Economic Confidential, December, 2008

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Who’s the world’s economist of the millennium?

By M. Sani Abdallah

John Maynard Keynes is the man any day-past and current history bears him out, as we shall see later.

As in a similar it ran on its Day Break Africa programme for the “African of the Millennium” in the Twentieth Century ended in 1999, the BBC World is again putting it to the world public’s to nominate the “Economist of the Millennium”. For the avoidance of doubt, nominations from Africa , much as from any other part of the world cannot be expected to pass any test of objectivity in this venture for obvious reasons. Any economic theory or policy that has failed to correctly gauge the African situation and experience cannot expect a favourable mention even though what is at stake seems a purely academic exercise. We will return to the subject of Africa shortly..

Serious social scientists never pretend that their discipline is exact. Subjectivity or value judgement, which some scientists allege denies the humanities the scientific character, is no doubt ubiquitous. Yet, the exactitude or objectivity even in the physical sciences has always been in doubt. For whatever reason, for instance, the theory of relativity, the underpinning of the atomic theory expounded by one of science’s most celebrated personalities, Albert Einstein, has been the subject of doubt in the scientific community until just November this year, when it was given a clean bill of health as ‘correct’. Even then, there is no assurance that one scientist and another hence will not come up with a disapproval of the theory later..

Thus, rather than an iron cast law of procedure or method, every theory, however sound, should be seen as a statement of value only to the extent that it may just the paradigm in vogue; one which may shift as current knowledge gives way to superior discovery or thinking. Thus, science in itself is a continuous debate, not the peak of the quest for understanding of phenomena. Against this backdrop, Paul Fayeraband, celebrated researcher in the seventies went as far as putting a damper on the debate of ‘scientificity’ of method, the prime factor often touted as the bedrock of scientific enquiry in his book, Against Method. Nobody, he argued, should pontificate method: objectivity, measurability, controllability, replicability and (even) predictability as the basis for judging the quality of any research finding. According to him, even the choice of a particular problem to engage the effort and enquiry of a researcher is bias in itself.

So now, with all the turmoil in the global financial system today and (rare admissions of) recession in many of the world’s strongest economies, what do we make of the analyses, appraisals, postulations and predictions by very senior (world class) economists, who just a few weeks ago pronounced these economies sound and healthy? Much more importantly, what is the current and future heuristic value of the age-long philosophical underpinning of the legendary market forces and its invisible hands which classical economist up to Adam Smith and David Ricardo argued are the most efficient allocators of resources?

Elevated to the status of the subject’s cannon law, if not a religion in itself, proponents of market forces assigned government no further role in the political economy than regulating the context or scenario in which productive activity and exchange take place. The assumption being that government is a bad business person, and that the private sector and individual initiative guarantee a more competitive and productive economy, hence enhanced welfare for all since being selfish every individual will want to maximise his return. The simple contemptuous term for government in late capitalism, to use Ernest Mandel’s term, is (was?) minimum government.

The current global financial crisis led to the historically inevitable question as to whether it is really possible to run an economy based purely on market forces with little or no input from government. As of today, the worldwide answer to that poser is ‘no’, whether the analyst is lay or expert. Without government bailouts perhaps all the so-called leading economies of the world would by now have completely collapsed in less than a month! Even now, the barrage of stimulus packages that began with a N300 billion package in September in aid of Freddie Mac and Fannie Mae, the largest mortgage companies by the US government is still going on with the Citigroup, one of the most flamboyant global banks getting a handout on 24 November this year.

Sadly for Africa , economic theory and policy has been guided more by input from outside the domestic scene with all manners of prescriptions as duplicitous as most of them are. In most cases, nobody gives thought to the specific local conditions that need to be addressed. African governments seem not to know what to do or if they did lacked the will or believe in the public good to do it. The west warns against government subsidy, even government investment, in the provision of essential social services in the poor world only to dole out hefty handouts to their own farmers and financial speculators and gamblers. Now that government’s place in assuring the health of any economy has been historically proved beyond all reasonable doubt, not in the poor underdeveloped countries but right there in the advanced capitalist world, perhaps the index for judging the economist of all times is any who has more correctly gauged the centrality of public policy and regulation in the conduct of business.

The futility of the debate as to the superiority of either capitalism or socialism has perhaps been proved permanently: while competition could speed up the rate of acquisition by the individual, economic stability is impossible without equity and nothing guarantees equity better than controlled, ordered and regulated conduct of human behaviour.

Going deeper on the subject of Africa and renowned economists, I recall the worldviews of three of the most recent winners of the Nobel Prize winners, including the winner in 2008, Paul Krugman, who writes for the New York Times. The others before him are Joseph Stiglitz and Jeffrey D. Sachs was Kofi Annan’s chief economic adviser during his tenure as Secretary General of the United Nations. All three men are Americans. The reigning Nobel economist returned to the old turf of competition. His ‘scientific’ explanation of the ecological footprint in productive behaviour and investment, which he points out guarantees better income distribution and employment generation, according to a review in The Economist magazine recently gave him the prize. The elucidation seems to question some of the assumptions of the comparative advantage, which was one of Adam Smith’s high grounds: “why do people import goods which they not only produce but in which they have a comparative advantage over the countries they import from? The Economist magazine offered a concise rhetorical question of Krugman’s thesis. Variety it answered.

Stiglitz and Sachs argue their trade from too strong a pro-poor disposition that bothers me: the developed countries of the world should give aid to the poor to enable them overcome poverty, they seem to argue, not as simply stated here but more or less so in essence. One of Sach’s most recent works is titled giving till it heals while Stiglitz warns of the consequences of Globalisation and it discontents, the exact title of his 2004 book. My worry is that charitable as both men who are eminent and respected economists with hefty schedules worldwide are, they want to prod, even harass governments, organisations and experts in the advanced countries to bail Africa out of poverty.

My belief is that bad governance and corruption, lack of will and commitment to do the right thing, all of which both men admit and regularly discuss are the reasons why most African governments ask for foreign aid in the first place, not endemic poverty or dearth of the potentials for overcoming it. That puts all the discussion of the role of government or the state in the developments matrix fully within the orbit of Keynesianism. In sum, Keynes argues that government should lead the process of development by investing in public services and infrastructure. The knock-on benefits of this will manifest in the expansion of employment opportunities, wider and better income distribution and economic growth generally. The current global economic meltdown and the fact that at the end of the day it is government, not the big businesses, that is funding the recovery process is a testimony to the fact that government should never have been far away from the centre stage in the first place. Is there a better proof that as in the post World War II when he proffered his thesis on post war rehabilitation for Europe , Keynes’ is the most relevant macro economics even now?