{"id":945,"date":"2019-08-20T11:23:26","date_gmt":"2019-08-20T11:23:26","guid":{"rendered":"http:\/\/vor.org.ng\/?p=945"},"modified":"2022-08-14T09:28:48","modified_gmt":"2022-08-14T09:28:48","slug":"is-unemployment-a-battle-of-two-economic-models","status":"publish","type":"post","link":"http:\/\/ictnetworldltd.com\/newvor\/2019\/08\/20\/is-unemployment-a-battle-of-two-economic-models\/","title":{"rendered":"Is unemployment a battle of two economic models?"},"content":{"rendered":"

\"\"
\nFirst published by Punch Newspapers in November 2017.
\nThe ideas of two economists, Englishman John Maynard Keynes (1883-1946) and Austrian Friedrich von Hayek (1899-1992), dominated the world economic landscape from the end of the Second World War, but with opposing views on economic freedom. Nigeria had implemented both of these models at one time or the other, and their clarity or implementation could be impacting on Nigeria\u2019s unemployment menace.
\nIt is estimated that over 50 million Nigerians are presently unemployed, with fewer prospects for those currently in our institutions after graduating. Those in government and Nigeria\u2019s economists seem to have fixated on GDP growth and less on employment. Unemployment has impacts on the society; recruitment grounds for sedition are often in the unemployment sphere.
\nThe economic impact of unemployment also manifests in our lives; over 80 per cent of those that clog the urban towns and cities in Nigeria during working hours are the unemployed looking for what to do.
\nKeynes, in his theory, argued for a more significant role of government in the economy, particularly during a recession. \u201cThe government would borrow money to spend on such things as public works; and that deficit spending, in turn, would create jobs and increase purchasing power. Striving to balance the government\u2019s budget during a slump would make things worse, not better\u201d.
\nI hope the Nigerian Parliament would in this period be supportive. Keynes\u2019 analysis was macroeconomic by treating the economy as a whole and focusing on government\u2019s use of a fiscal policy of spending, deficits, and tax. These tools are used to manage aggregate demand and thus ensure full employment. It has been found that Keynes\u2019 idea could lead to over-centralisation during economic expansion.
\nThe corollary is that government should cut back spending during times of recovery and development.
\nHayek, however, argued against and challenged Keynes\u2019 views on the economy. Hayek said, \u201cThe problem is that under central planning, there is no economic calculation \u2013 no way to make a rational decision to put this resource here or buy that good there because there is no price system to weigh the alternatives.\u201d Central planners only make technical decisions but not economic ones.
\nAfter 30 years of Keynesianism, that criticism proved to be extraordinarily prescient. \u201cSocialism shocked our generation,\u201d Hayek later said. He added, it profoundly altered the outlook of idealists returning from the war. \u201cI know, for I was one of them\u2026 Socialism told us that we had been looking for improvement in the wrong direction\u201d. To Hayek, less government intervention meant more economic freedom; believing that when people are free to choose, the economy runs more efficiently.
\nIt was Keynes that, however, won the argument at the Breton Woods Economic Conference in 1944 convincingly at the time because the political focus of the postwar was how to engage the millions that were returning from the battlefields into gainful employment. Therefore, it was to mitigate potential social unrest. Keynes\u2019 ideas oversaw the global postwar economic expansion from 1945 to 1973. Hayek was distraught since nobody listened to him at that time. Even when he applied for a teaching job in the United States in 1950, nobody was ready to hire him except a private university in Chicago, the University of Chicago. That opportunity would later change the world some 30 years later.
\nAt the Faculty of Social Sciences, School of Economics, he mentored the likes of Milton Friedman on market economics. They would be known as the Chicago Boys, and more than half of the Nobel Prize for Economics has gone to Hayek, Milton Friedman, and their disciples or those associated with Chicago ever since.
\nHowever, in 1971, while having coffee in a caf\u00e9 in the village, in Austria, where Hayek had retired, he saw a news clip in the newspapers on the rising inflation and unemployment in America. He knew the world was changing; Keynesianism was overloaded and was showing cracks. Hayek swung into action. Now, he thought the world would listen to him.
\nHayek had learned the virtue of socialism and he used it to advantage; at least the socialists were idealists that hold on to a belief, and the only way monetarism (market economy) will ever take hold is by borrowing the socialist tactics. People are always opposed to change; therefore, his neoliberal economic policies of the tripartite condition of deregulation, privatisation and fiscal austerity would have to be implemented repressively.
