ECONOMIC RECESSION SHOWS THAT CAPITALISM IS NOT WORKING
Socialist Democracy (SD) November â€“ December 2016 Edition
ECONOMIC RECESSION SHOWS THAT CAPITALISM IS NOT WORKING
Time for System Change
By H.T. Soweto
Within the space of a little more than a year, Nigeria’s story has turned full circle from an economy lauded as the largest on the continent with potentials to grow further to one enmeshed in its worst economic crisis in 25 years.
Now, the economy has officially contracted by -2.06 percent and the government is cash-strapped with 27 states owing workers and pensioners backlog of wages. Price of crude oil – Nigeria’s mainstay – has plunged leading to enormous losses in state revenue, a foreign exchange crisis which shaved off 60 percent of Naira’s official value, record level inflation, job losses, a banking crisis and consequently, economic recession. It is an end to an era – a decade that saw 5 to 7% GDP growth and boom in crude oil prices and sale. Now within the last one year, over 4.6 million jobs were lost in the economy with more forecast to go. This is in addition to about 2 million workers and pensioners starving because their wages and benefits are not being paid on time.
This together with a budget crisis and failure to accomplish any of its promised social intervention programmes has put the Buhari/All Progressive Congress (APC) government, elected last year May with 15 million votes, into a crisis of immense proportion. Confidence in the government is falling rapidly with many people starting to ask if this was the change they voted for.
The Buhari APC regime has tried to explain away this crisis, not as a failure of the system, but simply as a product of the unbridled corruption and profligacy of previous governments. According to the Finance Minister and other government officials, two factors accounted for the crisis: lack of sufficient savings when crude oil prices were up and the fact that the economy was not diversified.
The first point that must be stressed is that these half-hearted remonstrations about corruption and diversification are old songs that have been sung each time the economy entered into perilous situations. Especially for the Buhari government, the corruption argument, and the campaign against it, is a perfect diversion from examining the fundamental roots of the grim economic crisis. To be sure, as soon as growth picks up, by 2017 if we go by World Bank’s recent forecast, all of these remonstrations about diversification and corruption will be forgotten by the ruling class as they embark once more on quick profit-making and plundering. But while a clampdown on corruption could allow some improvements to be made, this on its own would not solve the fundamental issues facing the mass of Nigerians. In any case, it should be stressed that there is no sincerity in the anti-corruption fight of Buhari government. The only way working people, youth and the poor majority can begin to understand how the crisis came about is by examining capitalism itself as a global system and the position of Nigeria within it.
Capitalism is a system that operates on the basis of private ownership of the means of production (factories, manufacturing companies, electricity and energy companies etc.) and production for profit instead of people’s needs. The expectation of those who defend this system is that when individual producers bring their products to the market to exchange or sell, they are able to pay their workers’ wages which in turn goes on to feed the workers’ families and provide their basic needs. With his or her wage, the worker will patronize the farmer and market women for food, tailors for clothes, the cobbler for shoes etc. and in this way everyone and society as a whole benefits. But the reality of the past over 400 years however is that what is paid as wages to workers who produce all the products or commodities is merely a fraction of what they really contributed to the production process. The capitalists, or owner of the means of production, pocket the rest or ploughs some of it back into expanding their factories and buying new machineries etc.
But since the workers are the majority in society and they are the ones mostly expected to buy the commodities the capitalists are producing, very soon the capitalist drive for profits catches up with them when the workers are unable to buy the mass of commodities available in the market because they only receive a percentage of the value which of what is produced. This is inevitable under capitalism because the capitalist produce for profit, not need, and if workers’ share squeezes the capitalists’ profits they would not produce. To overcome this, capitalists seek new markets or encourage debt as a way of financing consumption, but both of these measures cannot continue indefinitely.
