Poverty and the Flow of Capital (2)

I have emphasized the critical role of capital as a factor of production, productivity, wealth creation and poverty reduction and stressed drawing on Hernando de Soto’s writings on “dead capital” in “The Mystery of Capital”, the negative implications of sub-optimal deployment and circulation of capital which is endemic in poor and under-developed economies. In particular in the case of Nigeria, I identified four “sectors” and one socio-cultural “force” which militate against the effective flow of capital within our economy and which in my view, are significant contributors to the phenomena of poverty, unemployment and inequality in our society. These “sectors” are government/politics-prevalent corrupt and rent-seeking nature of our polity ensures that public resources are diverted to whoever succeeds in “capturing” power thus marginalizing the poor and powerless; banks/financial system-receive deposits from rich, middle-class, average, and poor customers, but by-and-large lend only to large corporations and the (very) rich thus denying SMEs (not to mention micro enterprises) capital for building their businesses; crony capitalists/oligopolistic and monopolistic firms-charge higher prices than are economically justifiable, offer less-efficient products and services than would obtain in competitive markets and based on their alliance with or incorporation in the first group (government/politics-their initial and often sustaining profits are typically from economic rents transferred from the public sector) are beneficiaries of a prebendal, possibly fascist or even feudal political economy; and large religious organisations-receive voluntary or induced “taxes” from their members (and increasingly from government/politicians as well!) and not being established or structured to act in economically efficient manners, often spend huge resources in ways that erode the productivity of capital for instance by building inordinately large auditoria, buying fleets of expensive cars or acquiring private jets costing millions of dollars, while shirking the critical role they could play redressing social ills. The socio-cultural factor in my hypothesis are destructive aspects of culture and lifestyles that prevent capital accumulation-frittering away resources on marriages (introduction, engagement, “wine-carrying”, “alaga-ijoko”, wedding, reception, thanksgiving etc.!!!), funerals, child naming, chieftaincy, birthday and other celebrations; deploying scarce capital towards death rather than life and enterprise (a professor friend once wondered why in our society, if an unemployed young graduate asked family members to contribute N250,000 towards a business idea, he was unlikely to get any response, but double that amount would surface within days if the young man’s father were to drop dead!); investing huge resources in expensive cars and dormant houses while sometimes failing to pay children’s school fees or maintaining aged parents; our inclination to discourage local production in favour of everything foreign thus exporting not just capital, but jobs…!!! The list of our capital and (domestic) productivity destroying patterns of behavior may be in-exhaustible!!! You will notice that in all these, no one has necessarily set out to do anything sinister or evil to society-everyone is simply acting in their own selfish interest or according to “culture and tradition”. Politicians seek power and privilege; banks lend to the safest and most profitable segments of the market; businesses try to maximize profits; faith institutions seek as much donations as possible, the faithful try to live by the injunctions of their faith; and our people are caught in a culture more suited to traditional pre-metropolitan societies while living in 21st century internet age economies! What we lack are visionary leaders who can transform culture and society like Lee Kuan Yew did to Singaporean society substituting an ethos of excellence and productivity for old Confucian fatalism and docility; and institutions that can moderate behavior in manners defined by an enlightened sense of common good. I have already hinted at what I think the solutions should be. Government should define as its primary responsibility the protection of the poor and helpless rather than the rich and powerful, who in any event are well-placed to protect themselves. We need a fundamental paradigm shift in politics and government that places the welfare of ordinary people at the centre of policy. Economic success would in such a paradigm be measured in terms of human development, poverty reduction, life expectancy, quality of public education and not just growth in gross domestic product and our politics and government must become more egalitarian and less-prebendal! I would advocate a self-regulatory policy by banks and other financial institutions that undertakes to channel as a minimum whatever percentage of their deposits is sourced from MSMEs back into credits to such enterprises while eliminating prohibitive transaction charges against small or retail customers. As I mentioned in the earlier instalment, we need a robust competition and anti-trust law and policy regime to roll-back the emergence of oligopolies and monopolies across economic sectors and ensure that our markets are fair and competitive. Religious institutions will continue to receive funding from adherents. But those responsible for appropriating those resources must become socially sensitive and economically savvy, and this is consistent with their duty to God and man, as they are indeed trustees of societies’ “talents” and must manage them in a manner that makes economic sense and is socially responsible. I will like to see religious organisations setting up microfinance banks, venture capital and private equity funds, technical and skill acquisition centres, industrial parks, technology-incubation centres, universities of science and technology, polytechnics, schools and hospitals such that they become agents of social justice, economic productivity, equality, opportunity and egalitarianism rather than allies of a corrupt, uncaring and oppressive state.