Will Tinubunomics work?

Tinubunomics is a familiar ideology; not a new one. But to glean it and lay it bare, we should perhaps begin from far afield where the real world of politics, economics and economic ideology is currently playing out in classic fashion between the troika of China on the one hand and the US and the European Union (EU) on the other.

Last week, Janet Yellen, the top US economic official and treasury secretary, arrived in Beijing to hold talks with Chinese Vice Premier, He Lifeng, who is also the Director of the Office of the Central Financial and Economic Affairs Commission, and therefore the top economic official in China. Yellen’s mission was simple, but also a contradiction in terms. She wanted China to reduce government subsidies to Chinese companies producing electric cars, batteries and solar panels at the very moment her own government was pumping hundreds of billions of dollars in subsidies to American companies manufacturing the very same things.

That is a tough economic diplomatic nut to crack; you will be right to say, but the EU also wants the exact same thing from China, and last month, its executive arm, the European Commission, dispatched a high delegation to China to “investigate” the extent of China’s state subsidies handed out to Chinese companies producing electric vehicles such as BYD and Geely with a view towards imposing high tariffs on those Chinese items sold within EU borders.

For us here in Nigeria, and for the emerging contours of Tinubunomics particularly, the first question is, why are the US and EU, the world’s leading prophets of “open borders” and “market forces”, bothered? Why not simply allow “free markets” and “free competition” take charge of the situation as we have been told down here again and again? Why not in fact just say that is a market situation? Rather than call what is happening by its true name – competition – American and European officials and media are calling it Chinese “overproduction” or “overcapacity”; that is, China is producing so of much of these technologies that it will run other producers elsewhere out of business, even within their own domestic markets.

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Why, then, should anyone, least of all, the prophets of the free market worry about overproduction in the market? Isn’t that what the textbooks say will bring down the price?

The gist, as usual, is in the details. American and EU manufacturers of green technology, already fattened by subsidies from their governments, are still afraid of competition from China because Chinese companies make considerably cheaper electric vehicles, batteries and solar panels per unit, and if their products are allowed to flood American and European markets, then the local companies will be pushed out of their own domestic markets and all the state subsidies they received in the form of grants and loans will amount to zilch.

In a tinge of dark irony, Chinese officials responded to the EU by accusing the bloc of “protectionism” and formally lodged a complaint at the desk of our person at the World Trade Organisation (WTO). China, which was very reluctant to join the WTO, goes there to squabble against European founders of the organisation, passing itself off like the torch bearers of free competition.

But right there is another lesson for us here in Nigeria. You talk and do free market only when the productive capacities of your economy, or of certain sectors of it, are strong enough to beat or withstand challenges from elsewhere. Free market is a language of the strong; not of the weak, and free competition is a sport of the able; not of the stupid.

Still, you will be mistaken to conclude that this is an economic battle for today. It isn’t because right now EU imports of Chinese EVs stand at less than 15 per cent. In fact, China sells the vast majority of its electric cars, solar panels and batteries locally at home, and only in the past few years is it gearing up for the overseas markets.

So, the fear is for tomorrow, particularly given the fact that there is a great-power political dimension to it all: EU leaders do not want to depend on China for the technology of the future, given China’s dalliance with a neighbour they feel threatened by, Russia. And the US knows too well that to stay ahead of the pack, it must not lag behind in the technology of the future.

China too has its own reasons. First, it realised that to lift its economy from the sluggish growth wrought by COVID-19, and its own near disastrous responses to it, it must kick life into manufacturing and expand overseas markets in sectors that are still amenable to expansion in the global trade such as electric vehicles. More importantly, China foresaw, early on, that to remain an important player in the global economy, which is to say, to protect what it already has, it must add to it. Hence its early investments in “green” – in both senses of the term – sectors that are now the subject of criticism by other players who, arriving late to the scene, are in fact doing exactly the same thing China did.

So, who is right or wrong between China, the EU and the US in this case? As Nigerians, we are quick to judge, but in this specific instance, all three are right. As Dani Rodrik, the Turkish economist at Harvard, likes to say, economics is a science for understanding human affairs; and it stops there. Any policy recommendations from economics, Rodrik says, are no longer the science itself, but politics or ideology or other considerations, because, for economics, the science, the only appropriate answer to the question of what to do in any given economic situation is: “it depends”. There are simply no ready-made solutions in economics that apply to all situations.

But to bring the point home, let us say your research shows that fuel subsidy in Nigeria is riddled with corruption, that it rewards the well-off more than the poor, and that it sweeps funds away from other competing areas like education, health and infrastructure. All of this so far is economic science. But when you go from there and say the only solution is to remove it, you are no longer doing economics, but ideology, or something else, because, as always, the solution is “it depends”. If certain conditions are right, removal might work, if those conditions are not, it won’t. This is where we turn to Tinubunomics.

President Tinubu’s entire economics appears centred on removing state subsidies: remove subsidies from fuel and let the market take charge; remove subsidies from the naira and let it float to find its own real value in the market; remove subsidies from electricity and the lights will come on; and now, remove subsidies from higher education and throw in student loans. This is the crux of Tinubunomics in so far as we have seen from this government since May, last year. Perhaps, the next genius thing to do will be to remove subsidies from air and let it find its price in the market so as to finally “let Nigerians breathe”.

But the matter here is beyond my mild joke above. The question to ask is not whether Tinubunomics is right or wrong; the question is whether it will work. That is, whether state withdrawal from critical sectors of the economy will deliver any desired results. Economic ideologies adopted by a government must also demonstrate their true value in the lives of citizens. So, will Tinubunomics work?