Economic Recession

The Global Economic Meltdown: A Nigeria That Can Say No By Iliyasu Ibrahim Gadu [email protected] For God So Loved the World He Created the Blackman, For God So Loved the Blackman He Created Nigeria The Global Situation Today Mr. President the World is in a spin. Within the past year we have witnessed momentous developments that have shaken our assumptions of the global order of things. Starting from the United States of America the most powerful country on earth, we have before our very eyes witnessed what no pundit, or guru could ever have predicted; the spectre of a Blackman, the son of an African man from Kenya winning the right to rule the country that for all practical purposes is unabashedly the bastion of white supremacy. Alongside that development is the unprecedented economic crisis currently ravaging America with the virtual collapse of its financial and industrial sectors. Compounding the problem, the palliative measures being taken to stem the crisis appears too little too late to save America from a looming economic depression. Truly we are seeing the humbling of the American economic colossus before our very eyes. The malaise is not restricted to America. Britain, France, Germany along with other countries in the Euro zone are in the throes of what economics have observed as a deepening economic retraction which portends long time economic decline for these countries. Mr. President even as you read this memo, more and more banks and financial institutions in the aforementioned countries are headed for collapse as will more and more industries, leading inevitably to job layoffs and massive unemployment in the coming months. Conversely we have seen the rise and rise of China, a country once thought too weak internally to muster the necessary effort to achieve the greatness that it promised. Today from the doldrums of economic development that it once languished, China is recognized as the third largest and the fastest growing economy in the world with projections to take over the leading position from the United States of America not long from now. Following suit are India and a cluster of developing economies all burgeoning with bright prospects of becoming leading industrial powers in the not distant future. Although the shape of the world to come is yet undetermined, one incontrovertible lesson to draw from these developments is that the virtual unchallenged power which the United States of America, Britain and France arrogated to themselves to determine the fate of much of the world cannot be sustained any longer in the foreseeable future. Much like the continental drifts which reshaped much of the world’s landmass into the continents that we know today, our contemporary world is on the threshold of fundamental shifts in

political, economic and Geostrategic power and influence. Keen watchers of current happenings in the world have concluded that the ideas and forces that helped shape and underpinned the world from the end of the Second World War in 1945 to date are coming unstuck. The steady economic decline of the established industrial powers presages the emergence of new global players and the eventual reordering of the global order. The Real Origins of the Current Global Economic Downturn Mr. President there has been a lot of paternalistic platitudes and gobbledygook being passed around as reasons for the economic downturn in the major industrial countries which in turn has affected the world. But we should not be deceived. The economic crisis has its origins on the emphasis by these countries particularly the United States of America, in building and maintaining large but economically unproductive and prohibitively expensive military industrial complexes with which they have waged needless and unjustified wars around the world. In pursuit of this, they have had to sacrifice the productive and competitive sectors of their economies. As America lagged behind competitively in economic production, so also did the deficits in its trade with the rest of the world which has come to rely on American Market and the American dollar. For long the assumption was that being the most powerful economy in the world, America could print its way out of any economic problem. This hubris was given added fillip after the collapse of the Soviet Empire with a massive surge in American military production. Just as America thought it could print its way out of any economic deficits so also did the American leadership thought America could bomb its way out of any dissenting views against its conduct in world affairs. For long Economists have cautioned about the dangers of over emphasis on military production at the expense of the more productive sectors of the American economy where America had the competitive edge. They warned that as America became less and less able to produce and compete in the world trade market so also will its ability to meet it’s financial and trade obligation to the rest of the world. Mr. President, it is the flipside of this dysfunctional economic emphasis that America and the world are experiencing today. Unfortunately rather than engage in an honest dialogue with the rest of the world to whom it owed much for the massive investment in the American economy, the Bush administration chose to stick to the policy of what is good ( for that read, bad) for America is good for the world. Mr. President stripped of all its pretensions the current measures being pursued by America and those countries that have followed its path are therefore nothing but scorched earth economic policies designed to drag the rest of the world into the economic abyss they have wrought on themselves. Where will all this lead to eventually and what are the implications and challenges for Nigeria? The Coming Challenges and What they portend for Nigeria We have already seen the measures taken by the governments of United States, Britain, France and Germany to cushion the consequences of their collapsing financial and industrial systems. Each of these governments is on record to have pledged billions of