At the same time capitalism is an unplanned system. Private ownership of the means of production means the question of what to produce and how many to produce at a particular time, although planned inside individual factories and companies, is never planned on the scale of society as a whole. Through this anarchy of production which Karl Marx described extensively in his book “Capital”, the basis is laid for a glut in the market or what is otherwise known as overproduction which means so much has been produced by individual capitalist concerns over the past period that so little can now be sold profitably. The result is that as profits fall, the capitalists cut back production and attack working people and society enters into a period of economic crisis (i.e. recession, depression etc.) which comes after every few years of growth. A by-product of this is that today increasing numbers of capitalists attempt to make their money through finance rather than production as they hope to make profits even when the economy is in crisis.
By its ceaseless pursuit of new areas of investment and new markets for profit maximization, capitalism has succeeded in dominating the world by dragging pre-capitalist societies in different corners of the earth into the orbit of its activity. This is how the phenomenon known as the world market was created. Starting with the 300-year transatlantic slave trade and very more so since the dawn of the 20th century, many parts of Africa were dragged into the orbit of capitalism through colonialism and now neo-colonialism. But as latecomers into the orbit of global capitalism, these pre-capitalist societies including those in Africa are at the periphery of global capitalist civilization. This means that our vast continent with its huge and rapidly expanding population became not only a new market for capitalism, it also become a source for raw materials and minerals for use in big factories in the industrialized countries. For instance, Nigeria’s crude oil is much sought after in many countries of the industrialized West and it is on this that our entire capitalist economy rotates. So therefore when global capitalism enters a period of crisis, the primitive capitalist economies of countries like Nigeria inevitably enter into crisis as well.
It is this relationship that has defined the neo-colonial/dependent character of capitalism on the continent and the rentier and unproductive nature of its bourgeoisie till date. Nothing can change this as Kemi Adeosun, Nigeria’s Finance minister, and others who stridently call for diversification hope to achieve unless the working people are prepared through a revolution to break out of the iron hoops with which world capitalism has bounded the continent to its desire for profit-making. This is because for the local rent-seeking capitalists on the continent, they have no desire nor the wherewithal to break these bounds since by simply investing in exploration of natural resources and other areas of production which enjoys government protection or does not bring them into competition with the powerful multinational producers in Europe, they can be guaranteed a bountiful return. A good example is Aliko Dangote (Africa’s richest man) whose vast business empire is concentrated in cement production, sugar, noodles, oil and gas etc where he can enjoy government protection and monopoly of the home market.
Many advocates of “Afro-capitalism” like Tony Elumelu and other bourgeois economists like Pat Utomi often point to the successes of the Asian Tigers as an example of what could be achieved here. But these were products of different historical factors most especially the geo-strategic interests of the United States to allow thriving capitalist economies to develop as models on the continent in order to rival the “communist” dictatorships in China, North Korea, Soviet Union etc.. But this period, competition between the capitalist countries and those countries which then were non-capitalist has come to an end. Therefore, such considerations are, at present, not the case for imperialism’s interest in Africa.
But even if, for different factors in future, Africa and Nigeria’s rent-seeking local capitalist elite succeed in diversifying into production of finished technological products like automobile, computers, smart phones etc., so far they remain within the vortex of capitalism; this would not necessarily guarantee for the continent or any country within it an escape from periodic economic crises and poverty. Rather it would only mean for the working masses of the continent what capitalism has meant for over 400 years for working people in the industrialized West: inequality in the midst of enormous wealth and potential to rid society of endless poverty.
Breaking with capitalism and placing the commanding heights of the economy (the oil and gas sector, electricity sector, manufacturing sector, iron and steel industries, the textile industry, banks, telecom, ports etc) under democratic control and management is the surest route to resolving the on-going economic crisis and preventing the next.
It was the economic slowdown in China and other countries, together with the price war between OPEC countries and Shale oil producers, which affected both the demand and supply of crude oil leading to declining prices and inevitably loss of revenue for Nigeria. In order to protect their market share, countries like Saudi Arabia and Kuwait were, through continuous glutting of the market, prepared to bring down oil prices to as low as $20 in order to run the United States shale oil producers out of market. This was without consideration for the millions of working people in other oil-exporting countries like Nigeria or Angola who would be plunged into dire poverty on the basis of their countries’ loss of revenue. This is another example of how profit is the first and only priority of the capitalist system! Therefore if on the basis of diversification, Nigeria were to be exporting finished products, so far it remains under the capitalist system and its world market, it would never be free from the repeated cycles of economic crises caused by extreme pursuit of profit that is the hallmark of the system.
