A “Nobel Prize” Economist’s Mea Culpa And Lessons For Nigerian Economists And Policymakers -By Chibuike Obi

Angus Deaton, the winner of the 2015 Sveriges Riksbank Prize in Economic Sciences in memory of Alfred Nobel, commonly but misleadingly called the Nobel Prize in Economics recently expressed his growing doubts and rethinking last month, on the IMF website no less, of his long-held (over 40years) economic convictions and beliefs about privatization, deregulation and globalization. His beliefs also happen to be that of the mainstream economic thinking in virtually all of the global North and the Global South. He is only one of the latest in a line of prominent neo-classical or mainstream economists ranging from Joseph Stiglitz and Paul Romer, (the 2001 and 2018 Sveriges prize winners respectively and both former chief economists of the World Bank) to Rajan Raghuram (former Chief Economist and director of research at the World Bank), who have questioned one or the other of the central dogmas of free market economics namely that privatization, deregulation and untrammelled globalization lead inexorably to maximal wealth, happiness and welfare. This recanting by Deaton and other somewhat similar tergiversations by other prominent mainstream economists even within the ideologically hidebound precincts of the IMF and the World Bank should prompt a similar rethinking of the esteem and valuation put on received economic doctrines by Global South economic experts and policymakers, especially Nigeria. Nigerian Economists and policymakers, unsurprisingly given that they were mostly trained in Western universities or local universities completely captured by mainstream economic groupthink, regard economic theories and practices emanating from top US and UK economics establishments (universities, think tanks, NGOs), the IMF, the World Bank, the WTO and other international economic and financial governance institutions as the sine qua non for Nigeria’s prosperity. Since some of the high priests of the free market religion are beginning to renounce some of their doctrines, it behoves their acolytes in Nigeria and other Global South countries who blindly worshipped at their feet to reexamine those same doctrines, their espousal and practice of which had brought ruin and maldevelopment to Nigeria and the Global South.

Mainstream economic thinking, more or less synonymous with Neo-Classical Economics, dates from the middle of the 19th century at the onset of the marginalist revolution in economics, propounds the view that trade and capital market liberalization, balanced budgets, extensive privatization of the public sector, deregulation of private economic enterprises and unchecked globalization were the surest means to global prosperity. NeoClassical economics had been dominant in economic policy and scholarship up until the 1929 Wall Street Crash; even though other schools like the Institutionalist School, and the Austrian School, among others, were not without influence in both policy and scholarship. The Wall Street Crash of 1929 brought forth widespread immiseration and economic disaster in its wake and the persistent intractability of the ensuing crises to lazier faire capitalist remedies had resulted in the entrenchment of Keysiam and state–capitalist views in economic policy-making circles. Thus Keynesianism and Western European style Social Welfare Capitalism, which held that the State had a strong and prominent role to play in the economic sphere; especially in curbing the excesses and smoothing the rough edges of unbridled capitalism, became the economic orthodoxy from the 1930s onwards.

Laisser-faire capitalism, that is, capitalism freed from state or public accountability, which had been the lodestar of the governing classes, became widely discredited in the late 1930s and was relegated to the fringes of economic thinking. The passionate zeal with which conservative economists had proselytized the capitalism which had engendered and sustained the rapacity and inequalities of the robber baron era now burned low and the embers were kept alive by ideologues like Big Business supported economists like Frederick von Hayek, Milton Friedman and co. (Hayek and Friedman would later on win the so-called Nobel Prize in Economics which burnished their reputations and lent prestige and gravitas to their falsified ideas. The Riksbank, the Swedish Central Bank created the so-called Nobel prize as the” Sveriges Bank prize in Economics in memory of Alfred Nobel” in 1968 and in a stunning display of the power of the transformation of economic capital to symbolic capital, to paraphrase Yves Gringras, had by making the monetary value of the award, the arrangements and ceremonies of their prize similar to the original Nobel prizes created by Alfred Nobel in 1900 succeded over time in making non-economists and the general public accord the economics prize the same level of prestige, rigour and glamour as the Nobel Science prizes. Yves Gringras, an intellectual historian, relates how this transformation of cultural capital took place in his “Beautiful Mind, Ugly Deception”. Keynes, a brilliant mathematician, who was the 7th wrangler at Cambridge in his time, took a dim view of economists who tried to put economics on an equal footing with the hard sciences. He withering reviewed Jan Tinbergen’s pioneering econometric work and lambasted the predictive and scientific pretensions of econometrics. A review which is still valid today in the opinion of the many econometrics -as -a -useful -technique -in -economics critics like Lars Syll, James Klees and other heterodox economics thinkers. Tinbergen shared the first prize in 1969 with Ragnar Frisch).

The dethronement of laisser-faire ideas led to the gradual acceptance of Keynesianism and other State –Capitalist ideas and the notion that the economy ought to work for the rich and the poor alike and that the economy is not a self-sustaining system naturally returning to some imagined equilibrium with full employment and high productivity. This combination of active state intervention in the economy to ensure demand in times of slack or low private business confidence or activity and generous welfare schemes for the poor, unemployed and the elderly had ushered in what is widely regarded as the golden age of capitalism. An age where the poor and the working classes got a historically somewhat fairer share of the wealth generated in the economy and more protection from the cyclical ravages of capitalism.

But the oil price shocks of the early 70s and persistent stagflation of the 70s resulted in an upheaval in economic thinking that enabled big business interests and conservative economists to revive and force into practice and use completely discredited economic theories, which later became known as Neoliberazation, that consequently ushered in in an era of massive deindustrialization and de-unionization in the US and the UK with resultant impoverishment of communities hosting the industries, wage stagnation, high private indebtedness in the consumption of goods like housing and schooling, massive financialization of the economy that upwardly redistributed wealth and income to stratospheric levels of extreme income and wealth inequality not seen since the robber baron era that finally culminated in the Great Recession of 2008.

