OUTLINE OF PAPER PRESENTED AT THE FOURTH NIGERIA SOCIAL FORUM HELD IN ENUGU, NIGERIA FROM 2ND-5TH NOVEMBER, 2008.

 

1. INTRODUCTION

In the last two decades, there has been an ascedancy of neo-liberalism with the disintegration of the Soviet Union by counter revolutionary forces led by Milkhail Gorbachev. Neo-liberalism has been elevated to a dominant religion with the United States of America as the major crusader. But recent events of the food crisis, energy crisis and financial crisis has clearly shown the inherent  contradictions and crisis of capitalism. The world global crisis has signalled the failure of capitalism and the need for an alternative.

 

Capitalism generates and promotes poverty and injustice. The global political and economic structures are organised in such a way as to continue to perpetuate poverty and injustice through policies and actions that continue to widen the disparity between the rich and the poor. Marx and Engels propounded the laws of historical materialism and stated that the inherent contradictions in capitalism will lead to ruin of the capitalist system with the enthronement of socialism. Some scholars arguing for a non-communist approach to societal development encouraged conspicous consumption in the developed capitalist economies leading to the present economic melt down and credit crunch.

 

With the recent crisis, Northern governments have resorted to policies and actions that progressive and socialist scholars have advocated for years including state intervention in the economy, massive subsidies and nationalisation of banks. Unfortunately, public funds are now being used to bail out the failure of the bourgeosie and the capitalist system.

 

In this paper, we look at the role of global structures and national policies in promoting global poverty and the interconnection with the global crisis. But first, we will examine the concept of neo-librealism and how poverty is being globalised.

 

2. THE CONCEPT OF NEO-LIBERALISM

Neo-liberalism is a model and ideology of economic development that promotes the rolling back of the role of the state and the dominance of market forces. It has been argued that neo-liberalism in its present form has its roots in regimes of Margaret Thatcher in the UK and Ronald Reagan in the USA that dismantled their welfare states in response to global economic crisis in the 1970s; occasioned by rising costs of labour in the USA and Western Europe and the rapid development of capitalism in the newly industrializing countries of Asia leading to increased competition, reduced profit rates and the “crisis of overproduction.” The basic ideas behind neo-liberalism include:

• The state should reduce its role in regulating the economy and allow market forces to allocate resources;
• The market is the most efficient way of allocating resources;
• The state should reduce levels of social spending so as to limit budget deficits;
• Countries should liberalise and open their economies to foreign trade and investment and stop protecting their own industries;
• Corporate taxes should be reduced since they are seen to restrict foreign investment;
• Countries should adopt open-door policies on profit repatriation by transnational companies;
• Labour markets should be deregulated to allow the “flexibility” required for business expansion and economic growth (i.e. work process flexibility, wage flexibility and employment flexibility);
• Centralized collective bargaining leads to labour market rigidities and should be abolished;
• Wage increases should be kept in check as they are seen to push up inflation;
• Private management is seen as more efficient than public management;
• Private sector involvement and investment in state-run enterprises and services should be encouraged.

 

The neo-liberal ideology is being vigorously pushed by the international financial institutions represented by the Bretton woods institutions, the international monetary fund (IMF) and the World Bank. Since these institutions control the formulation of economic policies in the world especially in poor countries, the ideology and prescriptions of neo-liberalism has gone unchallenged by governments. However, due to the impact of neo-liberalism on the poor and excluded, the opposition and struggle against neo-liberalism is growing on a daily basis all over the world. Civil society organizations, labour movements and social movements are emerging in various parts of the world especially in Asia and Latin America to challenge neo-liberalism. In Africa, the organization of movements against neo-liberalism is gathering momentum.

 

Neo-liberalism is the latest manifestation of imperialism. In order to understand the struggle against neo-liberalism, it is important to know that neo-liberalism is not entirely new but a manifestation of an old phenomenon. It is the modern day equivalent of colonialism, neo-colonialism and imperialism. Scholars have documented that the underdevelopment of Africa is a dialectical process, which simultaneously led to the development of Europe. According to Walter Rodney,

Colonial Africa fell within that part of the international capitalist economy from which surplus was drawn to feed the metropolitan sector… Colonialism was not merely a system of exploitation, but one whose essential purpose was to repatriate the surplus to the so-called ‘mother-country’. From an African viewpoint, that amounted to consistent expatriation of surplus produced by African labour out of African resources. It meant the development of Europe as part of the same dialectical process in which Africa was underdeveloped.

