Buhari shares Adam Smith’s cynicism about business, but not his solution

For those who criticised President Muhammadu Buhari’s government for not having an economic team, the president recently had an answer. Asked in an interview whether he needed an economic team, Buhari retorted: “What do you mean by ‘team’?”, as he reeled out the names of ministers and officials who make up his economic management team, headed by the Vice President, Yemi Osinbajo. But, Mr President, this is a government-only team, with no independent or private sector presence. Well, for that too, the president had an answer. “We are averse to an economic team with private sector members”, he said, adding that such people “frequently steer government policy to suit their narrow interests rather than the overall national interest”.

This was President Buhari in his classic straight-talking, say-it-as-it-is, mode! But his comments nevertheless raise two interesting issues; one is about the quality of an economic team without business representation, and the other concerns the president’s characterisation of the private sector. I start with the first.

Now, there was an interesting twist to the president’s comments when the media adviser to the vice president, Laolu Akande, explained that private-sector actors were excluded from the economic team because the presidency regarded economic management as “a government affairs”. Really? Tell me, which serious country treats economic management as a purely government affairs? Nothing undermines government effectiveness more than a closed state-centric policy process.

As I wrote previously (“Economic summitry and need for expertise in Buhari’s government”, BusinessDay, March 14, 2016), the US government is suffused with independent sources of economic advice. There is the National Economic Council, which, unlike Nigeria’s political NEC, is usually headed by a renowned economics professor or someone with long-standing private sector experience. For instance, the current director, Jeffrey Zients, spent 20 years in the private sector as a CEO and entrepreneur; a previous director, Robert Rubin, spent 26 years at Goldman Sachs, while another, Larry Summers, was a professor of economics and former president of Harvard University. There is also the independent Council of Economic Advisers, which provides the president with “objective economic advice”.

In the UK, although the Treasury leads on the economic management, the Office of Budget Responsibility provides independent challenge and authoritative analysis on the government’s economic policies. Furthermore, every UK government department has non-executive board members, who are experts from outside government with significant private and voluntary sector experience. For instance, the website of one of the departments shows that its non-executive board members include the chief executive of Siemens, a Technology Engineer and Angel Investor and a Cambridge University professor.

The idea that economic management is purely a “government affair” is, therefore, another evidence of Nigeria’s insularity and exceptionalism. From efficiency and good governance points of view, several governments are bringingindependent external experts into their policymaking organs. An economic team without experts from outside government and independent challenge will fall into groupthink, be self-referential and fail to think outside the box! The truth is that the Buhari’s government-only economic team lacks the independence, analytical rigour and challenge that external experience and expertise bring. In a country where the civil service doesn’t have first-class administrative cadre to provide critical policymaking role, a government-only economic team is a misnomer. What’s more, government’s consultation with businesses in Nigeria istop-down, arrogant and perfunctory, so the exclusion of the private sector from the economic team on the basis that they are being consulted lacks credibility.

But all the above is a symptom of a wider issue: the Buhari government is not business-friendly. Indeed, President Buhari believes, as he said recently, that “Nigerian business people don’t care about this country”, and his comment that they “frequently steer government policy to suit their narrow interests rather than the overall national interest” further confirms this world view. But, leaving aside the generalisation, does the president have a point? Well, what’s really interesting about Buhari’s description of businessmen’s motives is that it actually chimes with the views of Adam Smith, the father of capitalism.

In his famous book, The Wealth of Nations (1776), Smith said “The interest of the dealers, in any trade or manufactures, is always in some respects different from, and even opposite to, that of the public”. He argued that their interest was always to “narrow competition”, which is against the interest of the public. He posited that “people of the same trade seldom meet together”, without their conversation ending “in a conspiracy against the public, or in some contrivance to raise prices”. Indeed, similar to Buhari’s view about the private sector’s lobbying intentions, Adam Smith said that “proposal of any new law or regulation of commerce”, which comes from business people reflected the position of those “whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public”. Thus, such proposals should be “listened to with great precaution” and should never be adopted until “after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention”.

Well, given the above, you would think that Buhari and Adam Smith share the same cynicism and suspicion about business people, won’t you? But don’t be deceived. Their motives are quite different. So, why would Adam Smith, who invented capitalism and who argued that self-interest and greed, rather than benevolence, are responsible for creating wealth, improving people’s lives and spreading prosperity be, at the same time, very critical of the motive and interest of business people? Is there a contradiction here? Well, the answer is no! Adam Smith’s view is that the prosperity that capitalism generates can only happen where the “invisible hand” of the market works unhindered, that is, under a competitive free-market environment. Thus, the business motives that he strongly condemned are those which “narrow competition” and stop capitalism from working as it should, such as monopolies, oligopolies, cartelisation and protectionism.

Self-interest and greed are, of course, good. As someone pointed out, the broadband internet is now widely available at low prices because of the desires of some entrepreneurs to make a lot of money by connecting up as many homes as they can in record time. The same goes for the availability of mobile phones in Nigeria after the dismantling of the monolithic monopolist, NITEL. But self-interest and greed can easily descend into “nasty” behaviours, such as the reckless gambling with other people’s money by investment bankers that led to the global financial crisis of 2008 or the alleged “systematic plundering” of the British retail chain BHS by its owner, Philip Green, who then sold it off at £1 to a serial bankrupt. This led to BHS’s collapse, resulting in a £571m pension deficit and 11, 000 job losses. Adam Smith would be appalled by such bastardisation of capitalism, and his solutions for preventing such nasty business behaviours are competition, transparency, reasonable regulation and voluntary moral behaviour, such as corporate social responsibility and building of social capital by entrepreneurs.

Now, how is President Buhari’s criticism of Nigerian business people’s motives different from Adam Smith’s? Well, first, unlike Adam Smith, Buhari is not a friend of the market, not a friend of business. Indeed, the president’s asceticism and reputation as a party pooper and his frugal attitude to money and wealth creation (as reflected by his asset declaration) make him the perfect foil for people who are driven by self-interest and greed to make fortunes for themselves and their businesses within the market system. Secondly, when Buhari said Nigerian business people do not care about the national interest, his definition of “national interest” is different from Adam Smith’s concept of “public interest”. For Adam Smith, public interest means the interest of the public, of consumers, and their rights to access varieties of quality goods at reasonable prices. But the Buhari administration wants to ban as many imported goods as it can even if this reduces consumer choice and raises prices, while concentrating wealth in the hands of owners of protected industries. Finally, while Adam Smith advocates competition, Nigeria is one of most uncompetitive economies in the world, with many sectors, such as cement, controlled by few large firms. It’s an economy dominated by cartels and rent seekers. What’s more, it’s a statist economy, with government interventions writ large.

So, let’s be clear. President Buhari’s exclusion of the private sector from his economic team and his criticism of the motives of Nigerian business people reflect his worldview as a statist and interventionist leader, not a pro-market reformer.When the president criticises the “narrow interests” of Nigerian businesses, it is not, as Adam Smith would favour, to make the economy more open and competitive, but instead to make it more closed and protected. That, of course, should be anathema to all economic liberals!

Olu Fasan