11 May 2009 |
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| A Comparative Analysis Of Market Reforms In The Face Of The Current Global Meltdown
By Professor Akin Oyebode Introduction
A spectre is haunting the world : the spectre of total collapse of the global economy as a result of the greed of a few decision-makers and the failure of regulators of the market in some countries. It should be emphasized, however, that cyclic booms and depressions are essential ingredients of the capitalist system, thereby rendering the so-called global meltdown not totally unexpected to those who monitor developments in the global market-place. The interdependence and inter-connectedness of the economies of countries within the global capitalist economy are such that when the biggest players sneeze, the marginal ones catch cold. In what is proving to be a financial swine flu, those without the wherewithal for survival in today’s world would be left with no other fate but perdition and doom. The beggar-thy-neighbour or dog-eat-dog mentality that characterizes the contemporary global economy ensures that only bones are left for late-comers. In the scenario painted above, it would seem that everybody is for himself while the devil takes the hindermost. It is on account of the foregoing that different members of the international community have been compelled to devise their own ways and means of coping with the impending conflagration, based on their peculiar circumstances and nuisance value within the global framework. Accordingly, the mission of this presentation is to interrogate the responses of a number of countries to the current scenario with a view to learning a few lessons in the task of containing the impact of the crisis for the Nigerian economy which has been characterized by stasis and inertia or, at best, band-aid solutions for a malaise that requires complete overhaul of the way and manner we have been carrying on. Specifically, we shall examine the approaches of Russia, India, China and South Africa to a crisis that is threatening to bring the roof down on everyone’s head. However, perhaps we should begin by reminding ourselves how we got to our present sorry pass. The Global Meltdown and the Rest of Us The end of World War II saw the US becoming the strongest economic power in the world such that it was able to bankroll the recovery of Europe and Japan, aside from dictating and enforcing international economic law through the instrumentality of the Bretton Woods institutions. The Vietnam war in the 1960s resulted in the collapse of the gold bar as security for the financing of the international exchange of goods and services in favour of Special Drawing Rights and the omnipotent US dollar. By the time the US was expending nearly $12 billion per month over the Iraq debacle, not to mention the colossal cost of the war in Afghanistan, it became obvious to discerning observers, at least, that something just had to give. The collapse of the US real estate and mortgages market, especially sub-prime mortgage securities occasioned by the greed of operators in companies like Freddie Mac and Fanny Mae ignited a domino effect on both the capital and financial market that saw big players like Lehman Brothers, Bear Stearns, Merrill Lynch, AIG Investment Bank, Washington Mutual and Wachovia tottering and finally going under or swallowed up by yet bigger fish. The greed on Wall St. also brought about a credit squeeze that was threatening to humble the biggest corporations- great auto-makers like General Motors, Chrysler and Ford. Well, as they say, if gold rusts, what should iron do?! The bankruptcy of Northern Rock and HBOS in the UK and the going under of the entire economy of Iceland meant that in a globalized world, what touches one, most likely, would affect others, if not, in fact, everyone. In Nigeria, like other primary commodity producers and mono-cultural economies , the effect, to put it mildly, has been harrowing. The hopes of false prophets that we were immune from the fall-out of the meltdown became mere wishful thinking as both our capital and financial market went on a downward spiral that has been adjudged as perhaps the most devastating in the world. The de-industrialization and capital flight which preceded the global economic meltdown has since been exacerbated by an almost unmanageable credit crunch, massive staff layoffs and drastic reviews of corporate plans and projections. An economy that was experiencing incredible unemployment, inflation and ballooning inter-bank lending and interest rates has now been confronted with a near collapse in the middle of a devastating crash in the international price of our most important source of foreign exchange-crude petroleum. Indeed nothing seems to have brought the dire straits of the economy home more to Nigerians than the present outrageous exchange rate of the naira vis-à-vis other currencies. Most importantly, while the rest of the world had been wrestling with efforts at damage limitation and all manner of attempts to contain the fall-out from what is threatening more and more to become a full-blown global depression, we are yet to see a comprehensive, well thought-out rescue package for the ailing Nigerian economy. If indeed we wish to cut our losses from the current situation and make speedy process towards an exit from the current cash squeeze, it surely is not too soon to start to elaborate a fitting response to what has been characterized by some as a global financial tsunami. However, perhaps we should begin by acquainting ourselves with steps which some other economies had considered prudent. Russia As a member of the G-8 or Group of the most industrialized countries as well as the G-20, Russia has been impelled