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Much has been written about the Transnational Corporation of Nigeria PLC (Transcorp). Media criticisms of the circumstances of its birth and the shenanigans surrounding its operations have been spot on. The ethical burden that it carries by virtue of being birthed by the president himself has been pointed out, as has the unacceptable duplicity of its chairman, Mrs Ndi Okereke-Onyuike, who is also the director-general of the Nigerian Stock Exchange, and the umpire of
Nigeria
’s investment market.
The shame of Transcorp is magnified by the fact that not long ago, many of its big players helped raise much of the cash for the president’s reelection campaign. Most of them also helped drum up support for the failed Third Term campaign, and may have also supported it with cash. All these point to the politicization of business in an egregious manner. They also point to the monetization of governance—the subordination of the serious matter of governance to the narrow dictates and interests of a select business aristocracy.
The exceptional vigilance of the media on the Transcorp phenomenon has been impressive. The criticisms have been focused and revealing. The critique that has resonated loudest with me is the accurate and perceptive observation by one columnist that Transcorp represents the substitution of a private monopoly for a public one as part of the on-going privatization process. This is my point of departure.
Transcorp’s shady acquisitions and the ethical and legal questions they raise are no doubt troubling. But the company is symptom of a larger problem of a flawed economic philosophy—some would say the lack of an economic philosophy. The emergence of Transcorp was not accidental; the company is not the product of a sudden presidential economic revelation, contrary to what some observers have said. It grew out of, and epitomizes the deep-seated belief in Mr. Obasanjo’s economic management team, that the best way to create wealth and spread prosperity is to economically gentrify Nigeria—to create and nurture through government patronage and concessions, a capitalist behemoth.
It is this belief, this economic philosophy, if you will, that has been packaged in an empirical, programmatic way and cleverly labeled reform. Several undeclared assumptions serve to authorize this regime of economic management. First, it is assumed that a homegrown transnational corporate giant like Transcorp will create jobs, compete for national and international business opportunities previously dominated by foreign companies. This would encourage the retention of capital in
Nigeria
and discourage its flight.
The conceptual designation for these assumptions is a familiar compound word called trickle-down. The central operative assumption here is that a pro-big business economic policy would make corporate
Nigeria
richer, deepen their capital base, and enable them to hire labor and invest in new sectors and technologies, which in turn would facilitate the creation of wealth and jobs. The more jobs you create, so the theory goes, the more money people have to spend on goods, which in turn help sustain the business class in a cyclical wheel of intertwined economic fates and fortunes. The economically empowered clique of super businessmen would also invest in innovative schemes, become venture capitalist, and sponsor research into new wealth-generating ventures.
It is not a new economic thinking. It has always been around. It is derived from supply-side economics, which prioritizes the business (industrial and service) sector of an economy over the consumption sector. Supply-side economics and the notion of trickle-down have been at the heart of neoclassical economic formations for a long time, and have constituted the bedrock of economic management in the West for centuries. The theory is simple: if you pamper and give concessions to industrialists and big corporate players, the nation will reap indirect, trickle-down rewards. Investing in, patronizing, or giving concession to big business is an indirect investment in the economy—in social welfare. It is assumed that such an investment would ultimately boost job creation, savings, and consumption.
There is, however, an alternative economic vision, demand-side economics, which is the antithesis of supply-side economics. Demand-siders believe that the thrust of any economic policy aimed at generating and spreading wealth should be consumers. The emphasis, they argue, should be on the demand or consumption side of the economy. Instead of creating, nurturing, and empowering a small class of super-rich business people a la Transcorp and hoping for benefits to trickle down to everyone else, demand-siders believe that those who purchase goods and services—which means almost everyone—should be the focus of any effective economic imagination. In this thinking, if the government must intervene in the economy or give out concessions, incentive, and subsidies it should not go to big business (the providers of key goods and services) but to sectors which would directly boost the purchasing power and quality of life of consumers.
This is a fundamental divergence from supply-side economics. Demand siders have no patience for trickle down or indirect benefits. They do not believe that the economic fates of consumers should be tied to the fortunes and the assumed behavioral patterns of business elites. The foundational assumption of demand-side economics is not, however, anti-business or anti-big corporations, although it may appear to be so. This thesis is quite clear-cut: consumption drives an economy. The people who consume goods and services are the most important people in an economy. They deserve all the breaks they can get from government. They deserve incentives, tax breaks, salary boosts, subsidies, concessions—anything that would increase their consumption activities and make them better and bigger consumers. The attraction of demand side, consumer-oriented economic management is that the biggest direct beneficiaries from any increase in consumption are—you guessed it—big business, the producers and providers of goods and services. This is one of the reasons why the objection of big business to policies which favor consumers is beffudling. As in supply-side economics, there is a cyclical element here, with each node of the economy playing a role in the cycle of economic progress.
It is clear then that both visions of economic progress share the same ultimate goal: economic prosperity. They also share the notion of complimentary economic roles for the business and consumption sides of the economy, and it appears that the difference is a chicken and egg question. But this reading would be a little misleading. The two schools of economic thought differ in their very perception of wealth. One believes that wealth is not wealth unless it is in the hands of the consumers of goods and services and directly serves their needs. In this perception, consumers fuel business or capitalist growth—they take care of business, so to say. The other believes that the concentration of wealth in the hands of a few investment-savvy and enterprising corporate elites like Transcorp is the true measure of a country’s wealth, and that it is this concentration of wealth that fuels an economy. In other words, big business takes care of consumers and fuels consumption, not the other way round. At this juncture, I will confess that I share the vision of demand-side economics because I believe that it puts many more people at the center of economic planning and thinking than supply-side economics. Supply-side, trickle down ideology is fraught with problems and contradictions.
