Human agency and economic reforms effectiveness
Economic reforms are transformational processes designed to alter the structures and operations of economies so they can operate better. Still, their effectiveness hinges to a large extent on the human factor. From the conceptualisation to design and implementation, the human agency plays a critical role in the success or failure of all reforms. Economic reforms […]
Economic reforms are transformational processes designed to alter the structures and operations of economies so they can operate better. Still, their effectiveness hinges to a large extent on the human factor. From the conceptualisation to design and implementation, the human agency plays a critical role in the success or failure of all reforms.
Economic reforms are broad and all-encompassing. They include market reforms; institutional, policy, and structural reforms, among others. On the sectorial level, such reforms also involve critical transformation in the banking and financial sectors, and the labour market, so they can contribute their quota to the programme. They also involve eliminating irrelevant institutions that have outlived their usefulness in an economy and creating new ones to superintend the desired economic and business environments envisioned by the reformers.
In the creation and staffing of such institutions, reformers are often handicapped when it comes to staffing the new organisations to direct the activities of players in the new environment. It is not enough to have institutions; their helmsmen must believe in the objectives of the reforms.
The global economic powers of today got to where they are now through a series of painstaking reforms. China moved from a predominantly rural economy to one that is currently driven by technology in a very fast lane. For a long time, China had only one bank; the People’s Bank of China, which was at the same time a central bank as well a commercial lender. Of course, it was clear that under such an arrangement, it would be impossible to run a market-driven economy that attracts and rewards capital appropriately. Today, China’s banking sector is different. It has banks that play various roles in a normal economy.
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Without reforms, nations would stagnate and begin to decline economically, socially and even politically. But it is through reforms that the engine of politics is oiled sufficiently to keep it going. Regular reforms of an economy ensure that the benefits arising from a booming economy are assured to keep the political structure sufficiently rewarded and taken care of, for the members to keep supporting the leaders.
Despite all these, reforms face great challenges. This arises from various factors. For instance, while the goals of reforms are generally in the best interest of the entire populace, the elitist implementation strategies fail to effectively market the programme to the ordinary folks so they can be part of the processes in the true sense of it.
This partly is the reason such programmes sometimes turn out to be occasions for government officials to resort to dispensing patronage because they themselves are untouched by the inconvenience arising from such reforms. This phenomenon is the aspect of reforms that causes citizens to abhor such exercises because the costs are not equitably distributed among the classes of people. When ordinary citizens see or feel only the negative aspects of reforms, then they are bound to resist such programmes as deliberate measures to punish them.
Reforms are part of the continuing search for increased efficiency in a nation’s allocation of its resources. This is a constant feature of an economy because the essence of having an economy in the first place is to have a systematic arrangement for the management of resources, and doing so in the most efficient manner. Achieving higher levels of efficiency means that over time costs are being reduced for every activity undertaken in the economy, and microeconomic theory says that this leads to consumer welfare.
Reforms can also be seen as the search for higher productivity or output so that on an ongoing basis, the economy will be able to satisfy the needs of the citizens. Thus, reforms are important if we must achieve improvements in economic welfare for the populace.
The Tinubu administration came into office with a promise to implement reforms and did not waste time to begin this. This is where Nigeria is today: wide-ranging reforms, from the price of oil products to the price and pricing structure of our currency, the naira. The reforms have reached every nook and cranny of the economy.
This is why a key requirement for success in economic reforms is that the government or the reforming agents must keep their eyes on the entire macroeconomic environment. In this regard, those driving the current economic programme must be clear as to what they want to achieve at every point in the course of the reforms.
Right now, there is so much instability in the macroeconomic system. Unfortunately, there is not much that can be achieved under an environment characterised by instability. We must set the magnitude of the variables that we expect to work with.
What do we want to achieve? For instance, the government has said it wants to attract investors. But in an environment characterised by high-interest rates or even volatile rates, there might be a challenge realising this target. This requires the authorities to pursue policies that are investor-friendly. The price level must begin to come down as policy reforms take root.
Along with high interest rates, there is also the trouble of rising costs. Right now, Nigeria is a high-cost business environment, and this is not good for the country’s reform efforts. So, as a part of the effort stabilises the environment, policies to address the generally high cost in the economy must be designed and gradually implemented over time.