\nFriedman was the chief arguer of this monetary economy, and with the help of the Chicago Boys, General Pinochet overthrew the government of Allende in Chile in 1973. So, for the first time in the second half of the 20th century, the market economy returned to the world stage, if only this time repressively.
\nThe pendulum on the world stage later swung in Hayek\u2019s favour in 1979, when Margret Thatcher became the British Prime Minister, and two years later, Ronald Reagan, the president of the United States of America \u2013 both supporters of free market policies.
\nIn the years that Hayek\u2019s theory was cooling on the shelf, the economists that Friedman mentored had quietly colonised the two world financial institutions on Nineteenth Street, in Washington D.C., U.S.A. By the mid-1980s, during the prolonged, protracted world economic recession, when any Third World country approached the IMF or the World Bank for a loan, they met a brick wall of monetarists unless they adopted the neoliberal economic policies.
\nConsequently, Nigeria in June 1986 adopted the market economy through the Structural Adjustment Programme. There is nothing wrong in neoliberalism or monetarism itself, as it transfers control of economic factors to the private sector from the public sector. But why has Nigeria\u2019s market economy experience been a disaster?
\nIn his book, the General Theory of Employment, Money, and Interest, the Englishman, Nobel Prize economist, John Maynard Keynes, challenged the status quo in the mid-1930s. It was a period of massive unemployment in Europe, and the similarity to what Nigeria is experiencing is astonishing.
\nThe preface to Keynes\u2019 book reads partly thus: \u201cThis book is chiefly addressed to my fellow economists. I hope that it will be intelligible to others. But its main purpose is to deal with difficult questions of theory, and only in the second place with the applications of this theory to practice. For if orthodox economics is at fault, the error is to be found not in the superstructure, which has been erected with great care for logical consistency, but in a lack of clearness and of generality in the pre-misses. Thus, I cannot achieve my object of persuading economists to re-examine critically certain of their basic assumptions except by a highly abstract argument and also by much controversy\u201d.
\nI purposefully quoted from that preface for the attention of our economists and economic planners. Now is the time to address the unemployment time bomb in Nigeria \u2013 a revisit to their tenet.
\nAfter the introduction of the market economy, in the wake of the national debate, there were no follow-ups which I understand could have been addressed by the branch of economics known as welfare economics. Surprisingly, immediately after Nigeria\u2019s GDP was rebased and became the highest GDP nation in Africa, the then finance minister, Ngozi Okonjo-Iweala, stated that a high GDP did not necessarily translate into high employment.
\nI was of the opinion it was an assault on most Nigerians\u2019 sensibility. Keynes could have had an answer to Ngozi\u2019s thus, \u201cA monetary economy, we shall find, is essentially one in which changing views about the future are capable of influencing the quantity of employment and not merely its direction. But our method of analysing the economic behaviour of the present under the influence of changing ideas about the future is one which depends on the interaction of supply and demand and is in this way linked up with our fundamental theory of value. We are thus led to a more general theory, which includes the classical theory with which we are familiar, as a special case\u201d.
\nAs an eavesdropper on economic debate, I can only urge Nigerians who have been tutored in the rudiments of economics to engage themselves in the discussion on the pregnant issue of massive unemployment in Nigeria. From all indications, many if not all of our brilliant economists are wedded to Hayek\/Friedman theory of monetarism to the detriment of the quantity of employment in the Nigerian economy.<\/strong>
\nThe impacts of the monetary economy are not only felt in the sphere of labour but most notably in human capital development (education) also, which is a topic for another day.
\nThe change that most people want is not for the highest GDP in Africa, but for gainful employment of millions of youths that roam Nigerian streets. These are agile, educated young men and women that clog the streets of Nigeria\u2019s state\u2019s capitals during working hours looking for what to accomplish gainfully. The cost of unproductive consumption of fuel in Keke NAPEP, danfos, and other vehicles that move the unemployed daily in search of jobs may arguably be astronomically damaging to the Nigerian economy also.
\nFor the labour unions, this is the time to drop the theme, \u201cWe shall overcome\u201d, and insist on pragmatic economic model for the advancement of the nation.
\nCapt. Caulcrick, a member of Voice of Reason wrote in from Lagos.<\/p>\n","protected":false},"excerpt":{"rendered":"

First published by Punch Newspapers in November 2017. 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