First, one of the claims of smug neoclassical economics, which supply-siders dogmatically adhere to, and which seems to be driving the current economic “reforms,” is that a corporatist economy approximates the virtues of free enterprise and the doctrine of the free market better than a consumption- or consumer-centered economic management. The problem is that, in practice, this assumption runs quickly into trouble, which often exposes the hypocrisies and contradictions inherent in it. The blatant way that the government has rigged the privatization process in favor of Transcorp is not a testament to free enterprise; it is capitalist cronyism that undermines free enterprise and the concept of free markets. Why do big corporations—emergent and established—need huge tax breaks, enormous subsidies, debt write-offs, and other perks that have been awarded Transcorp if the market is truly free and favors the toughest competitor? This question has been asked many times about the so-called pro-business policies of some Western governments. Such pro-business, trickle-down policies have included massive corporate subsidies and politically-mediated government patronage. As in
Nigeria
, the more the contradiction is posed, the less satisfactory the answer becomes.
Second, a key thinking behind Transcorp and similar manifestations of this problematic economic vision is the claim that if you produce a sizable group of wealthy businessmen, they will help engineer economic growth. This claim relies on a notion of human nature that is flawed: that wealthy people will always invest their monies in productive enterprise or share their wealth with the rest of us. When wealthy people become super wealthy, they do not always plough their new wealth into new, job-creating ventures, or into the sponsorship of innovation and research. They often invest more of their new wealth in opulence and vanity than they do in innovation, new industries, and job-creating ventures. This is especially true of
Nigeria
, where there is an entrenched culture of flamboyance and material vanity.
Even if the mega-rich investors in Transcorp could be relied on to invest their new loot in trickle-down ventures, how can an economy that has been made unfriendly to new investment and expansion by an acute shortage of electricity support such additional investment that would supposedly generate jobs and boost consumption?
Finally, even if the above problems didn’t exist and a corporatist elite could be relied on—and empowered— to create wealth, how would the created wealth find its way to the rest of us non-corporate players? In other words, how would the created wealth be distributed? The trickle-down concept assumes a mechanical, almost automated flow of wealth from the corporate establishment to the people. Such mechanical and theoretical assumptions have already imperiled several IMF and World Bank neo-market reforms in several African countries, forcing even those bodies to admit failure and to apologize for tinkering with African economies on the basis of unrealistic models of human behavior, wealth flow, and cause and effect. I am referring here to the spectacular failure of SAP in several African countries, a failure which has since discredited the notion of trickle-down.
If the notion of trickle-down economic benefits driven by the creation (by government or private associative will) of corporate behemoths has been discredited and consigned to game-theory and textbook economic modeling, why is it still driving the current economic “reform” and helping to inform the creation of Transcorp?
There is no easy answer to this question. In fact any good answer would involve an excursion into the affiliation, orientation, and single-mindedness of those running the Nigerian economy under Mr. Obasanjo. We have an economy that is being run with a single overriding goal: to improve the macroeconomic ratings of
Nigeria
in the eyes of the Bretton Woods institutions. The belief that economic progress starts with largely abstract advances and the creation of a corporate power house is the single most powerful economic imperative in Mr. Obasanjo’s idea of economic management. The corollary has been a callous disregard for mitigating evidence, for alternative visions of economic progress, for sound and more realistic economic paths, for reasoned expert criticisms and, more importantly, for the economic aspirations and needs of Nigerians.
The result has been an economic “reform” program that does not place Nigerians and their concerns and problems at its heart. The “reform” has also ignored commonsensical economic reasoning, lessons from peer countries, and the need to put real people before the pursuit of paper prosperity.
Take the case of fuel subsidy. The removal of much of the subsidy on petroleum products represents perhaps the most glaring example of the government’s determination to cater to big business ahead of Nigerians. Whether the government did this to repay corporate donors to the president’s election campaigns and pet projects as some people have alleged is not really the issue. That may be part of the explanation for the government’s broader commitment to serving the needs of corporate
Nigeria
. But in these matters political expediency has often converged with an underlying economic vision which venerates the primacy of the corporate elite.
Outside the confines of this narrow set of explanations, the removal of the subsidy on fuel does not make much economic sense despite government propaganda to the contrary. Governments all over the world routinely subsidize products that are deemed central to the working of the economy—products like fuel. This is done in the overall interest of the economy. It is not economic paternalism as some people have argued. The economic reasoning behind instituting and maintaining subsidy on strategic national products—and in Nigeria the entire economy runs on fuel—is quite sound and compatible with a modern capitalist economy.
The logic is simple. A subsidy on fuel keeps inflation in check, and increases consumption and disposable income. What people do not spend on fuelling their cars or on public transportation they will either spend or save. So, both saving and spending, two important economic indicators, benefit. This helps to raise consumer confidence, the volume of economic transactions, and builds a capital base for a good credit system. This chain of benefits that results from selective subsidies on important national products seems completely lost on Mr Obasanjo’s dogmatic, neo-liberal economic team and their World Bank inspirers.
Brazil
,
Venezuela
, and
Saudi Arabia
are three of many oil-producing countries that have grasped this economic logic and have refused to be deceived by the blanket and false condemnation of all subsidies. They have maintained massive subsidies on petroleum products. If many Western countries continue to use subsidies to protect farmers and certain industries and as a weapon of economic nationalism, why should we not apply subsidies in a narrow, selective way to boost our economy? When such a careful, strategic use of subsidy on our most important national product is backed by sound economic reasoning, it is almost criminal to continue to insist on the unrealistic postulations of theorists in the World Bank and to use them to justify subsidy removal.
There are other examples from the many practices that the government calls reforms that are equally illustrative of the government’s elevation of dogma and ideology over economic realism.
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Authors 
Posted by Robot| 11.07.2006 15:31