SEAL FOUR
GOD’S NEW COMMON WEALTH
“God says, 'I will bring you lasting prosperity; the wealth of the nations will flow to you like a river that never goes dry …”
- (Isaiah 66:12)
Consumables' prices raise worldwide each time demand for energy consumption is greater than the supply or production. And fall when energy is over-supplied or glutted. These imbalances in energy demand and supply nearly always cause trade-offs in price patterns of most goods and services rendered. That is, in some cases, goods and services that ordinarily would have generated wealth to some investors are thereby being relegated as “luxuries” in preference to other goods so-called “essentials”.
Economies sustained by and reliant upon these purported 'luxury' goods and services in international trade thus recess. This recession helps only to create a super-imposition or lopsidedness of ideas on the kinds of goods and services to be produced locally. Unemployment and other social vices usually then follow as the factories producing 'luxury' goods close down and retrench staff. Money needed to meet the economic needs or demands of the common man thus becomes scarce and they cannot compete favorably in the market place with the wealthy few for goods and services being offered. Those citizens who can afford it seek escape abroad in an attempt to find greener pastures or relief. In so doing, they create a problem of brain-drain and intellectual paucity in the already pauperized home economies. This is the bane of slow development in emerging economies today. It is a vicious cycle of poverty, recession and depression.
In Nigeria (using Nigeria my country as case study), economic policies are as a result of movements in international oil and gas sales – our main source of income. The management of oil-related risks therefore is of prior importance to us. Oil and gas revenues (in our opinion) should therefore be managed in such ways that provide employment, growth and succor for our teeming unemployed. The 3-tiers of government in gearing and sustaining the developmental effort should as facilitators provide the enabling business environment by constructing more sea and air ports, extending road networks, railways, inland waterways, telephony and other communication networks, provide pipe-borne water, supply regular electricity, and maintain adequate security of lives and properties. These all make manufacturing and investment fast-tracked and enabled.
Public corporations and investments rightly are to be privatized by stock sales.
Government's role should be only as facilitator - regulator or supervisor - and not as catalyst.
Government's portfolio of investments –inclusive of ministries and departments, etc - and retinue of staff should be shrunken [reduced or down-sized] and re-engineered to generate own funding through commercialization of their services and operations, leaving government with lesser burden.
As some other governments have discovered, our policy-makers too should realize that public-funded corporations and agencies are usually paid their salaries and running expenses from public resources, no matter their performances; while their private-sector counterparts in a market economy must earn their value to retain hold on their clients. Any wonder why they get constructive through research and development.
Some economists have argued that inflation is caused by excess money supply. These scholars opine: money should then be regulated to grow with Gross Domestic Product (GDP).
We argue to the contrary, that money pegging is unadvisable; rather, the problem is with increasing volume of production. To keep the economy booming, real production must be beefed up to equal quantum of fiduciary issue (money supply) vis-à-vis the rate of economic growth. So, to our learning and understanding, money deregulation will increase production, increase employment, encourage free trade, reduce inflation, and revive the economy; while money pegging or regulation will do the converse.
It is also noted by some economists that a currency's velocity of exchange is the rate at which it circulates (or changes hands). We further add that aside this, velocity too determines or measures the quality of development of the economy. For instance, the rate of circulation (velocity) of the naira – in Nigeria's case – determines the quality of growth of the Nigerian economy: A very rapid or fast velocity of naira exchange represents demand or scarcity of naira supply to meet growth. A rapid velocity thus thirsts for more money (i.e., monetary ease policies). Conversely, a slow velocity of naira exchange speaks of saturation of money supply. In an emerging economy like ours, it needs more volume or capacity enlargement [i.e., more production and/or investments]. While thirdly, an average velocity speaks of stability, or of even-paced development or full-capacity utilization.
In some other first pieces of advice to countries facing our kind of peculiar economic and financial challenges or seeking to grow wealth by increasing capacity, windfalls derivable from privatization or commercialization of public investments; or export receipts; or governments' deficit financing policies, etc., should be applied in monetizing entrepreneurs engaged in labor-intensive endeavors. In so doing government is grossly helping to empower economically the work force - because labor creates wealth (especially from exports).
In reference to the above therefore, labor markets should therefore be liberalized by leaving freely to the vagaries of market forces. Free labor markets provide job hunters with varieties of jobs than enforced wage policies. They best allow for the interfaces of the forces of demand and supply to place prices of wages to be paid to employees by employers, and vice versa. Only incidences of frictional unemployment would be permissible as workers move from one job unto another.
A second open manner of empowerment for commercial endeavors would be through the open market (OMO): in which, money is released into the economy by the central bank buying bonds. In the event of such monetary empowerment of entrepreneurs, they would turn the cash over; thus revenues would be accruable - especially from export receipts. And thus shall these businesses be enriched and empowered further. As commerce and industrialization boom locally, more workers would be needed, and more wages paid. The increased demand resultant from the expanded wages made available would further engender corresponding supplies and production from other firms to meet up. Gradually as this virtuous cycle continues, the economy would steadily pick up.
