From the ancient period to our time, God has always put in place great minds to tackle challenging circumstances of their times. There was the Abraham to lead the way for the establishment of god’s people, Israel nation, a Moses to lead Israel out from slavery in Egypt, a Joshua to occupy the promised land, a David to give Israel a territory befitting of a nation through conquering, a Solomon to bring peace and wisdom, Esther and Mordecai to save their people from Haman machination and the Mede-Persians, a Jesus Christ to reconcile mankind to God.
Again, a Socrates and Plato also to engrain morality in young people in a society that was morally debased, a Julius Caesar to cross the Rubicon river, a Lee Kuan Yew to take Singapore from obscurity to an Asian tiger, a Roosevelt to lead America through the Great depression and the world war II, a Keynes to proffer economics solution to the Great Depression etc. etc., and Ayade to take Cross River through the recession and from a third world to a first world in eight years.
This article seeks to cursorily bring out the core thoughts in Adam Smith’s economic theory and that of John Keynes Maynard, and then x-ray the Ayadesian economics theory that seeks to reconcile Smith and Keynes, while at the same time proffering solution on the way forward on the current economic recession that is ravaging not only Cross River and Nigeria, but the entire global community.
Adam Smith, a Scottish Philosopher, Political Scientist, Economist, Journalist, Educator and Scholar of high repute, who lived between June 5, 1723 and July 17, 1790, laid a solid foundation for a political economy which took a radical departure from the economic system that was obtainable in his time where emphasis was concentrated on gold and silver as the measure of a country’s wealth.
In his famous work, “An Inquiry Into the Nature and Causes of the Wealth of Nations”, regarded as the “Bible of capitalism” and a foundational work of classical economies, Smith firmly posited that rather than measuring a nation’s wealth by the metrics of gold and silver, measurement by the total production and activities of commerce was the case, an idea which gave raise to what is globally known today as the “Gross Domestic Product (GDP).
He expanded and magnified the theory of division of labour which dated back to the philosophical postulations of the great thinker, Plato who divided the society into three segments, the Philosopher-King, the Guardians/Soldiers and the Artisans, promoting specialization leading to increase in productivity in a qualitative manner. Smith viewed free-market economies as the most productive and beneficial to the society, for this reason, the preferred economic system is the one based on individual self-interest, leading to the greatest good for all.
This self-interest according to Smith is sustained by an “Invisible hand”, which though smith could not prove its existence, but argued that it works in the society through the butcher, baker, candlestick maker etc. each go about his/her business, producing the amount which by his judgment is correct and also buy the amount of items/goods his family needs without necessarily getting instruction from anybody, including the King-men.
By his postulations, the Scottish economist brought to being classical economics, whose central thought is a laissez-faire doctrine which emphasized that economic activities should be driven by the private sector with negligible involvement by the government to enable the “Invisible hand” guide all in their economic activities to bring about the greatest good for the greatest number of people in the society, ensuring economic and productivity growth, employment generation, wealth creation/accumulation.
The central doctrine of Smith’s political economy is that the means of production/economic activities (demand and supply) be controlled by market forces/private sector, in this rooted the theory/law of demand which states that the higher the price, the lower the demand and vice versa; all things being equal (ceteris paribus). This law operates under the assumption that the income of the consumer remains static; there is no close substitute of commodity for the consumer; the consumer’s habit remains the same; and that the taste preference of the consumer never change.
We all know that it will just be stating the obvious that consumer’s income changes, there are close substitute of goods for him, and his habit of consumption also changes just as his taste.
On his part, a British born financial guru/genius and economist, John Keynes Maynard (1886-1946) equally took an in-depth examination of capitalism and came out with radical and influential position which took a detour from those held by Smith in particular and as well as Karl Marx.
In 1936, John Keynes Maynard published a work, “General Theory of Employment, Interest, and Money”, which tackled issues as humans’ proclivity to spend and save as their income increases, and how such increases affect the economy. Writing during the Great Depression of the 30s where unemployment in the US then reached 25 percent as millions lost their life savings and jobs and consequently questioned Smith’s “Invisible hand theory, Keynes came up with hope as he outlined the role of government on not just a capitalist economy, but also a depressed one.
Keynes economics theory stands in direct opposite to the classical economics with strong root on private sector driven economy and strongly argued that decisions of the private sector often leads to bungling macroeconomic outcome, hence the need for active and robust policy response by the public sector as well as Central Bank (CBN) monetary policy and fiscal policy of government if the business cycle is to be stabilize. Keynesian theory therefore advocates for a mix economy where a greater chunk is controlled by the private sector with an open door for the government to effectively intervene in a recession economy.
Keynes position was that the solution to the Great Depression of his time was to consciously drive and stimulate the country’s economy, preparing it to be investors’ friendly (“inducement to invest”) by combining “A reduction in interest rates (monetary policy), and Government investment in infrastructure (fiscal policy). Through Keynes postulations, unemployment which sets in as a result of structural inadequacies is viewed as demand imbalances in contracting or expanding economy, rather than laziness and other moral deficiencies, and that unemployment is a natural consequence because there is no standard rule that supply will equate demand.