to work out an effective response to the global crisis as a result of its impact on the Russian economy. The World Bank Report No 18 on Russia, issued in March 2009, observed that the impact of the first global recession since the Second World War had been accentuated by that country’s structural vulnerabilities evidenced by its dependence on the oil and gas sector, a narrow industrial base and limited small and medium-size enterprise sector. Accordingly, Russia’s real GDP was likely to contract this year by 4.5 percent with the result that the fiscal space available for support for the economy would shrink considerably such that the country would have to finance its fiscal deficit thanks to its large fiscal reserves. The package elaborated by Russia to limit the damage occasioned by the global crisis has been proactive and larger than that of many other G-20 countries and greater than the internationally recommended 2 percent of GDP. The emphasis of the Russian recovery programme has been towards supporting the financial sector and enterprises. Since the global crisis had resulted in tighter credit and fall in demand for as well as prices of its exports, the Russian economy has experienced an acceleration in its slowdown, thereby hurting both investment and consumption growth. The balance of payments situation has deteriorated as a result of the fall in commodity prices. In view of the foregoing, Russia undertook a review of its monetary and exchange rate policy such that the Central Bank of Russia (CBR) provided sufficient liquidity and has had to unfreeze the credit markets while preventing excessive rapid adjustment in the value of the ruble against the backdrop of the sharp reversal of capital flows. Furthermore, the CBR began to gradually loosen its exchange rate policy by widening the dollar-euro currency basket trading band and then tightened monetary conditions in early February, 2009 in order to prevent further loss of foreign exchange reserves. In a bid to cope with currency volatility, the CBR increased policy rates and withdrew liquidity from the repo market. According to the World Bank, the early fiscal policy response to the crisis focused on supporting the financial sector and enterprises rather than providing succour for households. However, on March 19, 2009, the government announced a new set of priorities aimed at addressing the socio-economic impact of the crisis. Accordingly, seven priority objectives were identified—ensuring social protection for the vulnerable, supporting important industrial and technological sectors, stimulating domestic demand, diversifying economic structure, easing the business environment, strengthening the financial sector and maintaining a sound macroeconomic environment. Concrete steps were outlined to strengthen the financial system. These include supporting liquidity and recapitalizing banks, supporting the real economy using direct financial support and easing the tax burden for strategically important and needful enterprises with a view to stimulating growth and development in the business and industrial sectors. Also, the financial stimulus was extended to limited interventions in the labour market in the form of 80 billion rubles for unemployment benefits and active labour market policies on matters such as on-the-job training, creating temporary work programmes for the unemployed, ensuring direct support to households, including facilitating internal mobility and providing support for small and medium enterprises. In sum, the Russian stimulus or relief package is a comprehensive one aimed at containing the deleterious consequences of the global economic meltdown. Although the World Bank Report entertains some doubt on the efficacy of the package in the face of lack of proposals for structural reform, poor statistics on the unemployed as well as lack of a federal body to oversee the social assistance policy little or no information on regional responses, the stimulus package, if well implemented, should go a long way in addressing the fall-out of the global recession. India The integration of India into the global economy over the last decade, as observed by Duvurri Subbarao, in a speech delivered in Tokyo at a symposium on “The Global Economic Crisis and Challenges for the Asian Economy in a Changing World” held on February 18, 2009, has ensured the poverty of the ‘decoupling theory’ or immunity of India and other emerging markets from the current financial cataclysm. Like other economies throughout the world, India has been hit from different fronts, financial, real or confidence, to borrow the language of Subbarao. According to him, the Indian equity market, money market, forex and credit markets have all been dragged screaming to the slaughter slab of the global capitalist economy. The liquidity squeeze had resulted in the drying up of overseas financing for Indian banks and companies which set up a panic among Indian entrepreneurs who had to withdraw their investments from domestic money market mutual funds and non-banking finance houses, thereby bringing untold pressure on both the money market and credit market. Also, the forex market came under severe pressure as companies were converting rupees into foreign currency in a bid to meet their external obligations such that considerable pressure was put on the rupee in the foreign exchange market. The fact that India depends so much on exports to western markets and the Middle East ensured that the global recession nearly signaled the death-knell for India’s foreign trade in goods and outsourced financial services. In fact, the collapse of Lehman Brothers became as much a crisis for Wall St. as for India, coming as it did on top of a turn in the credit cycle, thereby compelling different banks to exercise tremendous caution in terms of their lending policies. Like other countries, India responded to the clear and present danger to its financial existence by way of a financial stimulus package. The Reserve Bank of India in collaboration with the government fashioned a multi-faceted financial response comprising different forms of monetary accommodation and what Subbarao described as ‘regulatory forbearance.’ Thus, the Reserve Bank of India set about putting in place policy measures aimed at creating some form of quarantine against the financial virus from Wall St. According to Subbarao, this was attempted by maintaining a comfortable liquidity position for the rupee and augmenting foreign exchange liquidity as well as maintaining a policy framework that would keep credit delivery on track in order to arrest moderation in growth. In his words, “This marked a reversal of [the] Reserve Bank’s policy stance from monetary tightening in response to heightened inflationary pressures of the previous period to monetary easing in response to easing inflationary pressures and moderation in growth in the current cycle.” From mid-September, 2008, several policy packages were taken, both conventional and unconventional. On the conventional side, Subbarao informs that interest rates were aggressively and rapidly reduced, the quantum of bank reserves impounded by the central bank was reduced while refinance facilities for export credit became expanded and liberalized. Furthermore, measures aimed at managing forex liquidity included an upward adjustment of the interest rate ceiling on the foreign currency deposits by non-resident Indians, substantially relaxing the external commercial borrowings (ECB) regime for corporate bodies, and allowing non-banking financial companies access to foreign borrowing. Among the unconventional measures undertaken were a rupee-dollar swap facility for Indian banks “to give them comfort in managing their short-term foreign funding requirements, an exclusive refinance window as also a special purpose vehicle for supporting non-banking financial companies, and expanding the lendable resources available to apex finance institutions for refinancing credit extended to small industries, housing and exports.” The government’s fiscal stimulus was encompassed in the Fiscal Responsibility and Budget Management (FRBM) Act which, according to Subbarao, “prescribed a calibrated roadmap to fiscal sustainability.” It was the emergency provisions of this enactment that the government invoked in recognition of the scope and intensity of the present conjuncture in a bid to relax the fiscal targets previously set and launched two fiscal stimulus packages in December, 2008 and January, 2009. The stimulus packages envisaged an expenditure of close to 3 percent of GDP on items such as additional public spending, particularly capital expenditure , government guaranteed funds for infrastructure spending, cuts in indirect taxes, expanded guarantee cover for credit to micro and small enterprises and additional support to exporters. It is instructive that these stimulus packages were in addition to an already proposed safety-net for the rural poor, a farm loan waiver package and salary increases for government staff, all of which are expected to stimulate demand. Subbarao has asserted that all the measures put in place since mid-September have had a therapeutic effect on the Indian economy. The financial market is said to be functioning in an orderly manner while the cumulative amount of primary liquidity potentially available to the financial system through these measures has grown to $75 billion or 7 percent of the GDP. This has also resulted in a comfortable liquidity position from mid-November, 2008 as evidenced by different indicators including weighted-average call money rate, the overnight money market rate and the yield on the 10-year benchmark government security. Besides, as a result of the various policies put in place, a large number of banks have since reduced their benchmark lending rates while bank credit has significantly expanded. In view of the foregoing, India, it can be truly said has come out with a well-reasoned and effective response to the global crisis based on the specificities of its economy. Subbarao insists that while policy responses in advanced economies were premised on the need to contend with both the unfolding crisis and a deepening recession, the Indian response should be understood as having been largely driven by the need to arrest moderation in the country’s economic growth. China In the last few years, China has recorded one of the fastest rates of economic growth in the world. Although the growth rate of the Chinese economy has slowed down somewhat, it has overtaken the US to become the second largest exporter of goods in the world after the European Union. In fact, there is a growing consensus among observers that within the next five years or so, China would occupy the No 1 slot in global production. In a Congressional Research Report authored by Wayne Morrison, an expert on Asian Trade and Finance, issued on November 13, 2008, it was stated that China, being a key player in the global economy and holding humongous amounts of foreign exchange, possesses incredibly high nuisance value within the unfolding global financial scenario. The import of all this is that China’s accumulated foreign exchange earnings, amounting to over $3 trillion, a significant part of which it has invested in foreign government bonds, especially US securities amounting to over $1 trillion makes the country one which any serious analyst just cannot ignore. An economy such as China’s which depends so much on exports is particularly