Buhari’s economics v Jonathan’s economics

The first time he used it, Clinton was blaming President Bush for the 1990-1 economic recession (troubles) in America.  The second time he used it, he was calling Americans’ attention to the fact that his government had ‘repaired’ the economy.While to some extent, Bill Clinton might have deserved to be reelected for his work on […]

The first time he used it, Clinton was blaming President Bush for the 1990-1 economic recession (troubles) in America.  The second time he used it, he was calling Americans’ attention to the fact that his government had ‘repaired’ the economy.
While to some extent, Bill Clinton might have deserved to be reelected for his work on the economy, George Bush might have not completely been deserving of losing the election in 1992 due to the poor economy.  
But he made a promise to Americans which he broke; and they remembered.  “Read my lips,” he said, “no new taxes.”  Bush then made a deal with Congress and raised taxes while at the same time cutting government’s spending – so Americans punished him.  When Clinton came, he did the same things: made a deal with the Congress to cut government spending and raised taxes in order to reduced deficit – the same thing George Bush purposed.
However, Clinton didn’t pledge that he wasn’t going to raise taxes, so he was not exactly burdened with the prospect of losing reelection.
So if the economy is a significant factor in deciding elections elsewhere, does it hold the same sway over electoral fortunes in Nigeria?  If I would hazard a guess, I would say yes, it does. One of the chief discontents of Nigerians against President Jonathan’s administration is about the economy: lack of jobs (the economy), lack of money (the economy), and the lack of business (the economy).
If this claim holds, then what are the economic plans of our two major political parties? And what are the economic leanings of the presidential candidates?
When experts, namely, Charles Soludo and NgoziOkonjo-Iweala attempted to provide answers, they muddied the water by yielding to name calling and name dropping.  “You’re a loser!”  One said.  “You’re incompetent and probably a thief!”  The other said.  “Look, I’m an international consultant!” One said.  “May thunder strike you down!”  The other didn’t say.
However, they did indeed make economics difficult for us, the lay people.  A subject which the late Professor Sam Aluko described as only “common sense complicated.”
Since the experts have failed us, think of today’s column as me trying to explain things to myself; but you’re free to follow along.
It’s important for the people to know the consequences of the actions their government wants to take. In doing this, we must also consider the long-term effects of those actions instead of the highly visible short term effect.
But, first, we must remember that economists are a disagreeable bunch.  They don’t get along with themselves, let alone with others.  It’s said that if you put 10 economists in one room and given one question, each will come up with a different opinion.
Consider for example, President Clinton’s announcement in 1999 that $2.8 trillion would be devoted to Social Security out of the projected $4.5 trillion budget surplus in the next 15 years.  The twist was, by law, $2.3 trillion was already devoted to Social Security.  If you totaled these, you get $5.1 trillion out of the projected $4.5 trillion!  Were they double counting?  Yes, said Dan Crippen, the congressional budget office director.  No, said Alan Greenspan, the Federal Reserve Bank director.
 If you add politics to the equation, we’re likely to get the sense that majority of those economists are clearly out to shaft us, and the remainder of them would be simply out for mischief.
Take for example the position David Stockman, President Reagan’s budget director, found himself in 1981.  The president had promised Americans (as politicians often do without consulting reality) that the nation would have a balanced budget by 1983.  
Not only was Stockman forced to shift the date to 1984, but also found himself doing some wondrousfinancial shenanigans.  In 1986 Stockman wrote in his book, ‘The Triumph of Politics:  How the Reagan Revolution Failed’:
“I soon became a veritable incubator of shortcuts, schemes, and devices to overcome the truth now upon us – that the budget gap couldn’t be closed except by a dictator.  The more I flopped and staggered around, however, the more they went along.  I could have been wearing a sandwich board sign saying: Stop me, I’m dangerous! Even then they might not have done so.”
Classical Economics v Keynesian Economics
Economics is the study of how societies manage their resources, says Gregory Mankiw; that’s simple enough.  Trouble starts when we realize that those resources are scarce.  In economics, there are two major schools competing for space. The classical economists believe that government should stand aside and allow the market to do its magic.  That is, if there are problems in prices of goods, the market would self-correct.  One of the giants in this school, Henry Hazlitt, wrote in his classic, ‘Economics in One Lesson’ that the belief that government interventions in the economy engender relief is a fallacy; especially if those interventions only focus on the short-term and address only one group of people.
“This is the persistent tendency of men to see only theimmediate effectsof a given policy,” he writes in his book, first published in 1946,“or its effects only on aspecial group, and to neglect to inquire what the long-runeffects of that policy will be not only on that special group buton all groups. It is the fallacy of overlooking secondary consequences.”
The Keynesians on the other hand are skeptical about market self-correcting, believing instead, that prices are sticky and do not adjust immediately to economic conditions and therefore may need to be unstuck.  This school is also a big advocate of public works, i.e. government spending on projects such as housing, roads, bridges, etc. to create employment, whenever necessary.
Now, it’s difficult to find a society which exclusively practice the teachings of any one particular school. Indeed, there’s now New Keynesian Economics and New Classical Macroeconomics – to add to the confusion.
So which schools are the parties leaning toward?  It’s not clear cut, however, there are some aspects of their programmes that are easy to tell.  For example, APC promises a great deal of public works, which would make Keynesians happy.  On page eight of its manifesto, it writes, “Expand domestic demand and undertake associated public works programmes to achieve this goal [of creating employment].”  I’ve not seen the manifesto of PDP, but from what they’re saying and their endless equivocations about capital projects, they also promise the same things.
But we have to keep in mind that more public works means more taxation; on account that the government has to source the money from somewhere and most of the time resort to taxation.  When this happens, neo-classical economists argue – and I agree to some extent – the government is not creating jobs, but reallocating the jobs.  If you take more money (in taxes) from me to build more bridges, you’re creating jobs for the builder and the engineer, but you’re also taking away a job from my tailor to whom I wanted to give the money the government took from me, because I needed a new kaftan.  
Above all, what is discouraged is building a bridge just to create employment, not because the bridge is needed. But in a place like Nigeria where bridges and roads are needed, public works should be encouraged.  Even Hazlitt agrees: “A certain amount of public spending is necessary to performessential government functions…to supply essentialpublic services. With such public works, necessary for theirown sake, and defended on that ground alone, I am not hereconcerned.”