Wednesday, May 18, 2011

Free Market, Subsidies Removal And Privatization: The Examples In Nigeria, America and Europe

Free Market, Subsidies Removal And Privatization: The Examples In Nigeria, America and Europe

There are opposing arguments, in favor and against Free Market, Subsidies and Privatization; The merits or lack of merits can be effectively and even forcefully advanced in connection with these concepts. These positions are at times opposites, conflicting or contradictory and at other times, quite to the contrary, complementary of one another! These propositions are by no means mutually exclusive, these are arguments however, must be delicately balanced, in order to attain a reasonable objective conclusion on either side, hence reaching a desirable compromise or confluence and convergence in the interests of all.

As I have said in the past, that care must be taken, always, in applying foreign theories and concepts to Nigerian nay African challenges, a neglect on the part of most, to take cognizance of these local situations, varied circumstances that necessitate modifications, variations of methods and procedures have led to woeful failures in policy formulation and implementations by all and sundry, including the IMF, the World Bank etc.

Economic theories that were conceived for the Western world have met with instant brick wall landings and premature deaths in South America, Latin America, most of Asia and Africa, it is therefore urgent, to re-examine the formulation and implementation of these foreign concepts, theories and policies to enhance their efficacies and success in the target environments; There is an urgent need to bridge the gap between policy initiators and the societies whose development benefit concepts and policies are intended.

The Past failure arises from a combination of a series of factors, the superior attitude of certain officials charged with the implementation, an attitude that seem to say “Look, do what we say, we are from the first world! We have the money; We know what is good for you; We know what works!” and this leads to unnecessary antagonism and friction between the agents of implantation and those at the receiving end.

Another factor is, a complete ignorance on the part of the agents implementation, regarding what obtains in the local environment for which the policies are intended, there is an adage in my place of birth that says in its English interpretation, visitors have eyes, but they figuratively and also quite literally do not see, it means that, there is never adequate compensation or substitute for a lack of or the absence of thorough familiarity with a terrain, and this universally applies to drivers, warriors or farmers! If you do not know the terrain, it matters a little, how good you are!

A local fisherman is more adept at the intricacies of fishing and will most often than not, excel over and above anyone with multiple PHDs in fishery and oceanography, a practical knowledge of any environment or terrain can be more valuable and practical in many circumstances.

Recently, the Breton Woos Institutions have failed in their policies in Argentina, Brazil and in several countries in Asia, if history is any guide, these avoidable failures are likely to persist, unless these institutions revamp their policies and have an attitude adjustments!

The argument for Free Market, Subsidies Removal And Privatization etc are very complicated and they are usually much more than meets the eye! Every country seem to be saying one thing and doing the other (usually the exact opposite!) Nigeria is being told again and again to remove subsidies and privatize and open up to free market economy, the vexed question is whether that is the right thing to do? Is that what others are actually doing? On April 27th 2003, The New York Times published an article, here are excerpts “European Union companies received €86bn ($95bn) in subsidies in 2001, the highest level since 1998, despite repeated pledges by governments to reduce state aid, according to the latest figures” (More than Nigeria’s annual budget!?)

“It is understood the scoreboard will show that state aid across the EU rose to €86.1bn in 2001, just under 1 per cent of EU GDP, from €85.2bn in 2000. The increase came in the year EU leaders pledged at their Stockholm summit to reduce state aid as a percentage of EU GDP by the end of 2003. The UK was the biggest contributor to the increase among the EU’s 15 members, with a 70 per cent rise in the amount of subsidies granted to €10.5bn.” (This is completely different from what Africans are being told to do!)

“The overall increase in the EU in 2001 is modest but runs counter to several promises by EU leaders to reduce state aid, which is seen as anti-competitive and protectionist by many companies and regulators”.

“If the subsidies for 2001 were spread evenly, every EU citizen would have received €232 from their governments. Grants were concentrated in a small number of sectors, led by agriculture, transport and manufacturing”.

”State subsidies almost always distort competition and if the company being aided is not viable in the long term they can also represent a waste of taxpayers’ money,” he said. The Commission has powers to police state aid but lack of resources and resistance from member states have limited its action. Mr Monti is to present plans to streamline state aid procedures and make them more effective” (A case of, do what I say, not what I do!)

