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Global Financial Crisis:Free Market Advocates have NOT
taken Cover!
James Shikwati
In his postcard Where are the Free Market Advocates? Tajudeen
Abdul-Raheem (Director, Justice Africa) questions why a
Capitalist country such as the United States of America opts to
bail out the rich (greedy bankers) and yet does not agree to
have the state protect poor people. One can defend the state's
role of facilitating a free environment that enables individuals
to generate wealth thereby migrating from poverty.
Free Market principles advocate for the empowering of
individuals to engage in private undertakings and for the state
(governments) to engage in enterprises that are beyond the scope
of private enterprise. It is wrong for Tajudeen to insinuate
that when individuals engage in private enterprise; they do not
take care of the interests of the poor, marginalized, and the
sick. The state ought to ensure (through sound regulation) that
private enterprise does not harm the interests of individual
citizens. For example, matatu owners; boda boda taxis, airlines,
bakers, hospitals, Agro-veterinary services, car manufacturers,
cellphone service providers and bankers among others offer
services to everyone at a fee.
By so doing, they help improve People's living standards.
After collecting the payments from their customers, they
pay taxes to the state. The state in turn uses the taxes to
offer services (public goods) that ideally no private enterprise
may engage in for profit. In other words, the state acts like a
soccer referee. If the referee gets compromised and engages in
fraudulent officiating of the game, it would be wrong to
conclude that the soccer sport in itself is a bad thing. Change
the referee!
He (Tajudeen) argues: "For decades we are told the state is
'useless', 'inefficient', 'parasitic', 'anti-enterprise' yet
when the wheelers and dealers are in trouble they fall back on
the same state to bail them out with freebies!"
I do agree in part with this sentiment in so far
as the methodology rich nations and their agencies such as the
World Bank and IMF have always sought to drive the free market
message to poor countries (especially in Africa and Latin
America). For example, forcing poor nations to privatize service
delivery in order to ensure that companies from wealthy nations
take over such services is anti-free market principle. In other
words, one need not engage in regime change and bomb out
governments to enforce the 'market forces.'
The free market principle recognizes the importance of a
'referee' (regulator) and can never refer to such an important
entity in the market as 'useless.' Perhaps what we need to
explore here is the role (or absence) of a global referee.
Wealthy nations are known to preach free markets but they do not
allow poor countries to access their markets. Wealthy nations
should not be made synonymous to the free market principle. If
anything, they violate this principle with impunity and we, in
our quest for foreign aid, allow them to ride roughshod on us.
The state has no 'freebies' to offer anyone apart from what it
collects from the very capitalists who generate wealth. As to
whether the state ought to bail out collapsing companies, the
free market answer to that is no! Bailing out failure is an
anti-market principle, since it will only perpetuate and gloss
over the causes of financial crisis. We ought to scrutinize
whether the U.S.A for example is bailing out the rich or the
poor who saved in a collapsing private enterprise. The financial
crisis is a pointer to the fact that one cannot cheat the market
- not for long! (We see it here in our own Nairobi Stock
Exchange when attempts to cover up broker failures come to the
surface)
My friend Tajudeen must be deliberately out to distort facts
about pro-market arguments or was simply sharing his
disappointment on how America's 'socialist' solution is indeed
further evidence that socialism does not work. In his own words;
"The market, we are deceived into believing is no respecter of
anybody and its immutable logic will fix things." Clearly this
is not a deception. The market respects no one. It punishes
individual, corporate or government failure with equal force.
In a socialist system, no one would ever have discovered that
the collapsed companies in America had a problem, taxpayers'
money would have kept them artificially in operation. It is
precisely because of the market system that the World was made
aware that the companies were in trouble.
Finally, we have points of convergence with Tajudeen as
Africans: we should not expect others to be our messiahs but
rather be our own liberators. We should stop ridiculing
ourselves by talking about our problems to those who pretend to
be out to help Africa. Yet again, I agree that we should not
'parrot' ideologies but interrogate them.
We are witnessing a new chapter in global history, but we shall
not go beyond the market - because African indigenous
enterprises are yet to make a mark in the global market. Let us
learn from the American mistakes and push for high productivity
and sane and sound regulation.
James Shikwati
Director IREN
CEO The African Executive
Nyaku House, Mezzanine Floor
Argwings Kodhek Road, Hurlingham
P.O.Box 135 00100 Nairobi Kenya
Tel: 020 273 1497
Fax: 020 272 3258
Websites: www.irenkenya.com
www.africanexecutive.com
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