It is the age-old chicken and egg question. Which comes first: the economy or politics? That’s the question at the heart of this intervention, and it was triggered by two recent events. The first was President Bola Tinubu’s response to the call for a new Constitution. The second was Dr Ngozi Okonjo-Iweala’s speech at this year’s annual conference of the Nigerian Bar Association (NBA), in which she called for a social contract for Nigeria, built around, among others, “the basic organs of the economy”. Everyone knew about those two events, but few detected their logical fallacies. So, first, let’s recall the events.
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Recently, in August, the highly venerated elder statesman Chief Emeka Anyaoku led a group of eminent Nigerians under the aegis of The Patriots to meet Tinubu at the State House and asked him to convene a constituent assembly to produce a draft people’s constitution for Nigeria. Tinubu said he would consider their request but only after he had tackled Nigeria’s economic challenges. “I am currently preoccupied with economic reform,” Tinubu said, adding: “That is my first priority.” It was a subtle brush off, couched in economic terminology. Around the same time, Dr Okonjo-Iweala gave her NBA speech titled “A Social Contract for Nigeria’s Future.” However, although she called for a social contract, she never once mentioned political restructuring. It was as if a social contact could exist in a vacuum, as if it could exist without a negotiated political and constitutional settlement.
Truth is, Tinubu and Okonjo-Iweala ignored some critical questions. For instance, can any economy function well without the right political conditions? And can any social contract work within a deeply flawed political and governance structure? As I said, this is a classic chicken and egg question about which of two things comes first and which caused the other one. Clearly, Tinubu thinks the economy comes first, and Okonjo-Iweala thinks a social contract comes first; they both ignore the underpinning role of politics and the imperative of the right political institutions.
Well, they are wrong, and my aim here is to show why. But, first, let’s explore the theoretical context because this is a long-running intellectual debate. For generations, economists and political scientists have inhabited parallel universes. Economists see the world through the prism of rationality, positing that Homo economicus, or the economic man, is a rational self-interested being who always weighs the pros and cons of his actions and always makes rational decisions to maximise utility or profit. But political scientists argue that while man is truly self-interested, he does not always make rational decisions due to ignorance and biases. Therefore, they posit, it is wrong to look at the economy or economics through the lens of flawless rationality without considering other influences, such as the political situation and political institutions.
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It is interesting to note that in the 18th century, what we call “economics” was known as “political economy”, and great economic philosophers like Adam Smith, David Hume and John Stuart Mill were called “political economists”. Why? Because they were interested in the interactions between economics and politics, that is, how politics affected the economy and how the economy affected politics. However, in the 20th century, the term “economics” emerged and took the form of mathematical or statistical modelling or econometrics. The problem, however, was that mathematical economics ignored non-mathematical factors, such as political and behavioural influences. Rather, it wrongly assumed perfect rationality.
“Clearly, Tinubu thinks the economy comes first, and Okonjo-Iweala thinks a social contract comes first; they both ignore the underpinning role of politics and the imperative of the right political institutions.”
Recently, the Financial Times remarked that economics suffered humiliation for “its infamous collective failure to spot a global financial crisis in the making.” The financial crisis engulfed the world in 2007-2008 and was blamed on economists’ fixation with mathematical modelling which ignored the irrational herd mentality of millions of investors, which the billionaire investor George Soros captured in what he called the “Theory of reflexivity” where investors’ biases and heuristics affect their decisions. That’s why many believe that behavioural economics and political economy offer a better way of looking at the world than quantitative economics because people, and indeed nations, do not behave as economists traditionally model them. Homo economicus is a mere theoretical abstraction.
So, what about politics? In their famous book titled Why Nations Fail, Daron Acemoglu and James Robinson argue that it is the political process and political institutions that primarily determine the success or failure of a country. The character of a country’s political process and institutions shapes the efficiency of its economic governance. Politics determines who gains power, and who gains power shapes the economy. Elect a socialist president, you have a socialist economy; elect a market-oriented president, you have a market-oriented economy; elect a corrupt president, you have a corruption-ridden economy. What brought Buhari and Tinubu to power? Politics. So, politics determined the economic failure that Nigeria and Nigerians experienced under Buhari and are experiencing under Tinubu.
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Well, politics matters in another key respect: it affects investor confidence. When foreign investors are considering whether to invest in a country, they do not think about its economy first. Rather, they think about what we call “political risks”. Is the country politically stable or not? Is insecurity high or low? Is corruption rife or tamed? Are political institutions strong or weak? For instance, are the judges independent or corrupt? Is the bureaucracy competent or not? These are what primarily shape how foreign investors view a country. That’s why political risk analysts are among the most sought-after and well-paid experts globally.
What’s more, a key symptom of state fragility is deep divisions in the society, which inevitably make the environment for private investment unattractive. Recently, this newspaper published a report titled “Fiscal instability: Behind the ticking time bomb of Nigeria’s debt” (BusinessDay, August 5, 2024). The writers made the following accurate statement. “Nigeria is grappling with a highly polarised political climate,” they said, adding: “The deepening divisions within the political sphere are making it harder to reach consensus on essential reforms and policies.” They concluded that if the political crisis continued, “investors may start viewing Nigeria as an unsafe place for their money.” They are right: an unstable political climate deters investors.
All of which brings us back to the internal inconsistencies in Tinubu’s and Okonjo-Iweala’s interventions. Let’s start with Dr Okonjo-Iweala. No one can disagree with her call for a social contract. But in any country where there is a social contract, it’s part of a negotiated political settlement. For instance, South Africa has a social contract under which state institutions are fiercely independent, citizens’ rights are protected under a Bill of Rights and the country’s diversity and sensibilities are safeguarded constitutionally. But the social contract was part of the negotiated post-apartheid political settlement. A social contract cannot exist outside the political context. Thus, Dr Okonjo-Iweala should have acknowledged the need for political restructuring and political settlement in her speech.
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As for Tinubu, his intervention was mendacious. What did he mean by “economic reform is my first priority”? Up to when? Can Nigeria’s economy be transformed under the current deeply flawed political and governance structure? Absolutely not. The World Bank said: “Political settlement is central to all development.” Thus, Nigeria can’t have development without a political settlement. If Tinubu understands that, he won’t kick the request for a people’s constitution into the long grass under the pretext of “economic reform”.
As president, Tinubu plays self-serving patronage politics. But he’s subordinating political reform to so-called “economic reform”. That’s disingenuous and misguided. He should heed the Patriots and kickstart the process of giving Nigeria a people’s constitution. The economy doesn’t trump politics; only the naïve thinks it does!