 

Various scholars have documented that before colonialism in the 15^th century, European technology was not totally superior to that of other parts of the world but colonialism led to the forcible incorporation of Africa into the international capitalist economy and removed the colonized from history and from the community.   After political independence, neo-colonialism ensured that the colonial economic relationships were maintained characterized by production of primary products by the newly independent nations for the requirements of the economies of the North, domination of the major sectors of the economy by transnational corporations, foreign investment e.t.c. The consequence of this is balance of payment crises, foreign debt trap, capital and outflows from Africa. According to the United Nations Conference on Trade and Development (UNCTAD), Africa received some $540 billion in loans between 1970 and 2002; but despite paying back close to $550 billion in principal and interest, it still had a debt stock of $295 billion at the end of 2002. In the so called debt relief for Nigeria in 2006, the country was made to pay the sum of $12.4 billion (7 billion GBP) to the wealthiest nations on earth. This singular payment by Nigeria is more than the debt deal agreed by the G8 in 2005 for poor countries in a decade. Out of the money, the UK received 1.7 billion GBP which is twice what DfID gave to Africa in 2005.

 

Neo-liberalism is a continuation of the economic ideology of neo-colonialism. The underlying principles of neo-liberalism outlined above are meant to serve essentially the same purpose served by colonialism: development of the ‘mother country’ and the underdevelopment of Africa through market forces, repatriation of profit, poor wages, emasculation of popular democratic forces and unfair trade.

 

3. GLOBALISING POVERTY

In the last decade before the recent global crisis, we have witnessed unprecedented production of goods and services with technological breakthrough and possibility for improvement in condition of living of citizens. But the reality of the world today is that many countries are very poor and cannot meet their development needs. It has been documented that more than 1.2 billion people, one in every five on earth live survive on less that US $1 per day. Wealth is concentrated in the hand of a few people while the majority wallows in abject poverty. The UNDP in its 1998 report documented that the three richest people in the world have assets that exceed the combined Gross Domestic Product (GDP) of the 48 least developed countries. Similarly, the 1000 richest people in the world have personal wealth greater than 500 million people in the least developed countries. Robert Chambers aptly captured it when he wrote: I am so angry at what has been done, and continues to be done, in our world. It is hard to believe that the nightmare is real. We seem trapped in grotesquely unjust systems, more and more dominated by power, greed, delusion, denial, ignorance and stupidity, fuelled by symmetries of terrorism and fundamentalisms.

In a similar vein, Amartya Sen pointed out that:

We live in a world of unprecedented opulence, of a kind that would have been hard even to imagine a century or two ago…And yet we also live in a world with remarkable deprivation, destitution and oppression. There are many new problems as well as old ones, including persistence of poverty and unfulfilled elementary needs, occurrence of famines and widespread hunger, violation of elementary political freedoms as well as of basic liberties, extensive neglect of the interests and agency of women, and worsening threats to our environment and to the sustainability of our economic and social lives.

 

In Nigeria, the number of people living in poverty has increased steadily over the years. Nigeria, which was one of the richest 50 countries in the early 1970s, has retrogressed to become one of the 25 poorest countries at the threshold of the twenty first century. It is ironic that Nigeria is the sixth largest exporter of oil and at the same time host the third largest number of poor people after China and India. Statistics show that the incidence of poverty using the rate of US $1 per day increased from 28.1 percent in 1980 to 46.3 percent in 1985 and declined to 42.7 percent in 1992 but increased again to 65.6 percent in 1996. The incidence increased to 69.2 percent in 1997. If the rate of US $2 per day is used to measure the poverty level, the percentage of those living below poverty line will jump to 90.8 percent. Although the 2004 report by the National Planning Commission indicates that poverty has decreased to 54.4 percent, the actual number of poor people increased from 67 million to 69 million.

