Western governments always pursue Keynesian economics as developed countries. But through the International Monetary Fund, they impose neoliberal economics on developing countries' governments. In other words, while they pursue expansionary, deficit-spending policies that focus on growing the real sector, creating jobs, and keeping infrastructure modern and upgraded, they continuously insist that developing countries should pursue anti-growth and anti-job macroeconomic prudence, including balancing their books every year (and possibly having budget surplus) by keeping capital spending low without borrowing even to invest in infrastructure. The goal is to keep developing economies in perpetual economic stagnation (if not in perpetual deceleration), leading to economic devastation and social dislocations.
While the IMF forces developing countries' finance ministers and their central bank governors to pursue restrictive fiscal and monetary policies, developed countries' finance ministers are never expected to toe that path as to cut deficit spending, let alone keep budgets balanced; neither are their central bank governors disposed to pursuing a monetary policy that could lead to increasing interest rates rather than lowering them.
But why are western governments not practising what they preach to the developing countries? Understandably, practising what they preach should amount to putting their economies in the same reverse gear they put developing economies, with such devastating consequences as difficulty to grow the economy, create jobs, and most importly, generate desirable tax earnings for the government. In short, western governments do not need to be told that cutting interest rates and increasing government deficit spending are the twin boosters of the private sector and demand.
Therefore, contrary to what imperialist neoliberals and their local agents in developing countries have falsely made us to believe, the system they operate in reality is Keynesianism for the west and monetarism for developing countries; meaning pro-growth and pro-job socialism for them and anti-growth and anti-job capitalism for us. In other words, while running budget deficits on a permanent basis should be okay for them, especially as long as the resulting debt is productively channelled toward justifying growth, such growth decisions are believed not to be tolerated in developing countries like ours.
Refusing developing countries too to "live beyond their means" like them has made it extremely difficult for the finance ministers in countries like ours to insist on borrowing to invest in infrastructure development, the secret of economic development and the instant game-changer that make unstoppable the acceleration of economic growth. But isn't it naive for us to agree with their ladder-shifting IMF and the World Bank that can't stop arguing against developing countries ever living beyond their present means, when it is by living above our means the same way young families live above its income, especially when they have to purchase new family cars and houses as well as train children in school, that the future becomes more prosperous than the present? In other words, neoliberals are always insisting that developing countries should be saving not spending, not to mention borrowing to invest in the development of their economies, like young families do.
That their representatives in countries like ours are bold enough to agree that there are no justifications for us to borrow even when it is obvious that there's no way developing countries can ever generate enough money internally — especially given their low saving-investment rates — to invest in development. The fact is that no matter the future benefits to the economy, even borrowing responsibly and investing productively should not be allowed.
But without investing in strategic infrastructure, how could countries like Nigeria be able to address their huge infrastructure deficit, or be expected to become as competitive as developed countries, enough to begin to narrow the present gap that forces them into the world's number one dumping grounds for foreign made goods, they should ordinarily be making themselves? If our clueless economic team seems to be rolling out drums in self-praise simply because some imperial rating agencies like Fitch, Standard and Poor's, and Moody's are mockingly assigning us some phony growth numbers to the country, should we be expecting any wise development decisions from such a team, even when it is clear to every eye that forcing us to simply live within our means has forced us to believe in such a macroeconomic prudence, even when it is anything but prudent?
But why should we be so fooled into believing that we should preoccupy ourselves with saving for the future rather than efficiently investing in the rapid transformation of our economy in ways to catch with the West? For how long should we continue to refuse borrowing productively, when the history of today's advanced economies is a history filled with heavy borrowings and heavy investments in infrastructure, especially during their initial take-off stages? In other words, shouldn't we be borrowing today to invest in our future? Besides bequeathing productive debt to future generations, we should also be bequeathing better infrastructure and superior and a more stable economy and a more inclusive society. Or, how should the country expect to succeed in accelerating its growth without having to live beyond our present means? That in the middle of such high infrastructure deficit, our debt-to-GDP at 18.30 per cent, remains among the lowest in the world (even far lower than Ghana's 44 per cent), compared with America's 105 per cent, Brazil's 65.50 per cent, China's 23.0 per cent, India's 67.57 per cent, and South Africa's 39.90 per cent. These economic superpowers and emerging economic superpowers, whose state of infrastructure is already world-class.
And that the Central Bank of Nigeria fights inflation without preoccupying itself with how much of it translates to economic growth and employment makes one wonder what exactly is the basis for such monetarist policy drive! What exactly is driving such tight monetary policy that in crowding out investment in the real sector also slows down job creation and tax revenues for government? The present actions and inactions of those running our monetary policy are only confirming the deep-seated nonchalant attitude of our so-called monetary policy technocrats, notwithstanding that it is in their hands the nation's lifeblood is placed. Obviously, at this critical stage of our economic development, one should have expected the CBN to abandon its current monetarist policy if not for any reason at least for the very fact that such entrenched monetarist regime has neither short-term nor long-term benefits to the economy. But why should the managers of the our monetary policy ever care when their newfound absolute independence gives them a sort of sovereign and non-representative powers in our representative democracy, whereas the US Federal Reserve System is forced by the law establishing it to ''conduct the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment…by moderating long-term interest rates;" (which is) done by constantly having the Fed Chairman regularly subjected to Congressional grill.
The only plausible explanation is that the CBN is adopting this high interest rate monetary policy regime simply because pursuing single digit interest rates, even as important as it is in promoting the real sector economic growth, should amount to excessive increase of system liquidity that could only be done simply by printing naira. The fear could be that in such a high import dependent economy, where virtually everything consumed by its 170 million people is imported, any loose monetary policy could prompt a runaway inflation which could trigger a corresponding run on the naira, leading to inevitable pressure on scarce foreign exchange reserves, especially in such absence of import bans or high tariffs.
Yes, it could be argued that given this reality, the CBN is in a dilemma here. That is that should it lower interest rates in such an absence of productive activities, more naira chasing fewer dollars would put more pressure on the exchange rates leading to a runaway inflation. Yes, it is a plausible argument to make but only if the country's fiscal and monetary policies are believed to be conducted independently. But is that the case? Should that be the case? Of course, since that shouldn't be the case, there's no way those managing our monetary policy should argue that their monetary policy decisions are made without taking fiscal realities into account.
Taking fiscal policy realities into account in formulating monetary policy, the CBN should have insisted on the need to raise import duties so as to discourage imports by encouraging local industries to begin to make the same imported goods. That should have been a macroeconomic decision taken in an effort to reduce the current destructive economic financialisation and deindustrialisation that are forcing the CBN to be pursuing its present anti-real sector growth and anti-job tight monetary. With this drastic change, there is no way the naira should be expected to find its true level, a true level that is made possible by an inward-looking CBN that attracts investors more to the real sector and less to speculation.
But, besides reducing imports pressure on the naira, with flexible exchange and interest rates leading to enhanced macroeconomic growth, banks' pricing of risks too should become more effective with cheap money going to the real sector of the economy. So, the urgent need to focus the fiscal and monetary policies on economic nationalism that first drives the real sector and infant industries through high import tariff and expansive local content regime imposition is long overdue.
