Public-private balance (II): beyond the obsession with one approach

The neo-liberal myth that public institutions cannot work; that everything must be privatised; and that this is the trend worldwide, is unfortunately alive and well in Nigeria. If this model is the ultimate future of all public policy we owe it to ourselves to ask whether these assumptions are indeed backed by facts or not? […]

The neo-liberal myth that public institutions cannot work; that everything must be privatised; and that this is the trend worldwide, is unfortunately alive and well in Nigeria. If this model is the ultimate future of all public policy we owe it to ourselves to ask whether these assumptions are indeed backed by facts or not?
One thing is clear from evidence: those nations that adopted this approach hook, line and sinker, failed woefully, and had to retrace their steps. Between 1960 and 1981 Latin America grew 2.6% per annum in per capita terms. They were cajoled into adopting the neo-liberal prescriptions and after a 30-year long experiment they actually saw their economies growing by less than 1% per year until recently when they started to kick those promoting those disastrous policies out of power. Even Mexico, which is touted as a success story of the North American Free Trade Agreement and a neo-liberal success story, gained only about half a million manufacturing jobs but lost over 2,000,000 agricultural ones when cheap American corn and other commodities flooded their newly liberalised markets. China and the other East Asian countries, on the other hand, that opted for state-managed globalisation enjoyed an average per capita growth of 6.7% annually in those 30 years.
Countries that resisted total deregulation, understood the need for (and stroke the right) public-private sector balance, retain their abilities and rights to design innovative policies for development, and refused misguided total opening of borders to subsidised and sub-standard agricultural and other products, are precisely the ones that are moving forward in today’s world despite the fiction we are fed with here in Nigeria.
Ironically, neither the US nor the major European nations apply these misguided policies to themselves. When open markets to foreign investors, total privatization, end of subsidies, and tight money austerity programs (high interest rates and credit cutbacks) are promoted as “cure” for balance-of-payments deficits, domestic budget deficits and price inflation they are meant for others. Yet they dominate the World Bank, IMF and WTO and keep preaching the opposite of what they actually do. America spends more than it earns. It owes others over $4 billion which it has no intention of paying back even if it can, running chronic U.S. trade deficits and huge overseas military adventures. When the Wall Street’s financial meltdown happened all pretences were abandoned. It pumped over $700 billion public funds to bailout its private sector, refusing to allow the market to “self-correct”, ruthlessly protecting its self-interest. The huge subsidies paid to American and European farmers are also non-negotiable.
Still, some will insist that our own public companies and parastatals do not work and are better sold off; that our private sector performs better. Indeed, some have accused Nigerians of an “obsession with ownership”. A spokesman of the defeated ragtag remnants of the PDP, Olisa Metuh, was bold enough to go as far as offering advice on how Buhari should reform the economy, claiming that the APC -led government is pursuing an “archaic communist economic agenda” which he said is “unworkable and unsustainable” simply because the CBN is attempting to ration foreign exchange. The truth is that the government has the constitutionally guaranteed duty to “direct its policy towards ensuring: (a) the promotion of a planned and balanced economic development; (b) that the material resources of the nation are harnessed and equitably as possible to serve the common good; (c) that the economic system is not operated in such a manner as to permit the concentration of wealth or the means of production and exchange in the hands of few individuals or of a group”, a passage I am sure Metuh never paid attention to.
The mixed economy is guaranteed by our Constitution, with the state given a directing role. Even in China, where many claim the public sector has receded, as it in fact did over the last 40 years, the state-owned sector still accounts for about 40% of GDP. Reforms are gradual and should not be rushed just because some neo-liberal ideologues say so.
Truth be told, there is an obsession blocking public discourse: an obsession with privatisation. Its biggest manifestation is the strangely named outfit called the Bureau of Public Enterprises (BPE). It was never set up to reform or revitalise public enterprises, but to sell them off. As if to buttress this fact it, was firmly placed under a National Council for Privatisation, headed by the vice president. Privatisation could work under certain circumstances, and may even offer real solutions to corrupt, badly managed or non-performing public entities. To assume it is the only solution in every case is wrong. Just as in the case of deregulation, to be obsessed with it is an error. Simply because a certain drug or concoction relieves malaria does not mean we should take it for all ailments.
However, beware the man with the hammer that Ha-Joon Chang keeps warning us about. Never heard of him? Well, Ha-Joon is a Professor of Economics at Cambridge University (UK, not Massachusetts) who never tires of warning us about those Neo-classical economists who think their approach to economics is the only “right” way. You will know them by their mantra TINA -There Is No Alternative, along with their refusal to consider alternatives.
As we continue to debate the appropriate changes needed to reform our economy, we should keep in mind those “economists” who only have one tool; the hammer. As he pointed out “he who has only a hammer sees everything as a nail. If you approach a problem from a particular theoretical point of view, you will end up asking only certain questions and answering them in particular ways. You might be lucky, and the problem you are facing might be a ‘nail’ for which your ‘hammer’ is the most appropriate tool. But, more often than not, you will need to have an array of tools available to you”.
There is more to economic reform than just deregulation and privatisation. There is simply not just one solution to the economic predicament of every nation. Each situation is unique and requires independent, creative and informed analysis. We must keep on looking for answers. The neo-liberal Washington consensus is not a solution to the problems of developing countries, but often a part of the problem.