This article derives its title from a report, ‘A Roadmap for Inclusive Prosperity (RIP)’, released January 15, 2015, by the Global Inclusive Prosperity Commission (IPC), a group of 17 international experts from five countries co-chaired by Lawrence H. Summers, president emeritus of Harvard University and former World Bank’s chief economist, and Ed Balls, member and shadow chancellor of the Exchequer in the British Parliament. Second, an earlier report, ‘Prosperity Economics: Building an Economy for All (PEA)’, co-authored by Jacob Hacker, a Yale University professor, and Nate Loewentheil, was released in 2012.
These two reports are significant and relevant in the context of the current state of the Nigerian economy for several reasons. First, they both have a central message of inclusive prosperity for all. Second, analytical rigour has been brought to bear on austerity economics and its discontents. Third, policies and programmes to inform prosperity economics of inclusion have been proposed. Fourth, the discourse on the issues of insecurity, inequality, economy and corruption in the electoral campaigns still needs to be guided by clearly articulated positions based on careful research and thoughtful analysis as both the RIP and PEA have done.
This article focuses on prosperity economics of inclusiveness for growing the economy while reducing pervasive inequality and high unemployment. We attempt here to provide a roadmap for a prosperous economy that all Nigerians, and not a few, can effectively partake in and share in.
Some pertinent questions emerge from the reports: How does a growing economy serve the common good? How do we create a stronger, fairer and more sustainable economic model in which the many and not just a few benefit from rising prosperity now and into the future? How do we ensure that a dynamic market economy and a fair society can go hand in hand? How do we make economic growth a friend, not a foe, of inclusive prosperity? How do we make markets work for the poor? How do we ensure that all of society’s citizens have a stake in its prosperity, and therefore all of its citizens have a stake in its future? As the RIP has noted, these are not questions just for governments, but for corporations, civil society, and citizens as well.
Austerity economics and its discontents
PEA has a chapter on ‘Austerity Economics and its Discontents’ which produce a vicious cycle of unequal growth, increasing insecurity, and unbalanced democracy. Even the coordinating minister for the economy, Ngozi Okonjo-Iweala, acknowledged the failures of austerity economics practised in Nigeria when she discussed the key evidence of a vicious cycle of inequality, insecurity, poor infrastructure, corruption and institutions in a speech on ‘Vision for Sustained Prosperity in Nigeria’ to the Atlantic Council in the USA in October 2014.
With the growing insecurity and worsening economic misery, the poor are not experiencing the democratic dividends and the targets set in Vision 2020: a poverty rate of 21 per cent by 2015 versus current over 50 per cent; a life expectancy rate of 60 years versus 52; infant mortality of 30 per 1,000 live births versus 85; a medium human development index (HDI) versus low HDI of 152. The HDI is a composite index that measures progress in three basic dimensions of human development: a long and healthy life, knowledge, and a decent standard of living. The exchange rate is now at over N210 to $1, as against N148 to $1 when the Vision 2020 blueprint was prepared in 2009. A targeted ranking of ease of doing business index of less than 80 was envisaged as against a current rank of 170; the rating on the corruption perception index of less than 60 was the target compared to the current rank of 136. A target ratio of 20 per cent of foreign exchange earnings coming from non-oil sectors versus 5 percent. A domestic refining capacity of 750,000 bpd was expected by 2015 versus the installed capacity of 445,000 bpd, which still runs on less than 30 per cent of installed capacity.
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Economic growth and inequality
How did we get to this state of socio-economic affairs? For one, austerity economics goes beyond the current austerity measures of pro-cyclical fiscal and monetary tightening induced by a significant decline in oil prices. Its root can be traced to decades, especially the last 16 years of policies and programmes with an emphasis on a few elite, growth per se as against reducing inequality, a narrow focus on selected few winners in selected few industries. Thus, the current situation is man-made. But the myth of austerity economics in Nigeria is that for the few elites, representing 0.01 per cent of the population with a third of the nation’s wealth, the glass is full to the brim. For the remaining poor majority, the glass is empty to the bottom: not even half-full or half-empty. In essence, austerity economics ignores inclusive, shared, scalable and sustained prosperity. The Harvard professor of political economy, Benjamin Friedman’s book on ‘The Moral Consequences of Economic Growth’ has noted that we should be concerned not only about the success of the few most privileged, but also about the poverty of the most disadvantaged as well as the economic well-being of the broad majority of the population.
Whereas some may use the Kuznets Curve by Nobel Laureate Simon Kuznets that while inequality may initially rise, it will improve at later stages of development, academic and policy research at the IMF, World Bank, OECD, and other international organizations have demonstrated that growth is unsustainable with high levels of inequality. David Landes, the author of ‘The Wealth and Poverty of Nations’, asserts that nations should go beyond growth figures and illuminate performance and its consequences by moral concerns and goals. Furthermore, some countries have demonstrated in practice that the Kuznets Curve is not cast in stone and that its shape can be impacted by prosperity policies, programmes and institutions. According to the Asian Development Bank, Malaysia’s triple bottom line prosperity model to improve the quality of life emphasises achieving a high per capita income of $20,000; inclusiveness which enables communities to fully benefit from the country’s wealth; and sustainability, which balances present needs without compromising future generations.
The IMF states that “Economic growth in Algeria over the last decade has been relatively more favourable to the poor than to the rich helping to reduce inequality…. Algeria’s pro-poor growth over the past decade coincided with a significant decline in unemployment and increases in social spending. Between 2000 and 2011, the unemployment rate fell steadily, from 29.5 per cent to 10 per cent. Over the same period, per capita, spending on health and education doubled in real terms…these developments may have disproportionately benefitted the poorer segments of society.”
Temitope Oshikoya