The economy for Keynes is incapable of maintaining equilibrium, employment-wise and as such government need to play a vital role of employing under-utilized funds into work through government spending. Individual actions like refusing to invest savings in goods and services which are the outcome of the economy at the microeconomic-level, taken by individuals and firms may lead to the economy working below its capacity output as well as growth rate.
Viewed differently from the classical school of thought, Keynesian sees glut as the “over-reaction of producers and the laying off of workers that led to a fall in demand and perpetuated the problem”, hence the strong need for government stabilization policy to checkmate serious economic issues through the reduction of the amplitude of business cycle, using government spending to increase aggregate demand to boost economic activity while at the same time reduce unemployment as well as deflation.
Keynesian economics vehemently asserts the reality of instances of a depressed economy not speedily move toward self-correcting for full employment and potential robust output, but remain encased indeterminately by astronomical unemployment and mothballed factories; hence Keynesian proved that without intervention and for government to deliberately spend to put cash in private sector pockets to get demand and services running, such conditions in the stable will persist, though depress, equipoise. President Roosevelt tried the Keynesian theory and work well for his country through the Great Depression and the World War II.
Smith and Keynes stand at opposite directions, and neither Smith nor Keynes theories actually settles the economics questions. The Ayadesian theory propounded by the current Governor of Cross River state, Senator Ben Ayade is not just a cursory and bold effort to strike a reconciliatory note between the economics ideas of the 18th century Adam Smith and 19th century dove-tailed to 20th century John Keynes Maynard, but also create a mathematical theorem and equation that places a constant K on the wellbeing of the people. Reconciling Smith and Keynes and at the same time charting a new economic theory in the highly digitalized 21st century, Ayadesian boldly proposes a healthy public sector modulation by government in order to stimulate demand while at the same time government mediated private sector is sufficiently catalyzed to shore up supply.
The new economics theory by the Obudu born Environmental Science Professor, Businessman, Senator, Public administrator and politician and now an economist, Governor Ayade, ensures dynamic but organic catalysis of demand and supply under government modulation through a careful watch on Keynes to prevent it from snowballing and creating a Socialist state with unsustainable artificial demand. Ayadesian does not also allow Adam Smith off the hook to go on rampage with capitalist mentality reducing humans into tools of production in an economic architecture that is vertically mercantile, creating the problem of over supply without an evacuation vehicle.
Ayadesian theory ensures that a point of inclusive, critical and a harmonious balance is struck between activated demand on one hand and accelerated supply on the other, thereby providing a dynamic equilibrium to pull the system off the recession hangman noose or booby trap. The Ayadesian theory therefore emphasized and encouraged putting food on the people’s table and a hoe in the hand as creating jobs to bolster demand devoid of a corresponding creation of government mediated private sector will ultimately leads to a disastrous end of demand outstripping supply, inflation; hence Ayadesian econo-kinetics makes room for Special Purpose Vehicles (SPVs) and third party structures to keep afloat or buoy the supply coefficient.
Ayadesian theory is effectively applied in Cross River State by the expansion of government through increase in unproductive jobs in order to mitigate social tension and at the same time increasing productivity through construction, agriculture and industrialization to consciously stimulate drive supply. This system has also been put into practice in Cross River through the expanded political appointments, the creation of the Green police and Homeland Security Company including several unproductive political boards and agencies.
This is deliberately aimed at stimulating consumption/demand and created state SPVs including the garment factory, Cross River Rice Company, Cross River Pharmaceutical Company, Cross River Power Company, Cross Infrastructure Company, etc. etc., all to serve as supply end to balance the increase in demand due to several political appointments.
Interestingly, when an appointee buys a shirt from the garment factory, garment factory buys fabric from cotton processing factory and factory buys cotton from cotton farmer, a robust economic circle is created and collectively, recession is beaten to obliviousness. With over 30 SPVs and 1700 appointees, the government of Senator Ben Ayade in cross River is acting both as public sector as well as private sector through SPVs under the Ayadesian economics theory.
Conclusively, while Adam Smith and his theory represents the capitalist society, Keynesian theory came from the angle of the socialist society, the Ayadesian economics theory and postulation is rooted on social-capitalism of the neo-liberal dimension/school of thought.
His golden triangle policy and developmental approach hinged on human, agriculture and infrastructural/industrial development as clearly reflected in the 133.7 kilometres dual carriage Federal highway that will cut across the five local Government Areas of the northern senatorial district of Cross River, the massive involvement in the government and the people of the state on agriculture, Rice and cotton anchor borrowers programme, the signature projects and development of new cities and people-oriented policies clearly brings to fore the social-capitalist ingredients of the Ayadesian economic theory.
Unambiguously, Ayadesian economic theory holds the solution to economics challenges of the 21st century; even as some leaders in Nigeria are beginning to appreciate its developmental approach.
Solomon Asha is a media aide to Governor Ben Ayade of Cross River.
Since You Are Here, Support Good Journalism
CrossRiverWatch was founded on the ideals of deploying tech tools to report in an ethical manner, news, views and analysis with a narrative that ensures transparency in governance, a good society and an accountable democracy.
Everyone appreciates good journalism but it costs a lot of money. Nonetheless, it cannot be sacrificed on the altar of news commercialisation.
Consider making a modest contribution to support CrossRiverWatch's journalism of credibility and integrity in order to ensure that all have continuous free access to our noble endeavor.