Can governments be business-friendly while remaining hostile to properly functioning markets? Both the crises currently confronting the economy and the laboured response of the incumbent federal government to these strip this question of its academic components. As our main measures of economic health worsen, finding the right answer to this poser acquires an existential urgency.
If our experience of governments (especially at the centre) since the mid-1980s is any measure, then the answer to this question is a “Yes”. Responding to a balance of payments crisis — prompted by oil prices having dropped from around US$35 per barrel in 1980 to US$27pb at the beginning of 1986 (and in the 12 months to end-December 1986, to under US$10pb) — the Babangida administration adopted the structural adjustment programme in 1986.
The main outcomes of the programme were fundamental reforms to trade, agricultural, foreign exchange, and business regulations in the economy. But by far the more radical component of the changes wrought as part of the economy’s remediation some three decades ago, was government’s commitment to step back and let the private sector drive economic activity. So crucial was this transition in public policy thinking that every government we have had since has felt a need to plight its troth to achieving this goal: a private sector-led economy.
What has it meant in practice, though?
In the last 30 years (as in the two decades-and-a-half before that) only private sector businesses have thrived whose connections with leading government functionaries remain strong. Under military governments, only those businesses receive government patronage whose prime movers support the sundry mad hat schemes designed to perpetuate in office whoever the sitting dictator was. In this period, civilian governments have been no different. Most businesses survive under them because the latter provide quasi-legitimate sources of party-funding.
Surely, crony capitalism cannot be what we mean when we insist that official policy is aimed at supporting private businesses to become the engine of our economy?
However, crony capitalism is consistent with a “nanny state” mentality. A government, fully aware of itself, and having defined its role as that of protecting the people, is also persuaded that the people are unable, by themselves, to look out for their own interests — and thus acts all the time to prevent the people from harm. This definition of the “state, its purpose, and its relations to the people” approaches its apotheosis in the Buhari administration.
Now (through these lenses), each assay at democratic rule since independence at the political level, “harm” is often the policies of the opposition party. So, the incumbent government assumes the duty of emasculating the opposition; and subverting the popular will by regularly rigging elections. If you remember that the “people” are not sophisticated enough to choose for themselves what is right, nor are they permitted to err in the exercise of this right, then even the rigged elections are but an act of charity bestowed by an all-knowing government on a still benighted would-be electorate.
It is to this loathing of the people’s right to choose that we must turn, therefore, in trying to understand why we continue to conflate crony capitalism with the market. Incidentally, this antipathy to the people being able to choose, or rather, the paternalistic assumptions about the people’s competence (or lack thereof) also lies at the heart of left-wing politics.
And they, i.e. all that subscribe to this perspective have a point. For not all will choose well. Take the transition from defined benefits to defined contribution pension schemes. Often advertised as strengthening the pensioner-to-be’s ability to choose instruments that enhance his/her final pension, it is anything but. It only allows both governments and private sector businesses to escape their unfunded pension obligations. It leaves individual pensioners open to the vagaries of the market. And only a few would come out of it less poor.
Left to the vagaries of the market, therefore, a few would thrive, the larger number would put in middling performances, and an unfortunate few would always remain relatively poor and vulnerable.
On the positive side, because the free choices that people make in the markets send (price, quantity, and quality) signals to producers not just are resources better allocated when markets function properly, but society innovates better and faster. And in such societies, the adjusted quality of life measures is always on the up, despite the extremes of relative wealth and want that discontents indicate.
As Otto von Bismarck demonstrated in the latter half of the 19th century the solution for those who are likely to fall off the markets, is the design of a safety net. One strong enough to hold, and as close to the ground as possible that it invites those who fall off to attempt going back up. Put differently, then, the markets may not guarantee equality of outcomes amongst the different cohorts that comprise our economy. And perforce call for countervailing policies to compensate for this.
But these policies should only aim at guaranteeing equality of opportunities.