vulnerable to the twists and turns in the global marketplace. Although the Chinese exposure in terms of sub-prime mortgage instruments remains very much a matter of speculation, it should be borne in mind that during the 1997-1998 Asian financial crisis, it was able to influence the course of events, presumably on account of its considerable investment in the region. China is also an important destination for Foreign Direct Investment (FDI), chalking up around $75 billion in 2007, the third largest in the world after the EU and the US which constitutes a major factor in its increasingly high profile in foreign trade. Indeed, the IMF had considered China the most important contributor to world economic growth in 2007. In the recent past, the country has become the choice destination for foreign investment, especially in the auto industry and information and communications technology. If China has become such a decisive player in the scheme of things, it goes without saying that we need to pay particular attention to its reaction and policy options in the face of a global financial conflagration. Broadly speaking, China’s response to the current global financial earthquake has been aimed at shoring up its economy in order to cushion it from the tremors, after shocks and other fall-outs. As the Chinese Premier Wen Jiabao reportedly stated on September 27, 2008, “What we can do now is to maintain the steady and fast growth of the national economy, and ensure that no major fluctuations will happen. That will be our greatest contribution to the world economy under the current circumstances.” On October 25, a spokesman of the Chinese Foreign Ministry declared China’s support for “effective and comprehensive reforms” while a few days later, another official stated that “In the future we are also willing, within the ambit of our abilities, to continue positively considering participating in a range of rescue plans.” It is instructive that earlier on, specifically, on October 8, 2008, China’s Central Bank announced a cut in its benchmark interest rate by 50 points as well as the reserve-requirement ratio, matching cuts by the US Federal Reserve and those of quite a number of other major central banks. On October 29, China again reduced its rates by 27 points following another cut by the US Federal Reserve Bank. Furthermore, China announced plans to beef up its economy by promoting greater domestic demand, boost living standards in the poorer sections of the country, achieve more balanced economic growth through lowering dependency on imports, for example, and address a number of socio-economic issues, such as boosting energy efficiency, lowering the acute pollution level in the country, narrowing income disparities and improving the social security safety net, particularly in relation to matters such as health care, education, pensions and social security. Morrison also informs that in October, 2008, the Chinese government announced a number of initiatives, including plans to implement a new stimulus package, encompassing acceleration of construction projects; new export tax rebates; tax and interest rate cuts on housing transactions; increased agriculture subsidies and new loans for small and medium-sized enterprises; and elimination of taxes on interest income from stocks and savings. On November 9, the government announced a 2-year $586 billion stimulus package, mainly dedicated to infrastructure projects. Like all other countries sensitive to the necessity for a rescue package in the face of the ravaging consequences of the impending global financial disaster, China has come out with a bold and fitting plan aimed at absorbing the shock of the meltdown. South Africa The Framework for South Africa’s Response to the International Economic Crisis, issued on February 19, 2009 is, perhaps, one of the most comprehensive, well-thought out and imaginative blueprints elaborated by any stakeholder in the global economy. The stimulus package envisages a public investment programme of R 787 billion over a 3-year period designed to expand and improve South Africa’s infrastructure. More important, the authors of the document declared that the programme was premised on the “collective responsibility to work together to withstand the crisis and ensure that the poor and the most vulnerable are protected as far as possible from its impact.” Aside from that, it was to be ensured that the economy is ready to take advantage of the next upturn and that the benefits of such are shared by all their people. Accordingly, the response is to ensure that the most vulnerable groups in the society should be protected from the full blast of the economic downturn while all effort is harnessed towards strengthening the capacity of the economy to grow and create jobs. Furthermore, the planned high levels of investment in public sector infrastructure must be maintained while the private sector should be encouraged to achieve levels of fixed direct investment and continue with their corporate social investment progammes. The response envisages timely interventions and periodic reviews of actions designed to counteract the downturn. Specifically, the massive investment in public infrastructure entails expansion and improvement of road and rail networks, public transport, port operations, dams, water and sanitation infrastructure, housing construction including low-income housing and publicly owned rental stock, information and communications technology and energy generation capacity as well as education and health infrastructure. The programme is designed to create additional work opportunities because of its emphasis on labour intensive wherever possible and spread across both urban and rural areas. As far as macro-economic