Prof. Sam's Corner

Home-Grown Economics: The Asian Example (Part II)

Beware of Ideology Masked as Economics

If Nigeria is to succeed in home-grown economic policymaking it must wisely manage economic ideologies. China and the successful Asians took note of ideology and avoided the pitfalls. Latin American and African countries closed their eyes to ideology and drowned in the pool of ideological waters. Economic policymaking has moved in ideological circles. At each epoch, especially with major social and political upheavals, economics gets trapped in an ideology which is pushed around the world like a new religion. In the world of ideological rigidity, it seems like those who succeed are contrarians, those who act contrary to precepts of the new religion.

Recognizing the role of ideology in economic policymaking, in 2003, when President Obasanjo appointed the then World Bank Vice President, Ngozi Okonjo-Iweala, the Minister of Finance, I wrote an opinion piece titled ‘Who Should Manage the Nigerian Economy”. My contention in that piece was that Nigeria needed to have a former leftist economist manage its economy. Such a person who has recognized the limits of Marxism and now understands the merits of the market as a mechanism for allocation would be a better manager of the economy than a doctrinaire free marketer who is trapped in market fundamentalism.

This had nothing to do with the bona fides of Dr. Okonjo-Iweala but rather a recognition of the ideological landscape of economic policymaking. I had argued in two books on privatization and the NEEDS policy how the outbreak of market fundamentalism in the form of economic neoliberalism, later to be nicknamed ‘Washington Consensus”, constrained wise economic policymaking in the third world. We were forced to mimic what New York opinionated columnist, Thomas Friedman, called ‘the golden straitjacket’.

Multilateral financial institutions played a key role in the dictatorship of no-alternatives. The World Bank’s role in economic reform in developing countries like Nigeria has been underwritten largely by the ideology of less government that took fundamentalist meanings in the Reagan-Thatcher era. During this era the cold war between capitalist west and communist west was ending in the west’s favor. Neo-liberal theorists interpreted the eventual collapse of communism as a triumph of the sets of market practices,-core values and ideology of the American Business Model (ABM) and institutions of liberal democracy -and the convergence of the world to a set of best institutions that correlates with the templates of the free market economy.

This hasty and tendentious interpretation foisted on development planners in the periphery South a fait accompli on the available options for development. As Hernando Desoto wistfully puts it in his classic: Dead Capital, “there is one game in town”, and that game is mimicking the market institutions in the prosperous west. But the tragedy is that the recommended menu for these developing countries often bears little resemblance to the set of policies that guided countries of the west to its prosperity or the policies they are implementing to sustain their prosperity. Cambridge economist, Ha-Joon Chang, has assembled evidence to prove that the Now Developed Countries of the west embarked upon the opposite of the ‘free market’ policies which they prescribe for developing countries. Their periods of growth were marked by infant industry protection, expansionary public expenditure, and massive government intervention to correct market failures. But they asked those aspiring to development to do the opposite.

At the heart of neoliberal economics is an ideological view about the role of state. The philosopher-king of neoliberalism, Frederick Hayek, an Austrian who fled communist dictatorship with a beef against socialism, wrote a magisterial book, “Road to Serfdom” which branded government intervention in economic activities as ‘evil’ and glorified individualism. Professor Milton Friedman became the cheerleader of the movement that grew out of ‘The Road to Serfdom”. Friedman’s book, ‘Capitalism and Freedom’, became the holy grail of the Chicago School that promoted the concept of the minimalist state.

In Latin America, Chicago boys ran riot with a brand of ideological economics that built on the Hayekian distrust of the government and Friedman’s theory of opportunistic intervention. Friedman has counseled his disciples to wait for the auspicious moment of social upheaval to remake the society. The Chicago boys saw that opportunity in the economic distress of the 80s when trade deficits and commodity price crash indebted developing countries to both London and Paris clubs. To address the debt crisis, neoliberals urged countries toward deflationary economics with reduced wages, removal of subsidies and liberalization of domestic and international factor and product markets and the diminution of the public sector.

Neoliberalism succeeded largely because it cleverly masked its ideological mission. It passed off its ideological prescriptions as natural truths. Neoliberalism deplored socialism and pretended not to be an ideology. Economists like Adelman have wondered why their colleagues did not see through the error of neoliberalism. There are obvious theoretical shortcomings in neoliberal economics, yet it was religiously prescribed. The reason is that an ideology was promoted as a science by its missionaries. The unwitting swallowed everything. Latin American and African policymakers swallowed the ideology of ‘government is evil and should get out of the way’. China and the rest rejected that doctrine and accepted the pragmatic idea of prudent state planning forcefully championed by Fredrick List and the German Historical School. Today, China and the rest are smiling, and we are mourning.
Authored by Prof. Sam Amadi, former Chairman of the Nigerian Electricity Regulatory Commission (NERC) teaches at Baze University, Abuja; and coordinates The Abuja School of Economy and Regulation

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Home-Grown Economics: The Asian Example (Part I)

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