The ideas of two economists, Englishman John Maynard Keynes (1883-1946) and Austrian Friedrich von Hayek (1899-1992), dominated the world economic landscape from the end of the Second World War, but with opposing views on economic freedom. Nigeria had implemented both of these models at one time or the other, and their clarity or implementation could be impacting on Nigeria’s unemployment menace. It is estimated that over 50 million Nigerians are presently unemployed, with fewer prospects for those currently in our institutions after graduating. Those in government and Nigeria’s economists seem to have fixated on GDP growth and less on employment. Unemployment has impacts on the society; recruitment grounds for sedition are often in the unemployment sphere. The economic impact of unemployment also manifests in our lives; over 80 per cent of those that clog the urban towns and cities in Nigeria during working hours are the unemployed looking for what to do.
Keynes, in his theory, argued for a more significant role of government in the economy, particularly during a recession. “The government would borrow money to spend on such things as public works; and that deficit spending, in turn, would create jobs and increase purchasing power. Striving to balance the government’s budget during a slump would make things worse, not better”. I hope the Nigerian Parliament would in this period be supportive. Keynes’ analysis was macroeconomic by treating the economy as a whole and focusing on government’s use of a fiscal policy of spending, deficits, and tax. These tools are used to manage aggregate demand and thus ensure full employment. It has been found that Keynes’ idea could lead to over-centralisation during economic expansion. The corollary is that government should cut back spending during times of recovery and development.
Hayek, on his own, challenged Keynes’ views on the economy. Hayek argued, “The problem is that under central planning, there is no economic calculation – no way to make a rational decision to put this resource here or buy that good there because there is no price system to weigh the alternatives.” Central planners only make technical decisions but not economic ones. After 30 years of Keynesianism, that criticism proved to be extraordinarily prescient. “Socialism shocked our generation,” Hayek later said. He added, it profoundly altered the outlook of idealists returning from the war. “I know, for I was one of them… Socialism told us that we had been looking for improvement in the wrong direction”. To Hayek, less government intervention meant more economic freedom; believing that when people are free to choose, the economy runs more efficiently.
It was Keynes that won the argument at the Breton Woods Economic Conference in 1944 convincingly at the time because the political focus of the postwar was how to engage the millions that were returning from the battlefields into gainful employment and therefore mitigate potential social unrest. Keynes’ ideas would oversee the postwar world economic expansion from 1945 t0 1973. Hayek was distraught as nobody listened to him at the time. Even when he applied for a teaching job in the United States in 1950, nobody was ready to hire him except a private university in Chicago, the University of Chicago. That opportunity would later change the world some 30 years later. At the Faculty of Social Sciences, School of Economics, he mentored the likes of Milton Friedman on market economics. They would be known as the Chicago Boys, and more than half of the Nobel Prize for Economics has gone to Hayek, Milton Friedman, and their disciples or those associated with Chicago ever since.
In 1971, while having coffee in a café in the village, in Austria, where Hayek had retired, he saw a news clip in the newspapers on the rising inflation and unemployment in America. He knew the world was changing; Keynesianism was overloaded and was showing cracks. Hayek swung into action. Now, he thought the world would listen to him. He had learned the virtue of socialism; at least they were idealists that hold on to a belief, and the only way monetarism (market economy) will ever take hold is by borrowing the socialist tactics. People are always opposed to change; therefore, his neoliberal economic policies of the tripartite condition of deregulation, privatisation and fiscal austerity would have to be implemented repressively. Friedman was the chief arguer of this monetary economy, and with the help of the Chicago Boys, General Pinochet overthrew the government of Allende in Chile in 1973. So, for the first time in the second half of the 20th century, the market economy returned to the world stage, if only this time repressively.
The pendulum on the world stage swung in Hayek’s favour in 1979, when Margret Thatcher became the British Prime Minister, and two years later, Ronald Reagan, the president of the United States of America – both supporters of free market policies. In the years that Hayek’s theory was cooling on the shelf, the economists that Friedman mentored had quietly colonised the two world financial institutions on Nineteenth Street, in Washington D.C., U.S.A. By the mid-1980s, during the prolonged, protracted world economic recession, when any Third World country approached the IMF or the World Bank for a loan, they met a brick wall of monetarists unless they adopted the neoliberal economic policies. Consequently, Nigeria in June 1986 adopted the market economy through the Structural Adjustment Programme. There is nothing wrong in neoliberalism or monetarism itself, as it transfers control of economic factors to the private sector from the public sector. But why has Nigeria’s market economy experience been a disaster?
In his book, the General Theory of Employment, Money, and Interest, the Englishman, Nobel Prize economist, John Maynard Keynes, challenged the status quo in the mid-1930s. It was a period of massive unemployment in Europe, and the similarity to what Nigeria is experiencing is astonishing. The preface to the book reads partly thus: “This book is chiefly addressed to my fellow economists. I hope that it will be intelligible to others. But its main purpose is to deal with difficult questions of theory, and only in the second place with the applications of this theory to practice. For if orthodox economics is at fault, the error is to be found not in the superstructure, which has been erected with great care for logical consistency, but in a lack of clearness and of generality in the pre-misses. Thus, I cannot achieve my object of persuading economists to re-examine critically certain of their basic assumptions except by a highly abstract argument and also by much controversy”. I purposefully quoted from that preface for the attention of our economists and economic planners. Now is the time to address the unemployment time bomb in Nigeria – a revisit to their tenet.
After the introduction of the market economy, in the wake of the national debate, there were no follow-ups which I understand could have been addressed by the branch of economics known as welfare economics. Surprisingly, immediately after Nigeria’s GDP was rebased and became the highest GDP nation in Africa, the then finance minister, Ngozi Okonjo-Iweala, stated that a high GDP did not necessarily translate into high employment. I thought that was an assault on most Nigerians’ sensibility. Keynes could have an answer to that, “A monetary economy, we shall find, is essentially one in which changing views about the future are capable of influencing the quantity of employment and not merely its direction. But our method of analysing the economic behaviour of the present under the influence of changing ideas about the future is one which depends on the interaction of supply and demand and is in this way linked up with our fundamental theory of value. We are thus led to a more general theory, which includes the classical theory with which we are familiar, as a special case”.
As an eavesdropper on economic debate, I can only urge Nigerians who have been tutored in the rudiments of economics to engage in the discussion on the pregnant issue of massive unemployment in Nigeria. From all indications, many if not all of our brilliant economists are wedded to Hayek/Friedman theory of monetarism to the detriment of the quantity of employment in the Nigerian economy. The impacts of the monetary economy are not only felt in the sphere of labour but most notably in human capital development (education) also, which is a topic for another day. The change that most people sought during the 2015 election was not for the highest GDP in Africa, but for gainful employment of millions of youths that roam Nigerian streets. These were agile, educated young men and women that clog the streets of Nigeria’s state’s capitals during working hours looking for what to accomplish gainfully. The cost of unproductive consumption of fuel in Keke NAPEP, danfos, and other vehicles that move the unemployed daily in search of jobs may arguably be astronomically damaging to the Nigerian economy also. For the labour unions, this is the time to drop the theme, “We shall overcome”, and key into whatever economic model for the advancement of the nation. The body language of President Muhammadu Buhari is Keynesian, while the rest of the Federal Executive Council is monetarism. We need to strike a balance.
Capt. Caulcrick wrote in from Lagos.