The Canadian philosopher of media communication and public intellectual Marshall McLuhan was famous for coining the phrase, “the medium is the message”. By that he was drawing the world’s attention to the fact that the form of a message is ipso facto encrypted in the message itself; and that there is a symbiotic interactive relationship between the message and the medium. What finally reaches the receiver as a message is not only determined by the content but also by the medium by which it is transmitted. In the field of economics and public policy, the medium may not be synonymous with the message, but it is just as important. In the economic policy arena, how a policy is framed is as important as its content and the credibility of the key players.
Although originally applied to the art and science of central banking, the question of policy credibility, in my opinion, is of wider applicability to public policy and governance in general. In our day and age, mass publics, civil society and financial market players are well-informed and increasingly more sophisticated. They are vigilant in deciphering the paradigmatic-epistemic models that underpin the formulation of a policy. They need to understand this so that they can anchor their long-term expectations and take their positions in the global marketplace.
The worst thing that can happen to a government is to do nothing and to hope that, somehow, things will take care of themselves. Tony Blair’s Director of the Prime Minister’s Delivery Unit, Michael Barber, recounts the story of Robert Arthur Talbot Gascoyne-Cecil, Third Marquess of Salisbury. He was the British prime minister on three occasions, for a total of over thirteen years in the nineteenth century. During his time Britain was an ascendant world power, its mastery on land, air and sea without equal. According to Barber: “The portraits reveal a broad forehead, shrewd, dark eyes and a very large, classically Victorian, beard. His appearance exudes stability. Given that his era witnessed Britain at the height of its imperial power and Queen Victoria’s diamond jubilee, stability was exactly what Salisbury set out to provide. He summarized his beliefs in a sentence which, as a definition of true conservatism, has never been bettered. ‘Whatever happens,’ he said, ‘will be for the worse, and therefore it is in our interest that as little should happen as possible’.”
It would seem that Lord Salisbury was not alone in seeing government as a plane on auto-pilot. He gives us the example of William Evarts, secretary of state in the administration of President Rutherford B. Hayes (1877–81) of the United States who advised his boss in the following words: “You don’t sufficiently realise, Mr. President, the great truth that almost any question will settle itself if you only let it alone long enough.” Calvin Coolidge who came fifty years later was of a similar bent of mind. He famously wrote a letter to his own father reaffirming the importance of doing nothing: “It is much more important to kill bad bills than to pass good ones.”
Coolidge was succeeded by Herbert Hoover, a successful mining engineer and Quaker. Hoover was good and rather pious individual. He even gave the whole of his presidential salary charity, a gesture that John Fitzgerald Kennedy was to do in the 1960s. Within a few months of taking over in March 1929, the Wall Street Crash took place. Hoover did not have the presence of mind to grasp the enormity of the situation. He recommended some mild and anodyne measures, including the project to create the Hoover Dam. It did not help matters that some of the brightest economic minds of the day, notably the great Irving Fisher of Chicago did not see the Great Depression coming. Three days before the Wall Street crashed, he confidently predicted that “Stock prices have reached what looks like a permanently high plateau”. It was a prophecy that was to cost Fisher not only an investment fortune; his reputation as brightest economist of his generation was never to recover.
So, doing nothing is a recipe for disaster. But policy credibility is not only about content; it is about ideology, people, reputation and institutions. The reigning ideology of the last three decades has been neo-liberalism. It began with Margaret Thatcher in Britain and Ronald Reagan in America in the early eighties. It was to become the ruling orthodoxy in post-Soviet Eastern Europe and throughout the developing world. Shock therapy as practised in Poland was seen as the best option while gradualism as practised in China was seen as sheer folly. The whole idea of policy credibility as propounded by the Bretton Woods Institutions was anchored on neoliberal shock therapy. Many of our countries in Africa applied these nostrums in the context of the structural adjustment programmes, with disastrous consequences.
Today, the world has changed. What came to be recognised as the Washington Consensus is being replaced by a more flexible, cosmopolitan paradigm. What I admire about the IMF and the World Bank these days is their willingness to accept mistakes and to learn from the follies of the past. The Spence Commission Report on Growth and Development sponsored by the World Bank a few years ago, acknowldges the importance of market solutions, but also reaffirms the need for domestic approaches and solutions to often complex developmental challenges. No economist worth his salt can ignore the markets. No sane statesman can run away from the reality of our complex integrated marketplace, with its challenges and opportunities. In the emerging global environment in which we must operate, it is imperative to evolve robust markets linked to effective institutions and flexible policies that take account of changing policy imperatives. Economic fundamentals such as high inflation and high interest rates must be tamed. Corruption and other forms of rent-seeking behaviour must be tackled while structural bottlenecks that militate against growth must be removed.
It goes without saying that the people that run the economy matter as much as the content of their policies and the institutions that manage economic policy implementation. In this day and age, high-level training in economics and development is imperative. The near-collapse of the world financial system in the autumn of 2008 revealed the failure of economics as a discipline. We have brilliant and mathematically sophisticated economists who cannot understand the most elementary principles underpinning a changed global environment. They have no understanding of the role of power, cultural or psychological dynamics. Once their elegant econometric fails on account of unrealistic assumptions, they are lost. The cost of this intellectual stupidity is beyond imagination. We must therefore be wary of ideologues that have been churned out from Chicago and the likes. I have come to know that the discipline of economics can behave like one-eyed monsters, to borrow an expression by the late LSE political economist Susan Strange. Even the choice of topic for dissertations and the methodologies approved are often determined by the whims and caprices of those who desire to control the world in one direction or the other. This is why there is so much one-dimensional thinking in the discipline of economics.
Credibility requires that policies are based on solid scientific principles. Evidence-based analytics are fundamental to all sound policymaking. But it is also important to address the question: Credibility for who?
The late Dudley Seers, one of the most humane and most broadminded economists working in the field of development economics, wrote about the importance of “economic nationalism”. We have been taught to believe that anyone who is nationalistic is somehow a man of low degree. Meanwhile, the most advanced countries, behind closed doors, design some of the most reactionary and nationalistic policies known to humanity. The EU, for example, insists we must open up our markets and impose blanket trade liberalisation, while on their part, they design all forms of stratagems to close up their markets to us. The same is true of Japan and other advanced countries. Everybody in the world but us is allowed to be nationalistic. The simple truth of the matter is that we Africans need nationalism more than others. Through the centuries of trans-Atlantic racism and oppression, black people throughout the world have lost their self-esteem. Our confidence has been shattered. The loss in capital terms is unquantifiable. To regain some of that lost esteem it is healthy for us to be nationalistic – not in the sense of reverse racism – but in a healthy love ourselves and our people.
Policy credibility must never be for others. It must primarily be for ourselves first and foremost. Of course, we cannot operate in total disregard of what the world think. But the first duty of the statesman is to his own people. Economists, for their own good, like generals in the battlefield, must operate under the guidance of the enlightened statesman who understands the most basic axioms of statecraft.
Obadiah Mailafia
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