fact, it is part and parcel of the capitalist economic system, characterised by cyclical booms and busts.
As Dr Oladapo Fafowora has pointed out in a perceptive essay in this newspaper (September 22), only in two countries in the world is the economy not in recession: China and India. Even so, China’s superheated economy has cooled down considerably.
Nobody, not even academic and professional economists, knows how the economy really works If this seems like an indictment of the high priesthood of the dismal science, it is coming from one of their own, Paul Krugman, the youngest person to have been awarded the Nobel Medal in Economic Science and one of the most respected scholars in the business.
Certain measures work under certain circumstance; some measures that work under one circumstance fail in other circumstances. Plus, there is the human element. Humans learn and grow and change and dissemble and behave in ways that defy prediction or even rationality. That is why economists are forever hedging their bets with the caveat ceteris paribus.
The problem is that, outside the laboratory where you can control one variable or another, ceteris is rarely paribus.
As an example, consider the excitement in the community of financial and economic experts when the Central Bank did exactly what they had been urging: deregulate and liberalise the foreign exchange market. The underlying theory holds that the measure will result in a sharp narrowing, if not outright convergence, of the foreign exchange rate at the so-called parallel market and the official foreign exchange rate.
Rather than shrink, the gap between the two exchange rates actually widened significantly.
There you have it: A beautiful theory murdered in Nigeria by a gang of brutal facts.
In the long run, the economy always recovers. Some measures may hasten recovery in certain places and under certain circumstances but prove ineffective elsewhere. But the economy always recovers, steered by Adam Smith’s “invisible hands”.
In the long run we all are dead, of course, as John Milton Keynes, whose middle name I erroneously rendered as “Maynard” several columns ago —thank you Eghosa Imade — has reminded us. But recessions are not forever.Nor is a recession a meltdown, although it can culminate in a depression. Going by present indications, we are far from that conjuncture.
There is therefore no cause for panic, nor for a panicked response.
Raising taxes in a recession is not good policy. A better course is to widen the revenue net and cut existing taxes to put more money into the pockets of taxpayers. Interest rates should be cut as well to encourage borrowing for businesses that will create jobs.
Selling off national assets to generate revenue has been canvassed as a way of turning the economy around. Every auction of public assets has been like a fire sale, with the items going to political officials or their cronies.
Pouring billions into the economy to stimulate it is good. But that should not translate into throwing money at the problem and in the hope that it will go away. Spending should be targeted at productive growth, job creation and poverty reduction.
How about cutting drastically the cost of running the government – the obscene compensation lawmakers appropriate unto themselves from the public purse, not forgetting the equally obscene compensation local government political officials enjoy, and the fleets of armoured limousines political officials acquire for themselves as emblems of power, again, from the public purse?
Rather than raise premature expectations of recovery, political officials should be counselling patience, and sacrifice. Especially sacrifice. But they must be seen to be tackling the most pressing issues of the day with conviction and imagination. It is not enough for them to say that they feel the pain of the public; they must be seen to be sharing in it.
President Buhari should have prefaced his request for emergency powers to tackle the recession with a national broadcast calling attention to the state of the economy, outlining the measures the administration intends to take, warning that there is no quick fix, calling for patience and sacrifice and assuring the public that there is no cause for panic.
He can still use that bully pulpit to great advantage even as the National Assembly deliberates on his request.
