ECONOMISTS AND GOVERNANCE: WHEN INDIFFERENCE IS COWARDICE OR TREACHERY

... I politely invite the reader to recall and revisit the patriotic intellectual who pronounced the instructive verdict on onlookers in a conflict between the oppressor and the oppressed as being in effect either cowards or traitors.

ADEREMI MEDUPIN

Interrogating some popular positions

A reading of an online observation that, “without a foundation in fundamental economics, less than optimal policies often will result. Public administration should promote good policy making, but has failed in at least one respect; the discipline often does not provide adequate economic training to policy makers” shows a genuine concern for good public economic policies viewed from the angle of public welfare rooted in good governance. But in reality, this representation is merely scratching the problem on the surface, as I seek to demonstrate. Meanwhile, however, there is a useful element in the observation boiling down to accusation of public administration for failure to “provide adequate economic training to policy makers”. The underlying assumption here is that robust training in economics serves as automatic guarantee for commitment to public welfare and national development. Is this true? Take this along with the other commentator who proceeded to justify faith in the importance of the role of economists in governance by offering the argument that, “in addition to analyzing economic issues, economists also investigate the factors that influence economic activity, such as consumer behaviour, business practices, and government policies. They may conduct surveys, collect data, and use statistical methods to analyze economic trends and patterns”. An economist reading this message has good reason to clap for both self and profession. But is this indeed a strong point?

From the platform, Investopedia- a source least suspected of grammatical illiteracy displayed this awkwardly phased question by Will Kenton, on August 29, 2022: “What is an economist?” What, not who is an economist? Whoever or whatever an economist may be described to be, I find the list of attributes ascribed to “a good economist” as compiled by Georgina Torbet and displayed on March 3, 2022 on the also awkwardly labelled platform, INOMICS, to be ambitiously titled but of empty content. The attractive title of the article reads: “10 Qualities That Define A Good Economist”, only to have the following as the qualities, namely: 1. Mathematical aptitude; 2. Knowledge of social sciences; 3. Good at understanding complex systems; 4. Curious; 5. Independent thinker; 6. Comfortable with uncertainty; 7. Writing skills; 8. Verbal communication skills; 9. Open minded; and 10. Self-motivated. As the reader can see, apart from quality numbers (1) and (2), all these attributes are what every professional, indeed every well-developed adult consciously and unconsciously cherish as tips to imbibe and exhibit. So, what’s on display through INOMICS is similar in style to authors who list the general principles of management and ascribing them to a particular discipline or profession. I apologise for this provoked digression and now go to the twin issues of what the role of the economist: what it is and what it should be and in the society, especially in relation to governance.

The contentious role of economists in governance

I have no time here for the loud noise that comes often from innocent quarters that “we are all part of the government” usually in reaction to criticism of an administration. Given that what we refer to as governance is the exercise of political power to manage a nation's affairs, for those outside of the effective exercise of such powers to refer to themselves as being “part of the government” is clearly self-delusionary. This is without prejudice to the fact that there will be people who are not directly in government but who nonetheless are psychologically attached, committed and desirous for a ruling administration to succeed just as opponents look for its downside and possibly downfall especially in a democratic setting in which such a fall serves as a window of opportunity for their own ascendancy to power. This characterization applies in general to the citizenry of a country, among them professionals such as economists some of whose members may end up getting directly involved in governance as implied in the very next citation. On this, I refer to the American Economic Association, AEA-the counterpart of the Nigerian Economic Society, NES-of which this writer is a proud Life Member- as it offers its perspective on the role played by economists in the context of US governance system to the effect that: “Economists in the Federal Reserve System conduct cutting edge research on a broad range of topics in economics and finance and contribute substantive policy analyses used by the Board of Governors, the Federal Reserve Banks, and the Federal Open Market Committee. In addition, System economists share their research at academic conferences and publish it in peer-reviewed scholarly journals and other outlets”.

On the above offer, three footnotes register as appropriate: one is that the American Federal Reserve is the equivalent of the Central Bank in other countries such as Nigeria and Ghana; the second note is that in most countries of the world, economists are appointed as advisers of government beyond the monetary authority (say CBN); and the third is the notion of “system economists” unknown to most economists. On this third point, instead, the well-known concept is ‘economic systems’, as a branch of the discipline which in contemporary times focuses on the structures and essential operating logic in particular of capitalism and socialism as economic systems distinguished by the critical indices of who owns what, who does what and who gets what in the economy? In this context, Communal, Slave and Feudal economic systems have become largely irrelevant and are mentioned in passing during lectures in the Course, Comparative Economic Systems, basically just to fulfil all righteousness. All the above and more come under the category of what economists are involved in, directly and or indirectly.