aspects of the stimulus package are concerned, especially against the background of the Budget, fiscal and monetary measures are to be put in place to ensure that the crisis does not cause job losses in the real economy. Accordingly, appropriate counter-cyclical measures are to be used to stave off a recession and resultant job losses. The South Africa Reserve Bank is to discuss the interest rate regime with stakeholders as well as ways of lowering the cost of capital and significantly reducing the real interest gap between South Africa and key trading partners as part of responding to the global economic crisis. In addition, labour and the business community and government are to enter into discussions soonest towards tax relief for low income workers and companies in distress. The blueprint also encompasses industrial and trade policy measures aimed at rebuilding local industrial capacity, avoiding de-industrialization and improving competitiveness and performance of key local industries, particularly vulnerable sectors and of small businesses. Sector specific strategies are to be developed to address vulnerable sectors such as clothing, textiles and footwear, mining and the auto and capital equipment sectors with a view to preventing job losses and regaining jobs and productive capacity lost in the recent past and promoting employment creation. In addition, other sectors with high levels of employment such as retail, housing construction and private services are to develop proposals together with labour and business for a rescue package for the affected industries. Areas of utmost concern with early signs of job losses and distress include the electrical and electronic sectors, engineering and the building materials industry. Finally, a special National Jobs Initiative bringing together a range of new and revamped separately administered programmes is to be launched at an estimated cost of R 10 billion over the 3-year Medium Term Expenditure Framework bringing together various government departments such as the Departments of Public Works, Labour, Minerals, Energy, etc. The mandate of this initiative is the coordinated and accelerated financing of industrial and special employment measures to avoid job losses and to actively increase the number of employed persons. Pursuant to awareness of the deleterious consequences of global warming and climate change, it is proposed that South Africa develops strong capacity in technologies and industries so that large numbers of so-called green jobs can be created aimed at mitigating the effects of climate change. Procurement of supplies, services and other requirements wherever possible is to be local and to maintain and increase local output and employment levels, especially in relation to procurement of pharmaceuticals and medical supplies, clothing and textile products, food and perishables, stationery, computers, office equipment and consumables, automobiles and transport services, consulting services and printing. In realization of possible increase in cases of custom fraud and illegal imports as a result of the global economic crisis, great attention is to be given to strengthening the existing enforcement mechanism, particularly risk management and invoice analysis systems and support of high-profile arrests and prosecutions of offenders to combat lawlessness within the import regime. Furthermore, trade measures will be used to address import surges, dumping and to address the short-term crisis of vulnerable sectors. The employment measures proposal lies at the epicenter of the South African stimulus package. Retaining and increasing employment are the cardinal points of the package. Thus, organized business and its affiliates are enjoined to urge and encourage CEOs of companies “to do everything in their power to avoid retrenchments as a result of the global economic crisis, and to instead invest in their people and modernize their productive capacity in order to avoid job losses and in anticipation of the opportunities that will emerge after the global economic recovery.” Vacancies in areas such as education, health and social work as well as the criminal justice system at the national, provincial and municipal levels are to be filled while work that hitherto had been outsourced or considered casual should be regularized with improvement in the conditions of work. Mention should also be made of the expanded public works programme which is designed to provide employment for those not absorbed into the labour market. The programme has already exceeded its 1 million work target in 5 years albeit on a short-term basis. However, it is intended to increase the target to 4.5 million in the next 5 years, with a cumulative total of 2 million full time equivalent (FTE) jobs for poor and unemployed people. Besides, 1 million unemployed youths, women and disabled people will be targeted in public employment programmes directed at socially useful activities, including home-based care, crèches, school cleaning and renovation, community gardens, removal of alien vegetation, tree planting and school feeding. Regarding social measures envisaged in the package, it is important to state the obligation on the government to the people under the social plan policy framework currently undergoing review. The benefits available under the Unemployment Insurance Fund are to be regularly reviewed such as to provide an effective response to the prevailing conditions. Furthermore, there is a proposal for an Emergency Food Relief Programme which is aimed at reducing the hunger level in South Africa by enhancing food accessibility and affordability to the poorest communities and families in distress and all who are experiencing difficulty as a result of