To overcome economic recession
On January 20, 2009 when President Barack Hussein Obama took office as the United States of America’s 44th president having won an election on November 4, 2008, his government inherited an $8 trillion ten-year deficit from his predecessor, President George W. Bush whose Republican government had squandered a $5.6 trillion ten-year surplus bequeathed to it by President Bill Clinton on January 20, 2001. Obama’s takeover coincided with the economic recession which started in 2008 leading to the collapse of many over-leveraged financial institutions in America among which are: Lehman Brothers, Merrill Lynch, Morgan Stanley, Goldman Sachs and AIG. Many of these banks having enmeshed their operations in subprime loans plunged that country’s financial environment into a catastrophic systemic collapse. It was during this critical period that many mortgage banks like Washington Mutual (WaMu), Wachovia among others went under, leading to millions of house owners’ mortgages going underwater and eventual foreclosure.
The buck would soon stop on the desk of Timothy F. Geithner who became President Obama’s Treasury Secretary as soon as his government assumed office in 2008 in collaboration with other economic council members to steer that country out of the economic recession. Within a few months of the economic council’s works, job losses were reduced and before long the hitherto comatose economy started to add jobs in thousands. Geithner exited office in 2013, leaving the United States of America’s economy in a sound footing while his team, working with that country’s Congress crafted reforms laws that sanitised that country’s financial landscape.
In his 2014 memoir titled Stress Test: Reflections on Financial Crises, Geithner stated the position a country in recession should consider taking to weather an economic storm:
“Governments always face political pressure to tighten their belts during crisis, because families and businesses are tightening theirs. But for countries that can afford to borrow, austerity in a crisis is a dangerously misguided approach. Keynes recognised this “paradox of thrift,” the idea that saving by individuals, considered virtuous in normal times, can cripple society’s demand for goods and services during a downturn if everyone pulls back at once. One family’s spending is another family’s income; the less people spend, the less people earn, and the less people earn, the less they have to spend. That’s when government needs to pump money into the economy to revive demand and restore confidence, even though politically, deficit spending can seem as profligate and counterintuitive in tough times as financial rescues.”
In response to the current economic recession in Nigeria, it appears the present administration is much more predisposed to undertaking austerity measures than providing overwhelming stimulus to jumpstart the economy. The signs are palpable, so does the antecedent of the foremost regime’s actor intrigue. An array of items was recently delisted for purchase by MDAs during conferences, meetings, retreats and other events. More might follow in the weeks and months to come. Although austerity is considered by some school of economic thought as a route out of recession, it is nonetheless a slow tool to revamp an economic downturn. It also inflicts unintended pains on the citizenry. As stated earlier, Geithner warns that in a crisis period, austerity is “…a dangerously misguided approach.” That is why many progressive economists would rather prefer jumpstarting an economy during a recession through provision of overwhelming stimulus.
The root causes of the current economic recession in Nigeria differ from that of the U.S. Nigeria’s was caused by the lull in commodity market, crude production shut-in due to challenges in the Niger Delta as well as by less than careful management of the finances of the state by the previous administration. The implication is that approaches to recovery might not follow the same route as the U.S.’s wholesale. However, general economic principles can be universally applied. That is to say, the question should be asked: Which policy thrust would serve the economy better at this critical moment: provision of stimulus or belt-tightening by way of introducing a regime of austerity measures?
If you ask me, stimulus should be provided to jumpstart the economy. Ambitious public works projects should be undertaken to put people to work. Government’s 400,000 jobs programme should take off immediately. The nation’s refineries should be rehabilitated within the next six months to curb the drain on the foreign exchange which in turn has consistently led to the free fall of the value of the Naira. Funds should be pumped into the Nigeria education system to enhance quality learning to curb parents from sending their children to schools abroad with, again, the attendant drain on forex. So should the health sector be brought to live through adequate funding to discourage medical tourism, as Nigeria loses millions of foreign exchange to this phenomenon.
In addition, and as a long term measure, the presidential system of government with its bicameral legislature should be subjected to consideration by Nigeria.
It is remarkable that the administration of President Muhammadu Buhari is sanitising the country through its war against corruption. This is imperative to rid the system of economic leakages. The government also has to bring about peace in the country to ensure economic development. And as a new development towards addressing the recession, Buhari recently requested that the National Assembly give him emergency powers to enable him deploy overwhelming action to refocus the economy. Two pertinent questions arise here. One, does Mr. President need emergency powers to execute these tasks rapidly? Two, does His Excellency or any human for that matter deserve such sweeping powers?
To the former: absolutely yes. He needs sweeping powers. Timothy Geithner states in his book that “… giving crisis responders the power to use overwhelming force to quell a panic makes panics less likely.” Legislations are a hindrance or an impediment in respect of time and magnitude of action deployable in a crisis time. In an emergency, multi-tasking is the word by the leadership at that moment in time. So is it that such a period requires gigantic actions of monumental proportion. The more powers he has to address the challenge, the quicker the outcome.
Is Mr. President deserving of emergency powers? Here recourse to an authority may not be farfetched. The authority: Lord Acton. And the popular 1887 phrase of the historian cum moralist is that: “Power tends to corrupt, and absolute power corrupts absolutely…” Since nobody can decide for the National Assembly whose support is already sought by the presidency, my candid opinion is that being an assemblage of honourable men and women, they would weigh all the contending options and do all that is needful in collaboration with the executive arm of government to turn around the nation’s economy.
In the meantime, Nigerians can’t wait to see the end of the recession.
Gboyega wrote from Abuja .