BURNING POT BY DR. PRINCE CHARLES DICKSON

 

That N8, 000 and our voodoo economics

pcdbooks@yahoo.com

 

The longest road you’re going to have to walk is from here to here.

 

In June the United Nations’ Sustainable Development Solutions Network published its Sustainable Development Report 2023, which tracks the progress of the 193 member states towards attaining the seventeen Sustainable Development Goals (SDGs). ‘From 2015 to 2019’, the network wrote, ‘the world made some progress on the SDGs, although this was already vastly insufficient to achieve the goals. Since the outbreak of the pandemic in 2020 and other simultaneous crises, SDG progress has stalled globally’. This development agenda was adopted in 2015, with targets intended to be met by 2030. However, halfway to this deadline, the report noted that ‘all of the SDGs are seriously off track’. Why are the UN member states unable to meet their SDG commitments? ‘At their core’, the network said, ‘the SDGs are an investment agenda: it is critical that UN member states adopt and implement the SDG stimulus and support a comprehensive reform of the global financial architecture’. However, few states have met their financial obligations. Indeed, to realise the SDG agenda, the poorer nations would require at least an additional $4 trillion in investment per year.

 

No development is possible these days, as most of the poorer nations are in the grip of a permanent debt crisis. That is why the Sustainable Development Report 2023 calls for a revision of the credit rating system, which paralyses the ability of countries to borrow money (and when they are able to borrow, it is at rates significantly higher than those given to richer countries). Furthermore, the report calls on the banking system to revise liquidity structures for poorer countries, ‘especially regarding sovereign debt, to forestall self-fulfilling banking and balance-of-payments crises.

 

It is essential to place the sovereign debt crisis at the top of discussions on development. The UN Conference on Trade and Development (UNCTAD) estimates that ‘the public debt of developing countries, excluding China, reached $11.5 trillion in 2021’. That same year, developing countries paid $400 billion to service their debt – more than twice the amount of official development aid they received. Most countries are not borrowing money to invest in their populations, but to pay off the bondholders, which is why we consider this not financing for development but financing for debt-servicing

 

Reading the UN and academic literature on development is depressing. The conversation is trapped by the strictures of the intractable and permanent debt crisis. Whether the issue of debt is highlighted or ignored, its existence forecloses the possibility of any genuine advance for the world’s peoples. Conclusions of reports often end with a moral call – this is what should happen – rather than an assessment of the situation based on the facts of the neo-colonial structure of the world economy: developing countries, with rich holdings of resources, are unable to earn just prices for their exports, which means that they do not accumulate sufficient wealth to industrialise with their own population’s well-being in mind, nor can they finance the social goods required for their population. Due to this suffocation from debt, and due to the impoverishment of academic development theory, no effective general theoretical orientation has been provided to guide realistic and holistic development agendas, and no outlines seem readily available for an exit from the permanent debt-austerity cycle.

 

I have quoted copiously from my friends at Tricontinental: Institute for Social Research, where they are eager to open a discussion about the need for a new socialist development theory – one that is built from the projects being pursued by peoples’ movements and progressive governments.

 

In the outgone week, the House of Representatives approved the N500 billion requested by Mr. Tinubu for the provision of palliatives to mitigate the impact of petroleum subsidy removal on Nigerians, amending the 2022 Supplementary Appropriations Act as requested by the president. Mr Tinubu had in a letter asked the National Assembly to amend the 2022 Supplementary Appropriations Act by extracting N500 billion to provide palliatives.

 

The lower chamber considered the amendment bill and passed it. Meanwhile, the President said 12m families will get N8, 000 over a period of six months to ameliorate the hardships faced by Nigerians as a result of subsidy removal. According to a letter to the House of Representatives read by Speaker Tajudeen Abbas during plenary on Tuesday, Tinubu said it was to enable poor and vulnerable Nigerians cope with the cost of meeting basic needs. The letter was for approval of additional financing for the national social safety net programme scaled up by the National Assembly. The President said this would have a multiplier effect on about 60 million individuals.

 

I should have done this first but it is never late, let me first issue a caveat, I am not a finance expert, an economist, or auditor, I am not a banker, I have not held the post of cashier, or treasurer. My mathematics is poor, but I know one plus one is equal to two. I also know money magic when I see one...however, in the light of all the economic jargon above I say with a sense of full respect for the office of Mr. President of Nigeria that the current route being taken would not work, we have gone that way before but met with a jam lock, we have gone there before and discovered it was a scam, we have passed that route and it leads nowhere.

 

I won’t go into explaining how such a humongous sum could be better utilized or how it could solve transportation problems for example or the logic of subsidy removal and borrowing again, the World Bank and their policies, I won’t go into the debate of the merits and disadvantages. I won't risk sounding pedestrian, but I will end with this short story.

 

It's a slow day in little Tensleep, Wyoming. The sun is beating down, and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit...

 

On this particular day a rich tourist from back east is driving through town. He stops at the motel and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs in order to pick one to spend the night. As soon as the man walks upstairs, the owner grabs the bill and runs next door to pay his debt to the butcher.

 

The butcher takes the $100 and runs down the street to retire his debt to the pig farmer. The pig farmer takes the $100 and heads off to pay his bill at the supplier of feed and fuel.

 

The guy at the Farmer's Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her "services" on credit. The hooker (prostitute) rushes to the hotel and pays off her room bill with the hotel owner.

 

The hotel proprietor then places the $100 back on the counter so the rich traveller will not suspect anything. At that moment the traveller comes down the stairs, picks up the $100 bill, states that the rooms are not satisfactory, pockets the money, and leaves town.

 

No one produced anything. No one earned anything. However, the whole town is now out of debt and now looks to the future with a lot more optimism. This is voodoo economics, don’t ask how it works, if it works, when it will work, who it works for, no one earned anything, it's just from here to here, like it is said in common place what do we know—May Nigeria win!