By Adisa Adeleye
IN the 1930s many developed nations of the Western World faced what was described as the worst economic crisis.Â Prices of commodities fell, abysmally and the New York Stock Exchange collapsed.Â That was followed by a severe loss of confidence in the economy, leading to failure of businesses.
Unemployment deepened beyond the imagination and ability of policy makers (advised by array of classical economists) of the time.
In Britain, under the aura of classicism unemployment was viewed as an aberration which would soon disappear under an anesthesia of wage cuts, reduced expenditure and heavy dose of balanced or surplus budget â€“ taking more revenue and spending less.
The measures proved useless with the British economy tottering under the terrible weight of mass unemployment, social disaffection and enormous increase in doles â€“ unemployment and other allowances.
The celebrated Marxists of the dreadful 1930s were justifiably and joyfully, but perhaps prematurely, expecting the downfall of mighty capitalism, the adored goddess of Western economy.Â Alas, it was not to happen. Capitalism was saved through the thinking cap of John Maynard Keynes (1883 â€“ 1946).
It is generally accepted that Keynes (later) revolutionized economic thinking by saving many nations from the prevailing crudeness that characterized budgeting before the publication of his book, â€˜General Theory on Employment, Interest and Moneyâ€™.
â€˜For the purpose of our comment, the relevant theme of Keynes approach is that, â€˜in times of depression and unemployment it is desirable to encourage spending and lavishnessâ€™ That concept was quite the opposite of the prevalent official policy of, â€˜economy, thrift, minimal public expenditure and balanced budget.â€™
Keynes advocated the injection of more money into a dormant economy to stimulate deficient demand for goods.Â A lively demand for goods would lead to an increase in supply and increase in employment, as there is a direct and clear relationship between the higher purchasing power in the hands of the people and the demand for consumer goods, and also the level of employment among workers producing the goods.
If Keynes revolution recognized the impact of investing extra funds into public works â€“ construction of new roads, and maintenance of old ones, and clearing of blocked and filthy drains, then Governor Babatunde Fashola (SAN) of Lagos State is an ardent disciple of Lord Keynes and a good exponent of his principles.
It is admirable to observe that the governorâ€™s policy is not of digging hole and filling it or building pyramids but reconstructuring the dilapidated infrastructures to change Lagos State â€“ roads easily motorable, buildings physically more attractive and environment, more conducive for healthy living.
There is no doubt that if the Lagos State local government councils would compliment the State Governmentâ€™s efforts in infrastructural developments by injecting extra funds into the system, the fear of unemployment might disappear sooner than later.
A little problem with the Stateâ€™s security and environmental policy is the hastily removal of security barriers in many areas and estates (on the advice of the police), subjecting the middle-class their serene arrears to the retaliatory gestures of Okada riders, fumes of rickety buses and dangerous tricycles plying the terribly maintained roads during the day and night (forget the time limit of 8 p.m. and 10 p.m.).
And of course, the menace of the dangerous elements roaming the dark streets and alleys at night for mischief or spoilage of environment.
Under the present dispensation when community policing is not yet fully developed, when minor and major roads exhibit varying sizes of potholes, the middle class residents have become trapped in their own homes.Â No more evening walks after a dayâ€™s toil to refresh for the other day; the musketeers have taken over in their vengeance.
Some buses have re-routed their journeys through the estates to justify their new won freedom.Â Goodbye to peace during the day and serenity at night.Â Could Lagos State continue to justify its discriminatory development charges between low and high density areas?Â Many buildings in the estates have started to suffer losses in value because of security and personal risks. I am sorry for a little digression.
The Lagos State government in its adherence to Keynes principle has advised house owners in public places and estates to enhance the environment by painting their buildings.Â This exercise (if faithfully carried out) will stimulate demand for paints, indirectly promotes expansion in the Paint industry, and increase the supply of paints and painters.
With government support of painting of public buildings and schools, the Paint Industry which is becoming depressed would bounce back to life and vitality.
If the economic policy of Lagos State Government is examined in good light, it is because of the leadership quality of the governor who believes in growth without unemployment.Â A case study for other governors who frittered public funds away on conspicuous consumption and doubtful projects.Â Some former governors have become regular visitors to EFCC offices.
Former governor, Prof. Soludo was no exception to his predecessor in mopping supposedly surplus funds.Â A poser for the new Central Bank governor (not on the removal of Banksâ€™ executives) but on the management of supply of funds.
The past governors who appeared as disguised classical economists frowned at excess liquidity or budget deficit policy of the government.
A former Central Bank boss, Joseph Sanusi once said that, â€˜the full implementation of the 2002 budget as approved by the National Assembly would dampen prospects for re-establishing macro-economic stability for sustainable growth during the year.Â We vouched on the need to sterilize the resultant excess liquidity by raising interest ratesâ€™.
The fear of inflation as aÂ result of excess liquidity had been the nightmares of the past Central Bank Governors and had resulted in bad advice to the government.
Surplus funds or excess liquidity should not result in inflation in an atmosphere of unemployment and low industrial capacity utilization.Â Excess funds should bring reduction in the rate of interest to attract the productive sector of the economy.
High interest regime has encouraged the banking system to embark on speculative and risky lending to the detriment of agricultural and manufacturing sectors of the economy.
And why not give Fasholaâ€™s government a low lending rate of about 5% and see what would become of Lagos infrastructural developments in a few years time.
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