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What we see and what we don’t see

Nigeria economy. PHOTO: buzznigeria.com

In his 1850 essay titled ‘Ce qu’on voit et ce qu’on ne voit pas’ (That which we see and that which we do not see), the great French economist, Frédéric Bastiat, introduced what he called The Parable of the Broken Window. His main insight was that people had a tendency to see the ‘good’ or silver lining in acts of economic destruction and tend not to take account of opportunity costs while doing so. He used the example of the window of a shop being vandalised. That is seen. People might then say at least it is good for the window repairer who earns money from fixing the window and thus the economy still benefits. What is unseen, however, is that the money paid to repair the window is automatically unavailable for various other economic activities. Thus, the economy as a whole suffers. Destruction is not profit.

Nigeria is going through an interesting period. On account of the economy being practically stagnant for the last three years, people are frustrated and angry. The dark side of this national mood is that it makes people willing to listen to all sorts of destructive ideas. Punishing or scapegoating businesses is surely popular right now especially as the only explanation forthcoming from the current government is that the previous government ‘looted’ the economy. If only to appease angry people, something must be done. But what is the purpose of leadership? Is it to calm or excite agitation?

One of the ways in which this economic destructiveness has been carried out in recent times is through regulators who claim to be ‘implementing the law’. Leave aside the fact that unreasonable laws are often not implemented for a reason, the giveaway with these regulatory actions is that you only seem to hear about them when it is time to punish someone. Once an ‘infraction’ is noted, the entire weight of the law is brought down to bear on the offender to ‘teach them a lesson’.

Consider two recent cases. Social media was set alight when the Consumer Protection Council (CPC) and NAFDAC shut down Krispy Kreme, a fast food outlet in Lagos, for being caught in possession of relabelled ingredients. Changing the expiry date on products is not illegal or unheard of – what was at issue in this case was that the company changed the dates without informing the regulator as required. No matter, without testing the products to ascertain whether the public was in danger of being harmed, the company was dragged through social media for endangering Nigerians. Many Nigerians cheered the regulator as finally ‘working’.

Or consider the ongoing drama with MTN. A few years ago, the government used to advertise MTN as what happens to people who miss out on Nigeria using Vodafone’s famous decision to ignore Nigeria’s GSM market in 2001. These days, MTN has become a dirty word. After being fined billions of dollars a few years ago for an infraction, it is now being asked to bring back $8.1bn taken out of the economy ‘illegally’. How such an amount of money can be taken out of the economy ‘illegally’ is neither here nor there, what is important is that the whole complex saga has been simplified down to fit the narrative of the economy being ‘looted’ over the years. Bringing in dollars into the country is not illegal. Taking your profits out of the country is not illegal. Changing your shareholding structure is not illegal. But there are many rules in Nigeria and you can always be found ‘guilty’ of one or three depending on how determined your accusers are.

All these things are seen. What is not seen is the effect this has on investors who might be considering Nigeria somewhere. There is no way to measure the number of people who look at Nigeria and decide not to come. The former DG of CPC said pricing was outside the organisation’s remit while the current one says pricing is ‘naturally’ part of its remit (to justify its attempt to fix DSTv prices for 2 years). All of this regulatory arbitrariness can appear costless and even to the benefit of the economy since they are ‘popular’ and on the side of ‘the people’.

To all of this I say – please calm down, Nigerians. When the battle is between the head and the heart, one should do as much as possible to at least give the head a fair hearing. As much as regulators should do their job and punish wrongdoing, there is nothing that says the punishment handed out should not be proportional to the substance of the infraction. One might get a rush of adrenalin from destroying a mosquito with a bazooka but you’re likely to incur some collateral damage in the process. Fundamentally, the problem is that the economy is not growing and poverty is increasing. As much as the mood is to punish someone for that stagnation, it is not the answer to anything.

There is no profit in destruction. Ask Bastiat.

Source: G Business

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