The Recession impoverished and devastated lower and middle-class communities across the globe and sparked hope of a paradigm shift in economic policy, research and pedagogy since no mainstream economist had anticipated or predicted the recession despite the much-vaunted technical sophistication of their macro and microeconomic models and theories. A paradigm shift reminiscent of the kind that occurred in the 16th and 17th centuries when Copernecioan astronomy replaced Ptolemian astronomy.

This did not happen because political leaders in the West- Barack Obama, Gordon Brown and others who were recipients of Big Business money- protected the banks whose greed, criminality, and recklessness had wrecked the global economy enabling them to not only avoid criminal prosecution but also withstand and survive public fury and clamour for justice. They emerged from the crisis, not only unscathed but vastly richer and emboldened enough to resume, intensify and reinforce the same policies that led to the economic crisis.

In the US, for example, Wikipedia states that the US Congressional Budget Office (CB0) studies had shown that “Between 1979 and 2007, the top-earning 1 per cent of Americans have seen their after-tax-and-benefit incomes grow by an average of 275%, compared to around 40–60% for the lower 99 per cent.”

Oxfam relates in their January 16th report that ” The richest 1 per cent grabbed nearly two-thirds of all new wealth worth $42 trillion created since 2020, almost twice as much money as the bottom 99 per cent of the world’s population” while the World Bank claims that extreme wealth and extreme poverty have increased simultaneously for the first time in 25 years.

Given that the IMF has been since last year prescribing their timeworn nostrum of the removal of fuel and electricity subsidies to Nigeria which has, as usual, none of the promised beneficial but the usual catastrophic effects; it is necessary that Nigeria and other low and middle-income countries reevaluate their receptivity to remedies from the IMF and other Western-dominated global financial institutions and indeed their relationship to these bodies.

The necessity is even more so for Nigeria which since the late 80s and the early 90s has placed an entirely unmerited valuation on ideas and persons coming from the IMF and the World Bank. Persons like Drs. Idika Kalu Idika, Okonjo Iweala, and Obiagelli Ezekwesili have parlayed their impeccable credentials from these arch-neoliberal institutions to push policies ostensibly pro-people but which have the net effect of transferring funds out of Nigeria and also enormously enriching the notoriously kleptocratic Nigerian political class at the same time. (See the political economist Patrick Bond’s article “Can A Nigerian Squeeze the Poor for the World Bank?” on the particularly egregious Okonjo-Iweala).

When the Great Recession so spectacularly exploded the pretensions of Neo-Classical Economics to any sort of scientific rigour, at least among the reality-inclined, there was a renewed call from many to study economics within its social, political, spatial-temporal contexts. And not the ahistorical, universalist and abstract-model-obsessed economics promoted by mainstream economic theorists. The tendency towards abstract model building and the use of complex mathematical equations in abstract models with extreme and highly unrealistic assumptions about human behaviour, dates from David Ricardo, a classical 19th-century political economist, and was termed the Ricardian vice by Joseph Schumpeter, a prominent 20th century economist. This tendency worsened with the advent of the Marginalist Revolution in classical economics which invented the abstract representative economic agent (Homo Economicus) maximising his utility and costs at the margin as the sole focus of economic study in contrast to their immediate predecessors, the classical economists, who had studied concrete social, economic and political realities. The big business interests of the day found this doctrine which erased all discussions of power asymmetries, income and wealth distributions between individuals congenial and united with the state to crush nascent forms of countervailing power, to borrow John K Galbraith’s phrase, which of necessity had begun to arise to protect workers from the depredations of the big capitalists. A notion that preeminent economists like Angus Deaton had just started to realise in 2024 some 200 years after the fact.

The Formalist Revolution in neoclassical economists in the 1930s merely consolidated this trend and the emphasis on the “Mathematical Tractability” of models i.e the expression of models of contingent, complex social phenomena in highly sophisticated mathematical forms even at the expense of the realities of those phenomena became the summum bonum of orthodox economic theorising.
But with the growing awareness of transnational political, military, ethnic and cultural factors on national economies, Nigerians can and should begin to interrogate fundamental questions about its position in global political and economic affairs and question the relationship of the manner of its founding and continued existence to the interests of its former colonial overlord the United Kingdom and the hegemonic United States. Alternative national and economic configurations including the complete breakup of the nation (which a sober and realistic as opposed to a romantic or naive assessment of the founding and continued existence of the country as a strictly economic tool of pillage by the British would deem inescapably logical) should be considered by Nigerians if they are truly fed up by over a 100 years tragic existence as a forcibly united nation.

Degrowth economics and Ecosocialism are only some of the alternative progressive political-economic systems which seek to move beyond climate-destroying capitalism and build a more just and equitable system which takes into consideration the ecological limits and resource capacities of the earth.

Perhaps if the many constituent ethnic nationalities who are nation-states in their own right, by any definition of the term nation-state, and who are trapped within the oppressive Nigerian State are courageous enough to explore some of these other alternative economic and political systems, they might eventually bring succour to their members who have experienced nothing but poverty, anguish and decimation in the hands of the British who first cobbled them together in 1914 and at the hands of comprador political class whom the British handed over to in 1960 as junior partners in the continued exploitation and ruination of their former vassals.

Chibuike Obi, a freelance journalist based in Niger State, can be reached at ojionu@hotmail.com or on Twitter @chibuikeobi19 or Facebook