But there are higher responsibilities that the economist should discharge. In this vein, if, as I hereby suggest, we see the economist as a responsible citizen with abiding interest in his or her nation’s progress and development, it follows that the economist’s first duty is to identify the most critical factors at play in the determination of the performance of the economy of their location, bearing in mind the interconnected nature of the economies of the contemporary rea. This perspective is of especial relevance in the situations of Global South countries spanning the continents of Asia, Latin America and in particular Africa which have been victims of modern imperialism and where the phenomenon of neocolonialism keeps unfolding with its basic characteristic being the effective nullification of economic independence and national sovereignty of the various countries concerned. As illustration of our argument, I make reference to cases where the patriotism and commitment to the nation should be obvious as demonstration fields for the economist, namely the role of transnational (misleadingly popularly called multinational) corporations and the case of the role of the Bretton Woods Institutions-IMF and World Bank.

Case of Transnational Corporations (TNCs) as illustration

As hinted above, the big, business concerns owned largely by the rich economies of the northern hemisphere spanning North America and Western Europe operating across the globe and influencing the economies of host countries especially in the underdeveloped countries are more appropriately labelled transnational corporations (TNCs) and not multinational corporations (MNCs) as people often do. The basis of my suggested preference is simple: the idea of ‘multinational’ gives the wrong impression that the companies come from and are owned by the nationals of several countries which runs counter to the truth of being from just a few rich economies. As aptly couched on the platform of Yahoo Finance: “A multinational is a company which is incorporated in a single country but its operations are spread across borders”. So, since they operate in and across many countries, they should be described as transnational that they are, in their operations. The reassuring news comes from the fact that at the level of the United Nations, this naming is duly appreciated; thus, a major publication by the United Nations Conference on Trade and Development (UNCTAD) in 2007 is entitled: The Universe of the Largest Transnational Corporations. Prof Richard Wolff, the highly esteemed American economist who appears frequently on You Tube, under the thematic umbrella of Democracy @ Work has exposed “how (these) large corporations, armed with the immorality and insatiable greed bestowed upon them by capitalism” have historically undermined the sustainable development of developing economies that host them, due to their ‘profit hyena’ syndrome, through which, on behalf of their owners, they accumulate “wealth they neither need nor use in any sense of a beneficial manner”.

According to Yahoo Finance, the actual history of multinationals, even though they were not known as multinationals at the time, is actually much older, in line with colonialism. As documented on the platform, the two earliest examples of multinationals are the Dutch East India Company and the British East India Company which were set up to engage in trade in different port cities. It is worth recalling that the British East India Company actually had its own army and formed the basis of the British colonialism of India. In contemporary times, the TNCs have become notorious for their unscrupulous activities; in particular, many of them are criticized for their size and political involvement, with lobbying, trade agreements and deregulated financial markets allowing them to exercise a lot of power. Despite the massive corporations earning billions of dollars every year in profit, most of them have been decried for their labour practices, including underpaying and overworking employees and these companies' opposition to unions or better rights for employees.

At this point, a caveat is called for, which is that, the biggest multinational companies in the world are not necessarily the biggest companies in Global South. This is true for Chinese companies which are state-owned and only have operations within the country. There are also a couple of health companies in the United States which are counted among the biggest companies in the world but are not multinationals since their operations are only concentrated within the nation. Based on the key indices of revenue, profits, assets and employees, the following are ten of the biggest fifteen T/MNCs in the world, extracted from insidemonkey.com blog, (citing Yahoo Finance) chosen due to their relatively high visibility:

   Table: 10 of the World’s Biggest Transnational Corporations

   Notes:

1. Walmart Inc., the biggest retailer in the world, is the biggest company in the world by revenue. It has more than 10,000 stores across two dozen countries and is the biggest employer in the world with 2.3 million employees.
2. Exxon Mobil Corporation is one of the direct descendants of Standard Oil, which used to be the biggest oil company in the world. It is also among the biggest companies in the world in terms of revenue.
3. Alphabet Inc. is the parent company of Google, and one of the biggest tech companies in the world. It also owns YouTube in addition to many other products including Pixel smartphones, Fitbit and Nest among many others.
4. Sinopec Group, the Chinese oil and Gas Company, is one of the few Chinese companies among the biggest multinational companies in the world with 51 projects in more than 25 countries.
5. Volkswagen Group is the biggest automotive manufacturer in the world; it is a German company which manufactures more than 10 million cars every year. It also owns some of the biggest car brands in the world including Audi, Lamborghini, Bentley and Porsche in addition to the Volkswagen brand. Volkswagen has operations in more than 150 countries while maintaining at least 100 production facilities in more than two dozen countries.
6. Samsung Electronics is a South Korean company which is among the biggest electronics companies in the world, the largest television manufacturer in the world and the largest manufacturer of smartphones in the world as well.
7. Saudi Aramco is the biggest oil company in the world, it is also the most profitable company in the world and the only multinational with profits in excess of $100 billion. At one point, it was also the most valuable company in the world and has the largest daily oil production in the world.

