In the quest for practical wisdom, finding the intersection points where ideas are validated by worldly realities puts us on the course for knowing what is best to do. Theories can help by presenting relationships between and among facts, but how many times have theories not aligned with practical realities in the long run?
There is a theory of capitalism and a theory of socialism. Which is a better theory to guide our decision-making? Which is more likely to bring about better outcomes? There is a theory that democracy is the best form of government for people. But how many successful democracies has humanity experienced?
The scientific method likes to look for facts and data and then examine them for patterns which repeat when the same facts and data are present and then propose a law of causation to explain why the pattern emerges. The law of causation permits prediction of future outcomes. So, if the law correctly correlates the necessary interdependence of some facts or data with other facts or data, then we can, with confidence, use the law to predict the future.
We can use the law to obtain desired results or use it to avoid outcomes we don’t want. Thus, if we want to know what outcomes to expect from capitalism and from socialism, it is best if we find some facts in the real world which might lead to the discovery of patterns and then to predictions of what will happen if that pattern is followed in our behaviors.
Nigeria today presents us with such facts on systems of human governance and economics. The conclusions we can draw from Nigeria, as a case study, are credible and revealing.
First, the July 13 issue of The Economist reported that “soaring food-price inflation is hurting Nigeria’s poor.”
Tomato prices that fluctuate with the seasons are normal in Nigeria, but the record annual pace of food inflation, which hit 41% in May, is not. Most pinched are the poor. Staples, such as beans and maize, cost 400% more than they did a year ago, while a 100kg bag of sorghum has more than tripled in price. Since wages have barely moved, the result is a deepening food crisis. Whereas hunger was once concentrated in conflict-ridden areas in northern Nigeria, now it affects poorer households nationwide (see map). Of the 44 million people in west Africa and the Sahel who do not get enough to eat, more than half are Nigerian.
We may ask if the inflation is the result of free market capitalism?
The Economist reports:
Much of the blame should be heaped on the government. A haphazard introduction of new banknotes under the previous administration led to a shortage of legal tender. This caused most hardship in the countryside, where penetration of bank or mobile-money accounts is lowest. With cash scarce, farmers charged middlemen a premium if they used electronic payments, pushing up prices in the markets.
A weakening naira dealt another blow – its 40% fall against the dollar made it the worst-performing currency in the world in the first half of this year. That has pushed up the cost not only of imported foods, but also of seeds and fertilizer. The government’s removal of fuel subsidies, though necessary, further raised the cost of running farming machinery and taking harvests to markets. …
A year ago, Bola Tinubu, the president, declared a state of emergency for food insecurity. Yet, promises that savings from the fuel-subsidy removal would be reinvested into farming have not materialized. A program to give free fertilizer to farmers to boost production was subverted by politicians, who put their faces on the sacks and gave them to loyal voters.
This week, the government announced plans to waive import duties on maize and wheat and to set a recommended retail price. The government itself also plans to import 500,000 tons of grain. But so far, Mr. Tinubu’s administration has been unable to stop prices from soaring. Last year, Nigerians were already spending 59% of household incomes on food, a higher share than in any other country. How much harder can they be squeezed?
In the July 26 issue of Newsweek, it was reported that Nigeria is at a cross-roads, quoting former U.S. Ambassador John Campbell saying, “I would suggest that Nigeria, at present, is not holding together. What you have is a government whose writ runs in only certain parts of the country and there are alternative power centers all over the country.”
Nigeria is beset by the lack of governance and the rule of the gun – a Hobbesian condition, where the life of people can easily be “solitary, nasty, brutish and short.” The country, reports Newsweek, is beset by Islamist insurgents, separatist movements, kidnapping and robbery. This year, through May, saw 7,519 incidents of violence, 9,892 killed and 6,292 abducted.
One woman said, “You can see people going crazy. They are not crazy, they are hungry. They are frustrated, they don’t have work to do, they don’t have anywhere to go. That is why you see them walking about stealing, doing armed robbery, kidnapping.” This would not be expected in a successful capitalist society, where wealth is created through enterprise and shared with stakeholders.
Nigeria sits near the bottom of rankings for corruption and still has a reputation after decades of being home to scammers who operate globally to strip the innocently trusting and the naïve of their savings. Long has Nigeria been under the thumb of military rulers. Tinubu won election as president in 2023, when less than 10% of registered voters bothered to vote.
Hard to have capitalist wealth creation where there is no morally responsible government.
The new government took steps to move towards more market rationality – ending subsidies for fuel and letting the currency float to a market value. But the initial consequences of those steps towards market efficiency is seriously higher inflation. A critic commented that the reforms were not part of any larger, broader program to boost the economy, again a shortfall on the part of government and the culture to value enterprise.
Nigeria’s government and economy run mostly on the proceeds of selling oil, not producing goods and services. This is the curse of dependence on rent extraction from natural resources. The cash flow does not come from workers earning wages through capitalist wealth creation. Nigeria ranks 127 out of 133 countries for diversifying its economy. It gained independence from Great Britain in 1960 – 64 years ago.