Wither Nigerian economy – Keynesianism or Friedmanism?—3
Samuel Akinyele Caulcrick

Also see:
Wither Nigerian economy – Keynesianism or Friedmanism?—1
Wither Nigerian economy – Keynesianism or Friedmanism?—2

In two successive articles in the Village sometime back, with the same topic, attempts were made to highlight the dangers of monetarism or free market ideology. The purpose was to warn our economic planners to stay clear of the Chicago ideology. Early last week there was a melt down in Wall Street that threatened the world economy. It was a direct consequence of a market left to self regulation – a key component of free market philosophy. The two articles ... highlighted the perils inherent in the Chicago Boys ideology of Milton Friedman. The two articles were biased toward what has proved to be a better alternative – the Third Way - the proposal of John Maynard Keynes (Keynesianism) on sustained economic health. 

Keynes had argued that since business investment necessarily fluctuated, it could not be depended upon to maintain a high level of employment and a steady flow of income through the economy. Keynes then proposed that government spending must compensate for insufficient business investment in times of recession. Since 1989, Friedman’s neo-liberal triumvirate of privatisation, deregulation/free trade and drastic cuts to government spending had become official in the Washington financial institutions because of the influence of the Chicago Boys in world financial circle. John Williamson, at that time, unveiled “the Washington Consensus,” which was a list of economic policies that the World Bank and IMF considered the bare minimum for economic health – “the common core of wisdom embraced by serious economists,” they boasted. 

As the world economy dumped Keynesianism for Friedman’s monetary ideology, led by Washington in the early eighties, wealth creation gradually shifted from the factory floor to the trading floor. The stock market created phantom wealth that assures false sense of financial security. It has turned out, as predicted by Keynes, to be merely paper-wealth. This ideology became the only medicine and was rammed down the throat of the Third World economies. Those that took the doses have remained on the economic sickbed ever since. Fewer countries that have managed to shift away from what Washington wanted are in convalescence, but majority of the Third World economies are still in coma. China and India, two of the world currently roaring economies, delayed their embracement of the monetary economic system until well after they had solidified their industrial base. In Nigeria, we were hoodwinked by our spineless paper-qualified economists, who got it wrong. Our economy has been flattering ever since, thanks in part to oil. 

Early last week, the peril of a market left to regulate itself became evident and in order to prevent turmoil in the world economy, President Bush yet again has to bail out the market to a tune of nearly $700 billion of U.S. taxpayers’ money. The president, a neo-liberal himself, has been jolted back to some senses. Guess what, he has embraced John Maynard Keynes’ argument in order to sail out of the economic storm that was gathering last week, which Friedman’s ideology had precipitated. It appears the doctor is now suffering from the same illness as his patients, but has refused to prescribe for self the same medicine he had given out to his patients. The Third World economies were discouraged and prevented from bailing out their ailing industries. I hope this is a vital lesson to our paper-qualification economists. How I wish Friedman too was alive to eat his words about what he said about Keynes. ‘Keynes, I think, got it all wrong from the beginning,’ Friedman said on several occasions. 

Those of us who are not economists are kind of wondering where the Nigerian economists with different views have disappeared to. Are they hiding in the cupboard? If they are, we think it’s time they came out of hiding for the sake of this country. The president in his cabinet reshuffle should expunge the Chicago Boys from his economic team. Those have inflicted untold hardship to Nigerians and have damaged the Nigerian economy. Most of them we know are charlatans, but have been elevated to stardom only because of the society’s placement of premium on paper qualification. Some of them have no economics ideology and only play to the gallery of Wall Street. They have prevented any sensible argument and because of their influence around the corridors of power, solid economists that know their onions were sent into economic exile. They gave us the impression that those were economists of the left. The nation has come off worse for it. They made Babangida inflict pain on the nation which we are still reeling on. They, however, presented a plan that made the rulers superrich in a sick economy, while the majority of the people have been abandoned in the economic forest.  

Samuel Akinyele Caulcrick

Robot  # 1 | 23.09.2008 02:12

Keynes had argued that since business investment necessarily fluctuated, it could not be depended upon to maintain a high level of employment and a steady flow of income through the economy. Keynes th...Read the full article.