the economic crisis. The programme is to be underpinned by a food distribution strategy including improvement in logistics such as transportation, warehousing and procurement in order to reduce food prices in the long term. Cost drivers in the food value chain would be investigated while strengthened enforcement of competition measures will be employed to act against food cartels and collusion which inflate food prices. In addition, Government is to encourage and support food production schemes in rural and peri-urban areas for households to grow their own food with support provided in the form of seeds, fertilizers and pesticides. In spite of fiscal pressures brought about by the current economic crisis, resulting in lower than expected revenues, Government will maintain social transfers and other key social expenditures, including increasing access to free basic services such as water and electricity, to the poor. Government would also progressively and steadily, starting in 2009, extend the Child Support Grant to age 18 and reduce the men’s age requirement for the social old age pension to 60 years. Other government measures will support existing community schemes, which utilize land for food production in schools, health facilities, religious institutions and urban and traditional authority areas. Furthermore, in recognition of the important role that cooperatives can play in absorbing the poor and unemployed into employment as well as providing services in poor communities, efforts would be directed towards promoting the establishment and funding of cooperatives including housing cooperatives and to ensure proper support for and regulation of the cooperative sector. An important aspect of the South African blueprint is an awareness of the need for a more equitable, balanced model of global economic cooperation. Pursuant to this, South Africa is to engage the other parties at all available fora, including the G-20 in order to bring about changes to the present global financial and social architecture so as to respond adequately to the current crisis and avoid future crisis caused by inadequate regulation of critical markets and economic activity as well as insufficient global collaboration with respect to balanced development and to ensure fair, just and equitable outcomes to all, particularly the poor in the developing world. South Africa intends to introduce further discussions at the G-20 level, measures needed to enhance stability in financial markets and discourage and penalize predatory and risky behavior such as short-term, speculative investment and other practices which contributed to recent economic shocks. As part of the need for comprehensive reform of the Bretton Woods institutions to meet the challenges of the 21st century, it is intended to ensure that developing countries, in general, and those of Africa, in particular, are better represented in the international financial institutions. Furthermore, South Africa proposes to pursue a re-focus of the WTO Doha Round such that it becomes developmental in character. Also, it is being recommended that the ILO be strengthened at both the field and global levels such that modalities would be put in place to ensure full and universal observance by all countries of the core labour standards on freedom of association, the right to collective bargaining, non-discrimination, no forced labour and no child labour. Finally, South Africa has created a social partnership of its people to coordinate the country’s response to the global meltdown. The Task Teams established to be the arrow-head of the country’s response comprises the following:
The South African response is, quite clearly, robust and all-encompassing. It is indeed a most comprehensive riposte to the problems thrown up by the global financial crisis. It seems South Africa has succeeded in turning the difficulty into an opportunity by enunciating a rescue package for its economy with the most vulnerable and disadvantaged occupying pride of place in the scheme of things. Deductions from the Comparative Analysis From all the proposals for responding to the current global crisis, it can be clearly seen that practically all the countries reviewed discerned the necessity for concerted action in the form of a financial stimulus or rescue package to contain the fall-out from the debacle. The various responses are meant to help jump start the economies of the countries concerned in the face of dwindling FDI, financial crunch, nose-diving of commodity prices, massive unemployment, stagflation and threatened economic collapse. The different countries in their packages recognized the need to provide some form of safety net for the most vulnerable and marginalized, whether in Russia or South Africa. The upper and lower middle classes can generally work out a survival or copying strategy for the economic vicissitudes that their countries are experiencing which explains the felt need to take care the wretched of the earth in all these countries. The interrogation of the policy responses of the various countries has revealed the poverty of relying on the big players whether on Wall St. or other capital or money markets elsewhere to do right and behave prudently and in the public interest. A free-wheeling capitalism which has encouraged greed among the players to such an extent that it has now become generally agreed that the money and capital markets have to be reined in by way of a firm control over interest rates, the Minimum Rediscount Rates and other fiscal and monetary instruments. Even the citadel of capitalism has since realized that the shibboleth of deregulation, privatization and liberalization have since proven dysfunctional and counter-productive. State intervention