Professor Mises (1881-1973) was one of the 20th century’s foremost economists. He explains simple truths of history in terms of economic principles. He describes how capitalism destroyed the hierarchical order of European feudalism, and discusses the political consequences of various kinds of government. He analyzes the failures of socialism and the welfare state and shows what consumers and workers can accomplish when they are free under capitalism to determine their own destinies. So we see that the best economic policy is to limit government to creating the conditions which permit individuals to pursue their own goals and live at peace with their neighbours. Government’s obligation is simply to protect life and property and to allow people to enjoy the freedom and opportunity to cooperate and trade with one another. In this way government creates the economic environment that permits capitalism to flourish.
Although President Umaru Musa YarÁdua may not be a professor of economics, but his recent strides towards the deregulation of the downstream petroleum sector gives an insight of his steps towards an economic miracle that would make the country a free market economy. While some quarters opined that the planned deregulation is targeted at enriching a chosen few in the society, creating more hardship to the people than it were; various other segments had supported the move, stressing that it will bring to a lasting end, the protracted problems which had agonized the industry nation over two decades. In Venezuela, it was termed Capitalization while Brazilians called it Flexibilization. In other countries such as Argentina, United Kingdom and Mexico where it has worked, different tags have been adopted but the aim and purpose have remained the same. Whatever the name of the policy introduced by the government is, the end product should be able to create an economy where the determination of price is vested in the hands of the people; and everyone’s having the right to serve the customer better and/or more cheaply.
However, the creation of an economic policy or programme is only a means to an end, its implementation, vis-à-vis the private sector’s involvement in the process may go a long way in making the policy a reality, and, a triumph that would truly transform the economy of a country. Such successes are credited to the government, not minding the involvement of the private sector as it was with Germany after the World War II, or the appraised economic turnaround of Ghana. Furthermore, when government assumes authority and power to do more than this, and abuses that authority and power, as it has many times throughout history–notably in Germany under Hitler, in the U.S.S.R. under Stalin, and in Argentina under Pern–it hampers the capitalistic system and becomes destructive of human freedom.
The goal for a perfect economic recovery for Nigeria is the application of the principles of freedom. What does this system of economic freedom mean? The answer is simple: it is the market economy; it is the system in which the cooperation of individuals in the social division of labour is achieved by the market. This market is not a place; it is a process, it is the way in which, by selling and buying, by producing and consuming, the individuals contribute to the total workings of society. The market should accord the individual a position to choose the way in which he wants to integrate himself into the totality of society. The individual is able to choose his career; he is free to do what he wants to do. This enhances professionalism and economic efficiency.
Yet, today, social freedoms are considered by many people to be independent of one another. Those who call themselves “liberals” today are asking for policies which are precisely the opposite of those policies which the liberals of the nineteenth century advocated in their liberal programs. The so-called liberals of today have the very popular idea that freedom of speech, of thought of the press, freedom of relig
ion, freedom from imprisonment without trial-that all these freedoms can be preserved in the absence of what is called economic freedom. They do not realize that, in a system where there is no market, where the government directs everything, all those other freedoms are illusory, even if they are made into laws and written up in constitutions.
Let us take one freedom, the freedom of the press. If the government owns all the printing presses, it will determine what is to be printed and what is not to be printed. And if the government owns all the printing presses and determines what shall or shall not be printed, then the possibility of printing any kind of opposing arguments against the ideas of the government becomes practically nonexistent. Freedom of the press disappears. And it is the same with all the other freedoms; oil and gas, employment and youth empowerment, accountability, electoral processes, finance and financial institutions, education, etc.
However, in all economic problems, we must bear in mind the words of the great French economist Frederic Bastiat, who titled one of his brilliant essays: “Ce qu’on voit et ce qu’on ne voit pas” (“That which is seen and that which is not seen”). In order to comprehend the operation of an economic system, Nigeria must not only deal with the things that can be seen, but also have to give our attention to the things which cannot be perceived directly. Freedom really means the freedom to make mistakes. This Nigerians have to realize. We may be highly critical with regard to the way in which our fellow citizens are spending their money and living their lives. We may believe that what they are doing is absolutely foolish and bad, but in a free society, there are many ways for people to air their opinions on how their fellow citizens should change their ways of life. They can write books; they can write articles; they can make speeches; they can even preach at street corners if they want-and they do this in many countries. But they must not try to police other people in order to prevent them from doing certain things simply because they themselves do not want these other people to have the freedom to do it.
