Connected parties and Government failure By Ifeanyi Uddin

Much of the media attention (and hence, the public’s) to the Director-General, Security and Exchange Commission’s (SEC) public hearing before the House of Representatives’ now defunct Committee on Capital Markets looked to the exchange between the DG and the panel chairman. The louche dicker between both had only one effect: it reinforced the public’s nervousness over our elected/appointed public officers. Alas, this constant (witting and unwitting) airing of our dirty linen has hardened us to the threat to the polity posed by the black holes in the national moral space.

Put differently, there is a world of difference, ultimately, between an amoral and an immoral person. It is hard to hold to account, for instance, one whose ethical universe lies outside or beyond our particular moral order. True, as the cliché goes, “ignorance of the law is no excuse”. But in moral matters, it is important that a community’s process of socialising, especially its youth, takes particular care of their moral coordinates. Otherwise, it would be immoral to hold them to a sense of order more elevated than the barbarians’. Conversely, it makes sense to proceed only against members of the community, who, conscious of the particular code of morals around which we have agreed to organise our societies, still act in violation of these.

The broader context for these musings is provided by one of the main challenges of nation building in this country: the paradox of the dearth of human capital in a population nearing 170 million. A popular definition of this difficulty is the one that begins by identifying the public sector as a big part of our national failure. This reading proceeds to blame this failure on the incompetence of public sector workers. (However, I also note, in passing, an alternate narrative. And even though this falls outside the consideration of this piece, we do well to dwell extensively on the thought that our civil service drops so many balls simply because personnel do not know otherwise. For there is an outside chance that the service might simply be responding to our unique suite of incentives). However, once the earlier downside to the civil service is considered, it makes perfect sense for an elected officer concerned to keep all balls in play, to look for her/his staff from outside the service.

Now, arguably the strongest of the incentives that the civil service necessarily responds to is its low remuneration levels. Increasingly, elected officials and their appointees find themselves having to respond to this too. In reaching out to the private sector for the uncommon talents (not “readily available” in the civil service, that is) necessary to make a good fist of their assignments, they find the civil service pay problematic. The pay cuts associated with a movement from the private sector to any role in the public one is often too severe to be worth the effort.

What to do, then? We have had ministers negotiate their emolument outside of, above the regular pay structures, and in more stable currencies (than the national currency) in a bid to square this circle. Unfortunately, once the public looked askance at this option, it ended in a cul-de-sac. But then, these “talents” are a must have, and the option of making do with what is on offer in the public service simply not on the cards. So, how about getting private sector employers of these “talents” to technically “second” them to work in the public sector for as long as their particular skill sets remain of any use? Two externalities reinforce themselves as soon as this stone is cast. First, the national development task gets its man. Second, the private employer justifies the “secondment” in terms of its social responsibility.

But, as the brouhaha over the SEC DG’s testimony struggled to make clear, none of this dynamic speaks to the possibility of “regulatory capture” or of “connected persons leveraging access to information that is not available to other market participants in order to obtain an unearned advantage”. The main threat from either of these is that agencies of the state set up to protect the public from the predatory instincts of the firms that they were set up to regulate, end up instead protecting these corporate behemoths from the public. The big paradox here is that a supposedly honest attempt to improve the public sector’s capacity to develop and or execute policy ends up in a new variant of government failure whose regrettable consequence is to encourage large private sector businesses to produce negative externalities.