From the tabulated statistics and accompanying narratives, it should be of interest to any economist of third world, nay African extraction, that the dominance of the world economy through the transnational corporations by the advanced economies is glaring and should be of concern. One of the obvious concerns is profit repatriation consequent on the dominance that translates to the dependency of the developing economies and the widening of the gap in income between them and their advanced counterparts. This is apart from the usual exploitation at the micro level that inevitably marks the daily operations of the corporations. The importance of profit repatriation lies in the crucial fact that if they were retained in the local economies, they could be ploughed back leading to economic expansion and growth of these host economies. This process of underdevelopment is ably aided by the international financial institutions, principally the IMF and World Bank, without losing sight of the World Trade Organisation (WTO) that supervises exploitation of the Global South through trade using its mischievously designed rules that effectively prime the poor to lose more than they gain from international exchange.

The Case of International Financial Institutions as another illustration                                              

In October 2023, ActionAid did us a surprising favour with their publication of its Report on “Fifty Years of Failure-The International Monetary Fund, Debt and Austerity in Africa”, which looked “at the impact the IMF is having in Africa through its austerity based advice and loan programmes” ad one of its main conclusions tabled right in the introduction is that: “The IMF continues to adhere to the cult of austerity despite mounting evidence that it has stifled economic development and human development across Africa”. One other takeaway from the report is that “African countries still have little say in decision-making in the World Bank and the IMF with less than 10 percent vote share in the IMF board-and the 46 countries in sub-Saharan Africa are represented by only two executive directors.” Yet, the power these institutions hold over African governments “significantly undermines their policy autonomy”. Not surprising, countries having large control tend to vote in a manner which is favourable to them. This often leads to biasness in decision-making which is more detrimental to low income countries, such as unfavourable loan terms and other restrictions attached to such loans. Also, the growth-based model followed by these institutions is such that that has the single-minded focus on growth only, failing to consider the equitable distribution of resources among all groups of people, a clear evidence of this failed model is the persistence of poverty. Relatedly, one of the enduring criticisms of the World Bank is lack of transparency and accountability in its decision-making processes. Of course, most economists know about the misguiding role of these institutions whose principal but unannounced role is to hold the hands of developing countries in order to facilitate the raping of their economies through diverse measures in the main debt ransom and ideological railroading. But what are our economists saying about all these? Fear of perquisite loss or of the unknown?

In search of courageous and progressive economists

At this point, I politely invite the reader to recall and revisit the patriotic intellectual who pronounced the instructive verdict on onlookers in a conflict between the oppressor and the oppressed as being in effect either cowards or traitors. In previous discussions, we have made reference to the original name of Economics as being Political Economy and recalling how both pragmatism and in particular ideology led to the separation and independence of Economics as a discipline-long before the definitional assault it suffered in the hands of latter day neoclassical economists symbolized by Lionel Robbins with his now almost universally adopted purely technical rendition around scarcity devoid of class or even group interests and government. In one of the allocated chapters contributed to the book compiled on John Maynard Keynes the economist, Norman Chester’s is titled: “The Role of Economic Advisers in Government” where the author made the point that: “The title I have been given implies a distinction between those who advise and those who decide”, which is an undeniable fact of governance in democracy. I do not expect an economic adviser to commit suicide just because his or her policy recommendations are not accepted and adopted by the ultimate decision-makers. The charge is: what kind of advice did s/he give and what informed the choice of the content of the such advice?

The escapist albeit innocuously rendered effort of Professor Richard G. Lipsey in his once very popular undergraduate text, An Introduction to Positive Economics as he sought to emphasise the distinction between positive economics and normative economics-in which the latter is about what should be as against what is, the focus of the former, comes to mind. This convenient divide comes from a refusal to honestly acknowledge the role of ideology in shaping the positions that economists and their social science counterparts take on public policies. Our point here is that what is largely perceived, understood and believed by the observing or advising economist usually issues out of some unwritten convictions which can be summed up as ideology. And I am not out to crucify the concerned economists for this given the long journey in indoctrination that they pass through to get to where they are now: a journey that in many places does not provide the student with alternative perspectives. This is how some prominent economists may not or refuse to see the exploitative relationships between groups and classes within and across national boundaries. From this disadvantaged position, what should be rarely features in their analytical thinking and this handicap becomes a major hindrance when such ‘innocent’ intellectuals become advisers to government. Ultimately, however, a refusal to transcend the limitations of what is to what to ought to be in order to change what is to what it should be, effectively translates to either cowardice or treachery-viewed from the needs of the masses consequently abandoned. I come in peace, please.