The book Financialism: Water from an Empty Well is an unusual book. The topic is unusual; the word is unusual; and the authors are unusual – Bola Ahmed Tinubu, governor emeritus of Lagos State and political juggernaut, and Brian Browne, former senior African-American diplomat who served as US Consul-General in Nigeria. And many of their ideas are bold and unorthodox. They are willing to challenge contemporary financial and economic convention as they carry out their joint mission of explaining “how the financial system drains the economy”.
Reverend Jesse Jackson in his foreword describes the book as both enlightening and entertaining, and apart from its volume (over 450 pages), it’s a very interesting book! The book’s audience, not surprisingly given the background and personalities of the authors, are “policy makers and opinion leaders in Nigeria and the black American community” and their objectives are to offer different perspectives on the role of government in management of the financial sector; how the financial sector allocates capital; and a critique of American capitalism which the authors assert has mutated into something they call “financialism”.
So what is this species called “Financialism”? Across the book you see attributes, if not a precise definition of this phenomenon – on page 11 – “a system in which money is not a sign of wealth, but wealth itself. People no longer make things to make money; they make money to make more money”; on page 131 – “Financialism is but the quadrangular marriage of individualism, opposition to government, the mistaken concept that money is wealth, and torrential greed”; on page 297 – “capitalism stood on the importance of the factory and assembly line. Financialism is defined by the dominance of banks and money houses”; on page 325 – “thus a strong connection existed between the rise of financialism and the weakening of labour and the middle class. Financialism instigated a subtle process of pauperising and shifting money from the middle class to the financial houses”; on page 332 – “wherever financialism takes root, the impetus towards production erodes. When production wanes, employment ebbs by necessity”; on page 335 – “Financialism has become so powerful that government subsidization of the financial sector is a tenet of economic policy”. And bringing it home to Nigeria, on page 339 – “Nigerian banks have been the prime culprit in the establishment of financialism. Traditionally, most Nigerian banks were not focused on providing normal commercial services, such as business loans and consumer loans. Their forte was currency arbitrage.”
These are statements which are unlikely to be uncontroversial! Yet in the wake of the global financial crisis and its Nigerian equivalent, few will deny that contemporary financial and capitalist systems are in need of reforms. Nobel laureate, Wole Soyinka, agrees in his foreword that “the skewed world of economics needs to be challenged”.
Chapter 1 chronicles the roots and evolution of the global crisis, while the second reviews the Nigerian version. The authors appear to endorse the actions of CBN Governor Lamido Sanusi, while predictably, given their abhorrence of large, powerful and “too big to fail” financial institutions, frowning on his predecessor Soludo’s creation of a “financialist” banking system in Nigeria through the banking consolidation exercise. It may be said, however, that perhaps the critique of SLS’s era at the CBN will be deferred until he is also out of the CBN.
The book provides philosophical and theoretical foundations which more intellectually-minded readers will be interested in – philosophy, economic theory, sociology and political science in chapters 3, 4, 5 and 6 before launching into how financialism has “trumped” capitalism and providing views on how “financialism” may be defeated: focus on productivity and industry; education; reform of the financial sector to re-instate Glass-Steagall (the US laws which separated investment banking, commercial banking and insurance); limiting the size of banks; and instituting stronger financial sector regulation, including over derivatives. In the fiscal space, they advocate more accommodative and “pro-poor” fiscal policies.
The ideas of Tinubu and Browne may naturally be subject to questions and critiques – can this not simply be a call for financial sector reform rather than scaremongering over a demon called “financialism”? The need for curbing speculative excesses of Western (and Nigerian) banking systems and disavowing extreme right-wing desire for unbridled and unregulated capitalism is fairly straight forward – do we have to invent “Financialism” to make this point? Might over-regulation of financial sectors, which the authors seem to advocate, not lead to another extreme in which government controls banks and capital leading to more sub-optimal conditions? Given Nigeria’s experience in the 1970s, 1980s and 1990s with government control of the financial sector and reckless printing of money by the Treasury and Central Bank, should we be in a hurry to recreate such a situation? Isn’t the global financial community already dealing with the worst aspects of financial sector abuses and reforms? Isn’t there something to be said for strong and robust, but competently and professionally-regulated financial systems?
With this book, Nigerians are reminded of the Bola Tinubu who worked as corporate treasurer at Mobil Nigeria (and not the politician) and a Brian Browne in the mould of radical black civil rights leaders (and not the diplomat)! Tinubu and Browne have undoubtedly made a bold and unconventional but commendable effort to examine and seek to illuminate policy in relation to capitalism and the financial sector. Financial sector experts will certainly not accept many of their conclusions, but the debate they may inspire is well worth having.