dollars to save banks and financial institutions from collapse. They have also announced far reaching measures including massive public works and infrastructure programme designed to create jobs and bring down unemployment in their countries. Mr. President this prompts the question where will the money to fund all these programmes come from? It should be noted that even before the coming of the current global economic downturn, the economies of these countries were already running deficits collectively amounting to trillions of dollars. In the light of this, where will the additional money come from? Significantly, in a fundamental shift from economic philosophy and policy, governments of these countries have constituted themselves into economic war cabinets to directly prosecute the economic recovery programmes rather than allow market forces. Mr. President there can be no doubt that the massive bailout money needed to save the financial institutions and fund the stimulus package will have to come from sources outside of these countries. Already each of these countries has tinkered with monetary policies to achieve this goal. They have announced cuts in interest rates designed first to devalue foreign money held in the accounts of banks and secondly to lure yet more foreign money into the financial trap. And because the massive public works requires access to raw materials cheaply, the cheap source of funds will finance the programme at little or no cost to these countries. For countries like Nigeria who have neither the Industrial nor financial power, we are already feeling the negative effects of these policies pursued by America, Britain and France In the short term as a consequence of these policies, the value of our foreign reserves held and denominated in foreign currencies and foreign banks have been on a free fall. The naira has continued to plummet against major currencies while the prices of our export commodities particularly crude oil have been on a downward spiral. The falling source of revenue is already being felt in the country with the looming massive cutback in government commitment to social goals. This can only exacerbate social and political tensions in our fractious and fragile polity. Also in the long term as these countries try to shift emphasis from hydrocarbon to other energy sources, oil producers like Nigeria will certainly be left in the lurch. Not only will our income from oil become less and less, we will be compelled to source our energy requirements from the alternative energy sources developed by these countries with all the financial, economic and strategic implications to our country. Mr. President we must resoundingly reject this grim and cruel fate being designed on the world by these countries. It is not our portion. What needs to be done? Mr. President, although the current crises ravaging the global financial system are essentially economic in nature, the solutions to them lie in the political realm. Hence faced with this tasking economic crisis, the governments of United States, Britain, France etc, have constituted themselves into economic war cabinets not only to directly take over

and manage their economies but also to set the stage for fundamental political paradigm shift to cope with coming political challenges. In the United States spectacularly, this has led to the emergence of Barack Obama with all the symbolic hope he portends for the future of that country to rediscover itself politically, economically and racially. Indeed as history teaches us, periods of great economic challenges usually serve as opportunity to reset the clock of development and progress. In this wise, the economic cloud hanging over Nigeria also contains a political silver lining which we as a people and nation must grab to make Nigeria the great nation that it should be. It should serve as the catalyst that we need to energize our country for the greatness that we have long promised but failed to deliver. Mr. President the road to this Promised Land must begin with a fundamental reordering of our economic engagements with the outside world. As a first and necessary step in this regard, we must consider seriously whether it will serve our long term economic interest to continue to engage wholesale the ideas and programmes of the Bretton Woods institutions. Are the IMF and World Bank themselves not tainted by the crisis engulfing their principals? For if the sponsor countries of these institutions have themselves proven to be inefficient managers of their economies what rationale can there be for countries like ours continue to accept economic advice from them? For there can be no question that the basis for enjoying economic seignorage by the IMF and World Bank and their principals have been laid hollow by the current economic downturn. It is all clear to see that the Emperor has no clothes on and that indeed, his feet is of clay. Secondly and critically, in a depressive economic situation such as we are now heading for, we must rely less on the international currency exchange reserve system which has now all but collapsed, as a determinant of our earnings. Money held in a reserve system that has no guarantee of solidity is at best a phantom. Instead we must place more emphasis on getting value for our resource and market potential through long term industrial development and market partnership with countries. Our position as a regional market hub in Africa should be fully tapped in this regard. The imperative of Nigeria to the World Mr. President, as the most populous black nation on earth, endowed with more human and material resource potential than Britain, France, Germany and Italy put together, Nigeria should aim to be among the key nations helping to shape the coming global order. We are justified to play this role not only on the strength our not puny size in population and resources, but more importantly on account of our divine ordination as the leader and spokesman of the world’s people of African descent wherever they may exist. No other nation in the world is more favourably positioned to play this role than Nigeria. Thus when Nigeria speaks and acts, it should and must be on behalf of all black people be they on the mother continent of Africa or in the Diaspora. Nigeria must hasten to acquire the necessary economic, political and diplomatic status to be able to do this. There can be no opportune time to pursue this noble task than now as the world goes into flux. Mr. President we have a window of opportunity of just a decade within which to attain this goal before both the full effects of the current global flux take their toll and the emerging new world order becomes definitive.

Fortunately by its strategic position and huge untapped potential Nigeria remains one of the handful numbers of countries that can successfully negotiate its way out of the impending economic cataclysm. We should vigorously pursue a paradigm shift in our economic relations to enable us pursue economic policies that will maximize the benefits from our huge human and material resources, our internal and regional market, our strategic position in Africa, the black world and the world at large. This Memo therefore recognizes and calls on President Yar’Adua as the most powerful black leader in the world, and the National Assembly as the most powerful black legislative body in the world to properly position Nigeria to play its rightful role in the push to shape the emerging new global order. Iliyasu Gadu [email protected]