FOR A SOCIALIST ALTERNATIVE
So without mincing words, the on-going economic recession poses quite starkly the fact that capitalism is a fundamentally flawed system and that so far this system continues to exist, any expectation that the lot of the working people can get better will only end up as a pipe dream. Whether in the period of boom or that of recession, it is the same crisis of poverty in the midst of plenty for working people.
One example suffices to explain this grim reality. That is the condition of the working masses prior to the economic crisis. The period between 2010 and 2014 for instance is generally regarded as a period of bumper crude oil sale for Nigeria due to the high price of crude oil on the world market and the consequent huge revenues available to the government. Unfortunately, despite the fact that Nigeria realized about $300 billion from crude oil sale during this period, workers’ wages only increased from N7, 500 to N18, 000 following repeated strikes and protests from the labour movement. This was at a period when a survey carried out by the labour movement showed that, at the end of 2008, the monthly minimum cost of providing basic needs for a working class family was N52, 200. During the same period of boom, funding to public education plummeted while tuition fees skyrocketed. So bad was the situation that in 2013, the UNESCO Education for All Global Monitoring Report (EAGMR) declared that Nigeria holds the world record of having the highest number of its young people out of school with approximately 10.5 million kids out of school. Similarly the public health care sector was abandoned while the condition of electricity, roads and other public infrastructures declined.
If this was the condition of the working masses during the period of boom, then it becomes completely foolhardy to then expect that all it would take for things to get better is for the working masses to be patient and endure. But it is the same working masses that benefitted nothing from the boom whose conditions are being viciously attacked today through job losses, non-payment of salaries and rocketing increases in food, fuel and electricity prices. On the other hand however, vast wealth is concentrated in the hands of a tiny minority who have continued to enjoy their largesse despite the economic crisis. A new report by Vanguard newspaper (8 August 2016) says 15 richest Nigerians are worth over $36 billion. To show the extreme inequality that exist, a report from the Nigeria Deposit Insurance Corporation (NDIC) shows that 90 percent of total bank deposit is owned by 2 percent of the population. 20 billion dollars sit idle in the domiciliary accounts of a few elite but instead of making use of this amount to begin to address the yawning budget deficit by investing in capital projects to begin to reflate the economy, the regime instead wants to go borrowing.
The Buhari government, for all of its anti-corruption fight, only goes after a few politicians. But what happens to the likes of Aliko Dangote, Mike Adenuga, Otedola, Ifeanyi Ubah and other dollar billionaires who amassed their enormous wealth on the basis of using their closeness to several regimes over the years to gain monopoly of different sectors of the economy, get import licenses and oil blocks and lobby for friendly economic policies like privatization and concessioning of national assets and through exploitation of workers in their employment? They are instead lauded as the ones who can save the Nigerian economy and given more handout, using taxpayers money, to expand their investment and make more profit.
It is not for nothing that Dangote called for the sale of national assets as a solution to the recession. The interests of the capitalist class, the so-called private sector, has always been the driving force of government economic and political policies. So far this remains the case and the capitalist system continue to exist, there can be no end to economic crises and the woes of the working masses. There is no final crisis of capitalism. Even after they hope for recovery in 2017, we can only be sure that this would only mean a brief interregnum before another crisis emerges throwing society into turmoil. Meanwhile through public ownership of the commanding heights of the economy under democratic control, state monopoly of foreign trade and implementation of socialist economic policies and support of working class internationally, it can be possible to rapidly bring Nigeria’s economy out of its multifaceted crises and its permanent state of underdevelopment by breaking with capitalism.
While fighting to win the best possible concession for working and toiling people, it is vital for the leadership of the labour movement and working class activists to come to the conclusion that this system cannot be reformed to the benefit of the working masses. It has to be changed and replaced with another that places the interest and needs of working people as the central objective of governance. This requires building a mass workers party on a socialist programme to take political power and begin to plan society for the benefit of the mass majority and not the profit of a few.