For Nigeria to compete effectively and efficiently in the global market place, the government should create an enabling environment, inject monies and resources, assist encourage and protect some of our essential local industries as America and Europe frequently do, the huge tariffs the American government recently placed on imported steel is a case in point; Another recent example is the approval of $100 billion to aid American Farmers in the next ten years!

Well meaning Nigerians should continue to thoroughly examine the way the world works and activities of other countries, particularly those countries that are quick to make all kinds of prescription for Nigeria and other Africans, such examination would reveal, what many Nigerians already know and say, the concept known as free market is a myth.

The concern of well meaning Nigerians is that America and their counterparts in Europe find the need to have state run enterprises as indicated by the excerpts from The New York Times story above and America and Europe equally find the need to heavily subsidize food, housing, transportation, manufacturing and major research etc: Even at this stage of their development? This, despite their higher per capita incomes and more robust economies!

These are in their efforts to cushion their citizens who are mostly, already comfortable compared to Nigerians or other Africans; They have a right to cushion their citizens; African governments should have the luxury of cushioning her citizens, without the pressure from America and Europe and foreign creditors of the Africans!

It becomes necessary then, for well meaning Nigerians/Africans to question, at least question, the pressure on Nigeria to succumb to the rigmaroles of free market, to imbibe the rules of demand and supply, to remove subsidies completely and to indiscriminately and blindly privatize, this pressure by America and Europe and their institutions, on Nigeria should be questioned, in view of their cushioning of their citizens with higher incomes compared with Africans who already experience scathing and scorching poverty

This, even though, American and European citizens have comparative economic advantage over the average Nigerian/African and their per capita incomes make subsidies for them even more implausible to comprehend.

All these bring to question, whether the acceptance by Nigeria of free market, removal of subsidies etc as demanded by America and Europe ought to be seen as the same thing as an a seller of umbrellas and rain coats, acting as our weather forecaster; Is it likely that the weather forecast is influenced by the desire to sell the umbrellas and rain coats? Are his forecasts simply objective and dispassionate? These are similar to the concerns that are already being expressed in connection with competing arguments for and against globalization! Do we want to be condemned to an eternal inferior partner position or role?

Should Nigeria inhale the seemingly overpowering vapors of the free market, privatization and the complete removal of subsidies as being advocated? Will these be in the best interests of the average citizen in your hometown and mine? In the end, will these be in the best interests of Nigeria?

Especially considering the present day circumstances in Nigeria, vide the economy that has been battered for couple of decades, current high level of unemployment, the paltry income per capita and the other indices of poverty in our nation and continent?
How can Nigerian/African citizens absorb the multitude of economic shocks to their bodies and souls, they have it rough-going with the present barrages of economic misfortunes!

We are being told that it will be easier for Nigerians/Africans who are already making do with less, to make further sacrifices that are inevitable or are imperative when and if free market and subsidies removal are accepted wholesale by Nigerians/Africans (This, in the face of our knowledge, that America and Europe actually are not bulwarks or grand mothers of these concepts, must Nigerians/Africans accept these policies roughshod?) What are the Nigerians’ and Africans’ best interests? Who determines them?

Free market is good! But who practices it? Subsidies are bad, but why are trains and buses cheap in New York compared to taxis, a bus or train ride is $1.50 and for the same distance by taxi, it is $40.00 or more! Why is section eight housing rule practiced to make housing affordable for the poor? There are many other cushioning and social safety nets in America and Europe that their government use in protecting the poor from the economic realities of free market, privatization and subsidies removal; We in Nigeria/Africa do not as yet have these cushions and shock absorbers!

Nigeria and other Africans must pursue these policies delicately and cautiously, to avoid further suffering, to avoid social friction and disaffection or a complete disconnect; Even as we concede that governments the world over, are not good in business, not efficient in business, nor are they the best in business, government it is said, has no business doing business! However, the implementation of the triad or tripartite policies of free market, privatization and the complete removal of subsidies must be pursued with a human face ala President Obasanjo advise to former President Babangida some twenty years ago, remains relevant.

God and Allah have always blessed Nigeria and will continue to do so, even more abundantly!

Paul I. Adujie is a Nigeria Lawyer and Information Technology Professional

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