in the market is no longer an option frowned against in the face of a threatened collapse of the entire capitalist system. Another deduction from the policy options considered is the necessity for foreign exchange controls in order not to deplete foreign currency reserves and stem the tide of capital flight by both local and foreign investors. Aside from this, canvassers of free entry and exit seem to forget that it is inimical to the interests of the poorer countries of the world which more and more look like mice being invited to a dinner with cats. Also, it no longer looks prudent to continue to maintain foreign exchange receipts in just one currency when a basket of currencies could provide greater protection and nuisance value in an increasingly unstable international financial environment. The poorer countries, in particular, can no longer afford a situation in which their economies would be mortgaged to the fortunes of one particular country and its currency. Nigeria and the Global Meltdown Despite the devastating effects of the global financial crisis on the Nigerian economy, with the crash in oil market prices, a massive foreign disinvestment, the collapse of its stock market resulting in around 65 percent loss of value, ballooning lending rates, incredible unemployment rates, collapse of public infrastructure and public utilities, shutdown of numerous factories and production units, ravaging corruption in practically every sector of the economy, lack of a safety net like unemployment insurance, real and effective health insurance, one can go on and on, it is almost unbelievable that our response to the crisis, has been largely timid and unimaginative, if not, in fact, a non-response. In our usual way of doing things, a so-called blue-ribbon panel has been appointed which seems to have gone comatose. Aside from some noises about privatization of the refineries, removal of mythical fuel subsidies and the suggestion that banks (and insurance companies?) adopt a common year end for their accounts, little else has been put on the table for the resurrection of the nation’s economy. Of course, there is the proposed reduction by 20 percent of the salaries of some public office-holders (nothing said about their sumptuous allowances) and the much-touted N200 billion Commercial Agricultural Credit Scheme. However, if one was waiting for a global and comprehensive blueprint on the scale of South Africa’s response, it is pretty obvious that we have to wait quite a while yet. Now, it is not that we lack the intellect to articulate a well-rounded response to the present situation but it must be noted, with regret, that we are yet to emerge from the inertia that has descended on policy formulation in the past couple of years or so. Regrettably, it is not only ourselves that are complaining about the immobility in public affairs. The rest of the world would seem to have given up on a country that forever continues to snatch defeat from the jaws of victory. Now that we have been reduced to lamenting over the way we are being ignored by the rest of the world, perhaps someone would just wake up and come up with a tour de force on the nation’s present predicament and what needs to be done to come out of the impasse. Those who lost fortunes at the stock market during our own meltdown or lost their jobs to a ravaging recession which had ignited massive layoffs in the battle for survival by their employers should not just sit at home licking their wounds. Same goes for graduates of our numerous universities and polytechnics who have been treading the streets in quest of non-existent jobs. We should all mobilize in order to ensure that correct policies are put in place by government. As Joseph de Maistre once observed, a people get the government they deserve. We need to decry and demand an end to questionable, unethical, sharp practice involving acts such as insider trading, rigging the stock market, tax and custom duty evasion, etc. all of which result in undoing the economy, job losses and impoverishment of the people. We should as a people insist on good corporate governance, transparency and accountability in the different facets of the economy in consonance with tested standards and international best practices. The time is indeed ripe for strengthening our regulatory agencies so that they can arrest all manner of malfeasance in both the money and capital markets. We must do everything that we can to block all the leakages in the financial system in order to be able to redirect our financial resources to critical areas of need in the economy instead of finding their ways at present largely to private pockets. It should be sounded loud and clear that the times deserve drastic action to contain a drastic crisis. The transfer of industrial production to neighbouring countries should inform the powers-that-be that if correct policy measures are not taken immediately to remedy the situation , we might (God forbid) be left with no country that we can call our own. The fate of failed states like Somali should be a wake-up call to the ruling class on the necessity for policy reversals that would rescue the economy from the abyss on which it is precipitously hanging. In the final analysis, it should be brought home to all concerned that Nigeria is indeed at a crossroads. One turn leads to recovery and re-invention of our self-confidence and innate ability to tackle the existential problems confronting the nation’s economy. The other leads to inaction , perdition and ultimate collapse of the nation’s economy. It is my fervent hope and wish that we take the right turn and launch our nation along the path of rediscovery and self-actualization.
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