 

It can be argued that two great problems confront Nigeria: corruption and adoption of neoliberal policies. According to the former Chairman of the Economic and Financial Crimes Commission (EFCC), Mallam Nuhu Ribadu, Nigeria’s previous leaders stole about 64 trillion naira (about US $507 billion) from public coffers. When benchmarked against the 2008 budget of N2.5 trillion naira, this translates to twenty six years budget.  It is not an accident that government at all levels are not building houses, schools, refineries or cement factories leading to problems in all these areas. It is fanatical implementation of neo-liberal policies.

 

4. ROLE OF GLOBAL STRUCTURES IN PROMOTING POVERTY

The architecture of the global polical and economic structures is constructed to pursue neo-libearlism leading to more poverty in the world. Examples include:

• IMF
• World Bank
• WTO

Global arrangements and institutions meant to promote justice and environmental sustainability like the International Criminal Court and the Kyoto protocol are undermined by the United States of America.

 

5. ROLE OF NATIONAL POLICIES IN PROMOTING POVERTY

The international global architecture ensures that national policies follow the “Washington consensus” and neo-liberal policies. The IFIs ensure that nations follow these prescriptions through various conditionalities and instruments. Even when they do not lend to a country, they still control the policies as in the case of Nigeria’s Policy Support Instrument (PSI).

 

In recent years, Nigeria’s case can be traced to the 1986 IMF debate when Nigerians rejected IMF and its conditionalities but the Babangida regime imposed it on Nigerians through the Structural Adjustment Programme (SAP) and second tier Foreign Exchange market. Another way that the Bretton Woods institutions have gotten a straglehold on Nigeria is through the “posting” of IMF Economists to head the Ministry of Finance e.g. Olu Falae, Chu S. P. Okongwo, Idika Kalu and Ngozi Iweala.

 

6. THE INTERCONNECTION AND THE GLOBAL CRISIS

The recent global economic crisis has reinforced the severity of the food crisis which started a few months ago. The stock market is down by more than 40 percent showing the weakness of creating paper money through casino capitalism. Investment Banks have collapsed. Most Northern countries are experiencing negative growth. But in all of these, there is some good news. Malawi is growing at 8 percent. China is growing at more than 10 percent. Many African countries including Nigeria are growing at between 6-7 percent with African average of 6.1 percent. It is instructive to note that the more linked your economy to the global capitalist architecture, the worse it is for your economy.

 

The challenge of the struggle against neo-liberalism is that even though it manifests itself at local and national levels, the driving force is international. According to Jeffery Sachs,

Africa is constantly berated for its poor politics and bad economic ideas, though most of the mischief has come from outside. In the 1960s, the fad was ‘development planning’. In the 1970s, this gave way to ‘basic needs’. In the 1980s, ‘basic needs’ was supplanted by ‘structural adjustment’… the focus in the 1990s has shifted to ‘good governance’ …donors now berate African governments for their ‘lack of ownership’ of a reform dictated by the IMF and World Bank.

Therefore, the struggle against neo-liberalism must simultaneously take place at the local, national and international levels.

 

7. THE WAY FORWARD

It is clear that the dominance of neo-liberalism in the last two decades with the operation of casino capitalism has led us to the present global crisis in food, energy and the banking sector. The world is crying for an alternative to the present order. In order to produce a new order, the following are imperative:

• Rejection of the Washington consensus and any modification of it to deal with the present crisis.
• Building of a new global financial architecture that will:

• Encourage long term productive investment in the production of goods and services and not in speculation or creation of paper money.
• Enhance economic democracy and national control by citizens
• Curtial the powers of IFIs
• Create fair trade rules that protect workers and environmental rights
• Bring about new international regulatory framework under the auspices of the United Nations
• Promote subregional and regional integration
• Ensure ecological and environmental justice

 

• Full scale socialisation of all banks and commanding heights of the economy
• Democratisation of politics and economy instead of democratising corruption
• Struggle for a Socialist alternative: The objective conditions for a socialist change is ripe in our country. What we need to do is to create the subjective conditions for that change to happen by creating the organisations and people that will bring about that change. Perhaps, what we immediately need now is a Movement for Transformative change made up of patriots, nationalists, socialists, working people, progressive businessmen and all those committed to building a virile, democratic and just nation.