A third and most imaginative, effective, and open manner of managing and controlling money stock and the economy is again for national governments solely to run and operate 'financial Ponzi schemes' as perpetuities for their citizens to subscribe to for investment capital to set up and run (their own) small and medium scale enterprises (SMEs). The 'Ponzi' could work in two-way as a monetary policy tool: On the one hand, it could channel funds into the hands of ordinary citizens, which they may accumulate and direct into desired personal investments or SMEs. And on the other hand, it could mop up excess liquidity in the economy back into the government's hand in the form of fees paid by all participants (or entrants). This, the government may then re-channel or redirect into the mainstream economy by any of the options or methods open to it (as in above). The continuing processes of releasing and mopping up money supply thus, would eternally avail funds or necessary capital to the real sectors for determinable and purposeful use.
We here support and call for the creation of more tax-havens. Possibly our whole nation should be a tax-haven! By this, minimal taxes and tariffs should be placed upon home goods to protect our infant industries so that their produces cost less relative to imports. Imports however (especially of goods with home substitutes) should particularly be sur-taxed over and above their home competitors so that they cost more and are discouraged. But these imports and their consumption should not be banned or outlawed, because competition enables product development and improvement. Necessarily, tariffs and taxes should preferably be applied at source and value-added so that they incidence on end-consumers. Income and whatever other taxes are however to be proportional, rather than regressive or progressive (which otherwise tends to be subjective or judgmental!)
Bank ratios and requirements are to be left competitive and flexible so that they become lowered. Banks can thence create wealth with freer hand with capital to facilitate commerce.
With the liberty of banks and other financial houses to disburse loans will come a more robust and healthier financial sector to boost economic growth.
In furtherance of our free trade and free markets advocacy, subsidies, exchange controls, cartels, or any other trade inflexibilities, etc, are to be done away with. There must necessarily be total and complete liberalization, deregulation and non-censorship in manufacturing and production, as in trade. Trade by specialization and exchange should therefore be the order of the day. What can best be produced locally thus be produced and exchanged for other goods and services better produced in other lands. All such inter-trading countries would ultimately save on costs, save wastages, and save energies and skills. Nations will then be enjoying the wealth of the earth as best they can afford. (This was probably what Adam Smith had in mind in his inquiries). +
Stock markets as we know intermediate investment capital. Capital made ready by whatever monetization of the citizens and channeled into the economy in investments on the stock market creates a stock market boom, given that such capital expands business and industrial activity. And as commerce and commercial activities blossom and become enlarged and competitive so will prices of goods and services decline in breakneck competitiveness. Thus inflation reduces. Imports would reduce if discouraged by taxing higher over locally produced goods; but exports would generate additional incomes for firms if taxed lesser - creating favorable terms of trade and favorable balance of payments. The monies thereby made available to those business concerns would bring down bank lending rates as fewer loans are demanded.
The lowered costs of capital would also induce more investments and engender more employment. With increased employment, more wages would be paid and consumption increased. The increased demand would in turn booster more production and further investments.
The spiraling situation would so greatly create jobs everywhere and for everyone phenomenally.
Indeed, we shall experience also an influx of brains and skills from abroad into our markets seeking for opportunities, known as “foreign direct investments”.
Evidently, so much investment capital would be made available such that reserves pile up and the naira gains value and strength and is at par with world top currencies. This probably is how nations of the world can attain the elusive and much desirable purchasing power parity (PPP) in international finance. Emphatically and concisely, parity can be attained only when inflationary rates are stabilized relatively, and GDP equilibrated comparatively vis-à-vis economic growth.
While yet achieving parity, we shall also inadvertently have divested our economy from a sole-export earner to a multi-faceted one. And evidently we too shall be setting up investments abroad like other advanced industrial societies. What is needed done to enjoy this great big wealth and prosperity is to: make our nation and the whole earth one phenomenal free-trade-territory! Then would our economies not have to cringe any more under the pangs of price and revenue fluctuations in any one product – oil and gas, as in the case of Nigeria. Other exports would buffer up the economy!
All things being equal, all nations following in the steps of this discourse would ever revel in this common wealth as already promised of God in the Holy Scriptures wherein He declares : “I will bring you lasting prosperity; the wealth of the nations will flow to you like a river that never goes dry”. Almighty God Himself invariably saying that the economies of nations would never recess and ever be in wealth!
Albeit, one snag to achieving all this loftiness is that not everyone is “economical,” there are a couple few whom when monetized would spend on 'consumables' rather than 'investments.' It behooves on governments therefore to bring the government closer to their peoples by carrying them along on the reasons and purposes of these policies and agendas so as to run with them on hitting ground.