When government protects the rights of individuals to do as they wish, so long as they do not infringe on the equal freedom of others to do the same, they will do what comes naturally-work, cooperate, and trade with one another. They will then have the incentive to save, accumulate capital, innovate, experiment, take advantage of opportunities, and produce. Under these conditions, capitalism will develop. Ideally government should be a sort of caretaker, not of the people themselves, but of the conditions which will allow individuals, producers, traders, workers, entrepreneurs, savers, and consumers to pursue their own goals in peace. If government does that, and no more, the people will be able to provide for themselves much better than the government possibly could.
In a free market economy, the individual has the freedom to choose whatever career he wishes to pursue, to choose his own way of integrating himself into society; choose the products he wants to buy or consume, choose the source of power, communication, and a neutral judicial system; live and be accorded territorial protection in your place of origin. But in a socialist system, that is not so: his career is decided by decree of the government. The government can order people whom it dislikes, whom it does not want to live in certain regions, to move into other regions and to other places. And the government is always in a position to justify and to explain such procedure by declaring that the governmental plan requires the presence of this eminent citizen five thousand miles away from the place in which he could be disagreeable to those in power.
Although the basic feature of the free market economy is that only people with sufficient control over resources, and wealth, in particular have the privilege to purchase goods and services, often priced very highly in a free economy. Prices, which are the only allocating and distributing factor in a free market economy, place the poor in an unenviable situation who are gradually thrown out of the system without any access to wealth and the basic needs of subsistence. Thus it deems absolutely imperative that a country like India and a few Latin American countries like Brazil, Peru and Nicaragua having a large number of poor have a public distribution system in place with subsidized prices being fixed by the government to protect the poor. For Nigeria to run an effective free market economy, it must consider the most efficient or optimum device to allocate a country’s resources, with wealth or income being the only yardstick.
Unlike the Latin American countries, Nigeria’s free economy mode lies within the arm bit of deregulation of some key sectors of the economy. Deregulation refers to a decrease in state or federal government oversight of industries and business. Characterized by repeal of laws that restrict trade and competition, deregulation is a major component of a capitalist model. Proponents of deregulation cite systemic economic benefits; industries may become more efficient in deregulated economies. Deregulation lowers barriers to entry in a given industry. When more firms enter an industry, competition increases and consumers have more choices for products and services. Individual businesses tend to decrease prices, to achieve a more competitive position in the market. Moreover, the society can benefit from a reduction of bureaucracy. Resources not spent on regulation can be channelled to other programs or key sectors of the economy, thereby aiding industry consolidation.
A perfect free market economy must consider the options of reducing its public assets. Privatization as a tool for economic management came to the front burner when Chile became the first country to turn public assets/businesses to private operators in the early 1970s. Since then, over 140 countries (both developed and developing) have embraced privatization as a route to economic growth and prosperity. While the details and strategies of the privatization exercise may vary in each of these countries, the ultimate objective is to liberalize the economies through increasing private sector involvement and capacity utilization. Today, in trending towards the path of economic efficiency through privatisation and deregulation in Nigeria, we must not forget that, in eighteenth-century England, conditions were much worse. At that time, England had a population of six or seven million people, but of those six or seven million people, more than one million, probably two million, were simply poor outcasts for whom the existing social system made no provision. What to do with these outcasts was one of the great problems of eighteenth-century England.
In economic policies, there are no miracles. Although many newspapers and speeches had opined about the German economic miracle – the recovery of Germany after its defeat and destruction in the Second World War, but this was no miracle. It was the application of the principles of the free market economy, of the methods of capitalism, even though they were not applied completely in all respects. Every country, including Nigeria can experience the same “miracle” of economic recovery, although I must insist that economic recovery does not come from a miracle; it comes from the adoption of-and is the result of-sound economic policies that could provide a higher standard of living.
We must realize, however, that this higher standard of living depends on the supply of capital. This explains the difference between conditions in the United States and conditions in India; modern methods of fighting contagious diseases have been introduced in India-at least, to some extent-and the effect has been an unprecedented increase in population but, since this increase in population has not been accompanied by a corresponding increase in the amount of capital invested, the result has been an increase in poverty. A country becomes more prosperous in proportion to the rise in the invested capital per unit of its population. The economic tumor has been identified; the question is: do we accept this and try to address it?
Salim Salihu Muhammed