How to Decommission an Economy

Proshare

Thursday, June 02, 2016 10.23PM / RECALL Opeyemi Agbaje Nov 4, 2015

Decommission - “…a general term for a formal process to remove something from an active status”. The term is usually applied to military weapons, for instance nuclear weapons, machinery and equipment, but not normally to an economy!

Most literature on economics focuses on growth and development, and appears to be based on the assumption that human progress is dependent upon increase, growth, enhancement or expansion. There appears to be an innovative case study going on in one unique part of the world that is testing an alternate paradigm-that it is possible to secure economic progress by winding down an economy. If someone wanted to test this peculiar hypothesis i.e. if someone wanted to put an economy out of activity, how might he or she wish to go about the process?

A set of preliminary actions may be useful-first the protagonist may start by making loud, indeed global allegations that huge sums of money are missing from that nation’s treasury. In order to achieve the desired effect, the figure must be large and humongous-perhaps $50bn or $20bn; or if a figure in local currency must be used, the figure must not be less than N30Trillion! This allegation must be given wide publicity in global publications like Financial Times, Economist and Wall Street Journal apart from local media, and must also be the subject of endless interviews on CNN and Al-Jazeera for at least six months!

Once this step is taken, foreign investment will begin to slow down as investors take a wait-and-see action in relation to that economy. This step is particularly effective if it coincides with a general election-the combination of elevated political risk and fears about large-scale official thievery is especially devastating to investor confidence and should achieve the objective of dissuading investors. Please note that it is immaterial whether the allegation is proven or otherwise as long as it is made by “credible” and believable individuals.

But I have missed an important step in the preparation for this process of putting an economy out of service! This is by way of long-term preparation to ensure that the economy’s “immunity” is removed before the onslaught begins! The way to make an economy devoid of defenses, especially in an economy fueled (literarily!) by sales of a single commodity extracted from beneath lands and waters is to ensure the economy has no fiscal buffers-no savings so that when the price of the commodity drops, it will be unable to draw on reserves and remain in service.

There are five ways this exclusion of savings can be achieved-ensuring that if your finance minister drafts a budget using a budget benchmark price lower than the actual commodity price, your National Assembly raises the benchmark to reduce or eliminate the possibility of savings; ensuring that your Governors insist on sharing all previously accumulated “excess” savings; ensuring that if your President pushes through a law to institutionalize sovereign savings, you get some governors to challenge it in court and obtain an injunction to restrain its operation; and ensure that your central bank refuses to make even minor adjustments to the value of your currency, so that your relatively cheap reserves can be frittered away.

It helps of course if your president is weak and lacks the courage of his convictions to insist on what is best for the nation, no matter whose ox is gored! The fifth way is to sustain your decade-old culture of corruption and rent-seeking behavior. This way you have removed any chance that large savings will enable that economy survive the inevitable decline in commodity prices unlike the last time it dropped in 2008-2009, which you survived because you had $65bn in “excess” savings!

Having ensured your potential victim economy lacked immunity through absence of fiscal buffers, and scared away investors through elevated political risk and fears of institutional thievery, it is time to move to the next stage of the decommissioning process. To execute this phase, it is useful if you secure support from someone in a position of authority, whose declarations are entitled to be believed by domestic and international audiences. This phase is simple-all you require is for the person of authority and various subsidiary persons of authority to make announcements in local and global media that the economy’s treasury is empty!

These announcements may be made at least every fortnight by different people-a governor, party spokesman, presidential spokesmen, comrade or anyone else! When the announcements seem to be wearing thin, add the fact that a foreign government has confirmed that one single individual stole $6bn from the country’s treasury and that prosecution of all those who “looted” the country’s economy will imminently commence!  One day, you may also announce that a foreign government is about to prosecute one official who single-handedly stole GBP 32bn (Thirty Two Billion British Pounds Sterling!!!) Do not worry, human beings, especially of the Nigerian variety love scandal; and they have been traumatized by decades of corruption, so they will believe anything you tell them!

The most important phase of the economic decommissioning process is to ensure an absence of governance and policy for six months! Find any excuse if you have to; just make sure your economy does not have any policies and does not have a government!!! While at this, there will be stubborn economic participants who resist your decommissioning agenda-impose large fines on them, and they will begin to understand that you mean business! The fines must be large and punitive, ranging from N1bn, N5bn or $5.2bn!!! Both local and international investors will get the point that this is serious business and your economic decommissioning is well on course! At this point, you can move to the final stage, which is the easy part. At every opportunity, issue a caveat emptor to the whole world that they do business with your bankrupt nation and its corrupt people at their own risk!!!

Related Posts by Opeyemi Agbaje

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2.             The Case for Downstream Deregulation

3.             Fashola and Nigeria’s Electricity Challenge

4.             Conversations on the Economy

5.              Day of Multiple Reflections

6.             Posers on Housing Deficit

7.              Legislative Reforms for Development

8.             Memo to Godwin Emefiele – Jun 25, 2014

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