As the global economy shrunk into the throes of a catastrophic recession over a decade ago, there was a resurgence of interest in the hitherto seemingly abandoned ideas of such unconventional economists as John Maynard Keynes (1883-1946), whose policy suggestions had played a crucial role in enabling the advanced economic countries successfully emerge from the great economic depression of the 1930s. The illustrated cartoon sketch book, ‘Keynes: A Graphic Guide’ by Peter Pugh and Chris Garratt published in 2009, helped in no small measure to make the great economist’s thoughts at least relatively accessible to readers without deep academic training in economics.
The blurb at the back of the book cryptically captured the virtual resurrection of Keynesianism in the corridors of state economic policymaking and compelled me to buy a copy at the time. It read, “John Maynard Keynes was arguably the twentieth century’s greatest economist. As a new recession bites, it is Keynesian ideas that are being called into action by governments across the globe. In the wake of the Great Depression, Keynes advocated that governments spend vast amounts in order to create jobs and prosperity. His ideas which formed the bedrock of Roosevelt’s New Deal in 1930s America revolutionized government and helped create an economic consensus that was shattered only by the monetarism of Reagan and Thatcher’s 1980s”.
As the world was increasingly shrouded in economic gloom, Keynes was quoted as telling the ordinary people of the UK in a BBC interview in January 1931 that “The best guess I can make is that whenever you save five shillings (12p, but about 12 pounds in today’s money) you put a man out of work for a day. Your saving that five shillings adds to unemployment to the extent of one man for one day and so on in proportion. On the other hand, whenever you buy goods you increase employment- though they must be British, home-produced goods if you are to increase employment in this country…”
He thus enthusiastically charged the ‘patriotic housewives of Britain’ to “Lay in stock of household linen, sheets and blankets to supply all your needs. And have the added joy that you are increasing employment, adding to the wealth of the country, because you are setting on useful activities, bringing a chance and hope to Lancashire, Yorkshire and Belfast”.
This account represents the thrust of elementary Keynesianism in a nutshell. Of course, it stands to reason that to engage in consumption spending, a considerable number of buyers must have some income, which implies either employment or access to some financial support. Keynes believed that government spending to stimulate economic activity was critical to either prevent economies slipping into recession and if they do, get back to relative equilibrium.
In another book on Keynes published also published in 2009, ‘Keynes: The Return of the Master’, the political economist, Robert Skidelsky, elucidates the great economist’s view that “an unmanaged market system is inherently unstable because of irreducible uncertainty; that fiscal and monetary ammunition is needed to counter economic shocks; and that governments need to maintain enough total spending power in the economy to minimize the chance of serious recessions happening”.
I remember that in one of his always stimulating and provocative contributions to a public debate on economic policy, the late Keynesian economist, Professor Sam Aluko famously declared that rather than lay off workers among other suggested austerity measures, it was better for government to dig a huge pit and employ people to fill it up in order to enable them earn income, buy goods and services and boost investment and growth!
One of the most lucid presentations of Keynes idea on the indispensable role of government in being at the vanguard of economic stimulus policies is by the South African political scientist, Lwazi Siyabomga Lushba, who points out that “Moving from the premise that markets do not always respond effectively to depressing conditions, Keynes argued that, in stagnant economies afflicted by low levels of aggregate demand, governments can trigger the economy through expansionary economic, particularly fiscal and monetary policies. This they can do by increasing government expenditure, cutting taxes or lowering interest rates, thus leaving consumers with more disposable income and encouraging borrowing for investment”.
“Thus it is counter-productive in times of depression to apply contractionary and inflation-targeted policies, for this makes the economy more unattractive”, Lushba submitted.
Retreating from the ascendancy of neo-liberal policies following the emergence of Thatcher and Reagan-type governments in the 1980s across the west, Keynesianism had fallen into disrepute as it was heavily criticized for allegedly fostering wasteful big government and unsustainable social welfare expenditure. However, the severe global economic recession of 2008-2010 provoked massive fiscal interventions by governments in the advanced economies to bail out failed banks and big corporations as well as stimulate spending, growth and job creation, which were ordinarily antithetical to the conventional wisdom of neoliberal, austerity –inclined economic policies.
Although Keynesian policies had helped the world to emerge from the 2008 economic recession, neoliberal economic orthodoxy continued to reign supreme in most advanced western capitalist countries and were also imposed on weak and vulnerable African countries through the instrumentality of the International Financial Institutions. As Lwazi Lushaba again argues, “Social spending is often the first sector that suffers when these contractionary measures are imposed, the results being low primary and secondary school enrolment and retention ratios, high levels of infant mortality, dilapidated infrastructure and near non-existent social services that are in turn cited by the very institutions as indicators of African underdevelopment”.
The horrendous impact of the raging coronavirus pandemic on the health systems of some of the most developed countries in the world, particularly those who like the United States and the United Kingdom, for instance, with governments that adhere in doctrinaire fashion to the principles of neoliberalism and the supremacy of the market, brings into bold relief the shortcomings of this extremist laissez faire ideology.
Despite their huge resource endowments, the health and other critical welfare and life-sustaining systems of these countries are subordinate to the dictates of market force and priced beyond the reach of large segments of their vulnerable populations. Meanwhile, such largely unproductive sectors like the military-industrial complex continue to be munificently funded.
Thus, a poor, underdeveloped country like Cuba provides superior healthcare services to the majority of its citizens compared to the capitalist economic powers where the interplay of market forces enable speculative investment in assorted financial derivatives to be hugely profitable. However, the non market-attractive health equipment and facilities to enable effective response to unpredictable pandemics are in critical short supply with fatal consequences for the citizenry.
It is obvious that in the aftermath of the coronavirus traumatic experience, economic and social policy conceptualization, articulation and implementation will not remain the same across the world. Even ultra conservative Trump has approved trillions dollar injection into the US economy. Keynesianism seems destined for a longer stay on the economic policy menu of most countries irrespective of ideological orientations even after the current emergency.
In Nigeria, the National Leader of the All Progressives Congress (APC), Asiwaju Bola Tinubu and his co-author, Brian Browne, had in their 2012 book, ‘Financialism: Water from an Empty Well’, launched a fierce attack against neoliberal orthodoxy especially its financialist variant of speculative investment and optimal profit maximization for a few divorced from concrete production in the real economy to the detriment of spending that prioritizes infrastructure modernization, job creation and poverty alleviation.
In their words, “For the sake of Nigeria, the rest of Africa, and the Black race, Nigeria must assume the challenge of industrialization on a grand scale. Nigeria can bring to the African continent the formula for success that once sparked America’s greatness and now ignites china’s. To do so, Nigeria must jettison the financialist model it has adopted. Financialism smothers the vitality of the real economy where jobs and genuine wealth are created. It turns the political economy into a zero-sum mire”.
These words are even more pertinent in today’s world, which has already been fundamentally transformed by an invisible virus. It is hoped that Tinubu’s far-reaching and bold Economic Stimulus Policy proposals on responding to the coronavirus; the unabashedly Keynesian thrust of Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele’s policy initiatives to strengthen the resilience and capacity of the Nigerian economy to transcend this crisis and the Vice President, Professor Yemi Osinbajo’s welfarist and humane disposition and influence as Chairman of the Economic Sustainability Committee can combine with other forces to birth a post Coronavirus economic renaissance in Nigeria.(Nation)