Subsiding incompetence, By Ifeanyi Uddin

Columnist Ifeanyi Uddin

Without question, the most important aspect of the torrid sequence of events associated with last week is the role played by social networking sites in the protests that crisscrossed the country. There are as many dimensions to this aborning phenomenon as there are users in Nigeria of these sites. But a couple are to the fore and centre. First, is the organisational angle. “Unprecedented”, and “epic”, were some adjectives used to describe the numbers and character of persons that came out to protest against government’s hole-and-corner increase in the pump-station price of petrol over the New Year holiday. Much of the protesters’ organisational success owed to popular access to Facebook, Twitter, and the ubiquitous BlackBerry devices.

The second aspect was the extensive information exchange, which happened in response to government’s new policy direction. Scintilla of news became available, online and in real time, allowing an unending debate that helped to both outline and deepen the resolve of the new engagement. Connected to these sites you could literally follow the curve that the debate described in space and time, as it moved from concern with the economics of harsher prices to a thoroughgoing revulsion with the failure of good governance in the country.

For one with an obligation to write a column every week, this latter aspect is the biggest downside! Essentially, at this point, there is nothing more to add to the debate. Repeating on these pages, threads of discourse that were thrashed to the point of exhaustion last week would be of scant use, too. So, what to do?

With the broad outlines of the new debate etched, as it were almost memorably, unto the social fabric, and respective proponents delving deeper into their trenches, the thin spaces between the opposing positions offered stingy pickings. The broad canvass had two sides to it: pitch black on one side, and dazzlingly white on the other. Accordingly, on one hand, the removal of “subsidy” on petrol is advertised as necessary for bringing about improved levels of efficiency in the downstream sector of the oil and gas industry. Contrariwise, opponents of this policy initiative are concerned that the shortcomings in the system that made it hard to properly husband the petrol subsidy regime belie the “efficiency” argument. Chicken and egg?

Not necessarily. One of the heavier (intellectual) weights who pitched for the removal of the “subsidy” put it piquantly. Before a doctor, and afflicted by a string of maladies, what does a (rational) patient do? Or, better put, what does a competent physician do? His answer was that the doctor would have to address the bigger of the ailments. Ostensibly, because unattended, it would exacerbate minor maladies, and could metastasize with disastrous consequences. Sadly, pushed any further, this medical analogy moves quickly into slippery terrain.

The central predicament, which the current debate invites us to deal with, is this. “Which is the bigger worry? A nagging headache that might herald cardiac problems, but which still allows one meet all current obligations? Or a stomach bug, that keeps one toilet-ridden?” The Yoruba’s put this dilemma pithily: “Why” an old saw asks, “leave symptoms of leprosy alone, in order to treat episodes of ringworm”? Yet, what we confront in the petrol “subsidy” debate is not a relative relationship, as government’s cheerleaders would have us believe. It is instead, the often contradictory tension between an ailment and its manifest symptoms.

If a market economy is to function as close to its production possibility frontiers as is possible, (and this reasoning goes back to the “Iron Chancellor” – Otto von Bismarck – himself), along with the efforts to equalise opportunities, society must engineer for safety nets that ensure that the poor and the vulnerable do not drop beyond the pale of the civil. The social security infrastructure built up in Western Europe and North America over the years, is in this sense the biggest such subsidy arrangement the world has ever seen. And do not be deceived! These are subsidies on consumption, not on production.

As an aside, the “production” versus “consumption” subsidy distinction is over-wrought. To the extent that consumer spending is essential to sending signals to key economic actors, there’s a place in economics for stimulating (if necessarily through subsidies, including the new “quantitative easing” programmes pursued by central banks all over the world) consumer spending.

So, there’s nothing inherently wrong with subsidies. Targeting them at the desired beneficiaries, and ensuring that they do not dis-incentivise desirable conduct is the central task arising from the administration of any subsidy programme. When therefore, government cites unintended beneficiaries of its fuel “subsidy” programme (“The Cabal”), it confesses to its inability to function as government (Italy and the “Mafia”). Now, this inability is either the result of significant levels of incompetence, i.e. we do not know how to proceed in pursuit of our goals. In which case, we should be looking to recruit those who know. Or, we do know what to do, and are able to so act. But purchasable considerations drive us down a different path!

 

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