Wednesday, September 24, 2008

America's Financial Crisis: Lessons For Nigeria

In an era in which the world is described as a "global village" the recent financial crisis in America has sent shockwaves throughout the world's economies. Much like a butterfly flapping its wings, the Wall Street hurricane which has succeeded in bringing down some of the world's most venerable financial institutions has caused similar storms elsewhere, with governments scrambling to ensure that their own markets are not caught pants down.

When the root causes of the problems on Wall Street are finally analysed, it will be clear that one factor above all precipitaed the crisis - greed. Enron's collapse was brought about by the fact that its executives were greedy, and using their lobbyists, they were able to remove what little government control there was over their actions, allowing them to rack up huge losses disguised as profits, while stuffing their pockets with money belonging to their numerous shareholders. The collapse of Enron was swiftly followed by that of Arthur Andersen, their principal accountant. The warning signs were there, but they were ignored.

A while ago, Sky News ran a story about how people, finding themselves mortgaged to the hilt, simply began transferring their mortgages to their credit cards, and walking away. The credit card and mortgage companies were left to sort out the mess.

Fast forward a few years, and the same scenario is being played out in the financial sector. Years of reckless borrowing to people who clearly could never repay loans has finally come back to bite the banks in the arse. Once upon a time, you couldn't get a credit card without the companies, in the words of Don Corleone, poking their noses up your very asshole to make sure you would be able to repay them, but suddenly, you could get a credit card on the internet. Laws that were enacted after the Wall Street crash of 1929 were repealed, and the wisdom of the 90s was get government off our backs, and leave everything to market forces. The free ride could not last, and it didn't.

Now, these same people are chewing their very fingers waiting for the U.S. government to come and bail them out. The champions of the free market economy are pushing hard for measures that seem right out of Karl Marx's playbook. The inherent hypocrisy is enough to make you laugh till you cry. The same companies who now want to go on what is essentially welfare, are the ones who lobbied for decades for the government to get out of the market. The same ones who built up that "free market" dogma that the IMF and World Bank have shoved down the throats of countries for years have suddenly discovered that they actually have a strong strain of Socialist DNA.

Not so long ago, South Korea found itself caught in the Asian financial crisis. The IMF came in with a rescue package, but there was a catch - the banks and other institutions that had been caught in the storm must not be bailed out by the government, but should be allowed to fail. Thousands of jobs were lost, pensions wiped out, but them's the breaks. The South Koreans must be viewing the talk of a $700 billion bailout package for Wall Street with bile in their teeth.

For our rulers in Nigeria, who seem hell bent on swallowing everything the IMF and World Bank tell us with little or no regard for the real world consequences of bad policy decisions, the rush by America to abandon the dogma of the "free market" should serve as a clear warning. If the very founders of the market economy are now in an almost unseemly hurry to queue up for their chance at the government tit, what right do they have to still tell us to "deregulate"? Afterall, right now they are all blaming deregulation for their troubles. If they had stronger government control, all this shit wouldn't be coming down now. The fact that the U.S government has virtually nationalised America's largest insurance company must not be lost on observers.

Someone once tried to convince me to purchase shares of a certain bank during a public offer. I asked him who determined the prices of the shares. "The market," was his slightly pompous reply. "And who is the market?," I asked. "We are," was his sheepish response. The consequences of allowing the market to run itself with little or no governmental oversight are being clearly seen on Wall Street, and don't let anybody tell you different. Indeed, the recent turmoil in the Nigerian stock market is also more proof of what happens when the market is left to run wild, as shareholders have seen the values of their investments crumble before their eyes. In fact, the bank whose shares I was being urged to buy have dipped dramatically below the price at which the public was made to buy them. In Nigeria, the stock exchange is "bearish" today and "bullish" tomorrow. Hell, one stock market magazine called it the "bearish bull" which is a load of bull.

Surely, were we to strictly follow the rules of "market forces" and apply the principles of the free market economy to Wall Street, all ailing companies would be allowed to fall, and corporate vultures would feast in joy. That they have not is more proof that some animals are indeed more equal than others.

I urge our rulers to take note of this undeniable fact - national interest trumps all other considerations. Even in America.

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I love my country, enjoy a cold beer once in a while, rabidly support Arsenal FC, but I don't get Diet Coke...