We need to go back to basics and encourage job creation with modernized esusu to spur small business growth since more than 50% of our graduate youths are idle. Big stock markets lured us away from mama and papa stalls that buy from locals and neighboring countries. The middlemen, traders and travelers went to stock markets to buy and sell for more profits. Over the years big foreign businesses have been able to produce many services and materials we need at cheaper. The money and time saved have been spent on unsubstantial endeavors to satisfy imported ideas and luxuries. It failed and burnt us.
What we need is the return of small businesses providing work in a jobless world economy. But for the small business to do well and hire more workers there has to be demand for their products and services by a relatively large number of people. That is, a working class that will spend the money for needed products and services, not subsidy for who can wait out the recession before they spend in depressed markets. There is a great demand for basic needs in developing countries, yet we are always short of them.
We may have got to where big businesses, too big to fail may have reached diminishing returns because of too much tax cuts, incentive and kickbacks to undercut performance. There is opportunity cost lost to small businesses that can give us better returns on the subsidies. We do not have to be an economist to realize when more of the same gives us less pleasure. Too much of a good thing is not good, even for big businesses. The first drink of water after being thirsty is not as satisfying as the second or third glass.
It has long been recognized that when a business becomes too big to fail, it stifles others creating a monopoly. They intentionally lower their prices temporarily to lure customers away from small businesses. As the small ones fold up, they raise prices. Communities of small business have been destroyed that way. Governments put in place anti-monopoly regulations to curb some of their practices. Rather than give all types of incentives to attract big businesses, it may be time to cuddle and spur small businesses again.
Yet, there are advantages of big businesses taking on mega projects that need both technical and financial support. In order to raise the amount of money needed through the stock markets, venture capitalist and investment banks are needed. In Africa, most of the funds are sourced from governments. The venture capitalists and middle men are politicians that divert the money to their investment banks which in turn finance mega projects with their foreign partners. The bribes encourage sub or under-performance.
Nigeria National Petroleum Corporation, Ajaokutal Steel, Ghana’s Gold Mining and other natural industries are examples of government business that became nobody’s business. They got so big and riddle with corruption that International Monetary Fund advised to privatize them sounded more attractive than getting rid of endemic corruption. As the evil of corruption pulls on one side, the greed of foreign ownership pulls on the other.
The World Bank and International Monetary Fund under their Structural Adjustment Program (SAP) wanted the Gold Mine in Ghana and the Oil Industry in Nigeria sold to foreign big businesses and our currencies devalued as the best way to economic development, as far back as 1984. There were African experts working for both bodies pushing African military bureaucrats to obey. In retrospect, it was a disaster which was later regretted by both sides: World Bank-IMF and African militricians. It wiped out African middleclass.
Since privatization fueled the rise of Nigeria stock market, some of us were skeptical. Nigeria Stock Market provided the highest return in the world but nobody could explain intelligently what the exuberance was based on. A consumer economy that has no international trading partners for its finished products except crude oil, the speculative trading kept building on this single product. Big businesses were operating in our major industries but no timed guarantee or incentive to train enough local technical partners.
It was based on voodoo economics of President Reagan in the 80s that almost triple US Government debt by cutting taxes on the rich and corporate bums. Mr. Stockman, his Budget Director could not get him to cut enough spending on military to pay for it. Some called it credit card feel good economy. It took the Clinton Administration to return the Government back to surplus by raising taxes, back on the rich. The Bush Administration, again ran the Government back into red on tax cut and finally into the worst recession.
While China was getting its priorities straight, developed countries were busy inflating their goods and services through the stock market until it crashed. Instead of developing countries investing in agriculture like China to feed starved people, they were following developed countries to the edge of the cliff. We allow big businesses that were heading to disaster to take over our developing economies. Many of them duped us by bribing politicians on power generation like Enron, others ran our steel and Gold industry down; intentionally so that we cannot compete with their home based industrial products.
Along the way, stock got bigger and stated predicting what will be available and in what quantities, betting on the futures of those goods and services. We were not satisfied with old banks that made commercial and individual loans. We followed big western economy that became highly dependent on venture capitalists using people’s funds on high risk speculative credit default swaps. Funds and shares of common folks were used for unstable or over inflated products and services hoping for higher returns. Even new generation banks, like Saraki’s Societe General, took our money outright or joined world trading partners through their investment in private equity or edge funds.
Consequently, unregulated big business plunged us into this recession because the old magic of pampering big businesses led to accumulation in bonuses and fat salaries to the few. The large number of workers retrenched through takeovers and consolidations did not improve their balance sheets. As they get even bigger, they lost focus on what drives the economy. Instead of increasing products and services, they become creative in maximizing profit, volatile shares swapping, securities, debt and credit betting.