Trickle-Down Economic Policies are not the Solution: IMF and World Bank Report Acknowledges

The world has yet to witness the unacceptable proportion of socioeconomic inequalities we are seeing today. All the “very fine” talk about the potential for “trickle-down” economic policies and infrastructures to bridge the inequality gaps have yet to be justified. I am particularly worried about the “centre and extreme right” socioeconomic and development policy advocates; as well as neo-liberal ideologues who have long argued for such policies as the only surest bets to reducing global poverty and inequality.

Studies have shown that, allowing the “rich” the latitude and the economic space to play by their own rules don’t in any way provide the needed incentives to bring down inequality (Picketty, 2014). Instead, their wealth and economic resources continue to expand exponentially at the expense of the poor and the marginalised. Because they wield a lot of power and influence, they in turn dictate the terms and conditions of their employees-whether fairly or unfairly. Being rational and human as they are, their first instinct is to ensure that, every single effort of theirs is aimed primarily at maximizing profit. After all, is that not what the investor looks out for?

Just a couple of weeks ago, the IMF and the World Bank; who superintended over Structural Adjustment Programmes (through privatization) have come out to admit that, their projection and notion of the capacity of the trickle-down economic policies as “inequality arresting” strategies need a hard rethink. Countries have literally, been coerced to adopt and implement structural adjustment policies without considering how negative the consequences of such policies were going to be. For over four decades, ever since SAP policies were adopted, the fruits of such economic policies have yet to bear the desired results.

In Lima, Peru where these discussions happened, the effects of inequality have been identified to have gone beyond what we used to consider as “abstract”, to physical and more tangible realms. Like we see in many sprawling urban communities across the globe, physical landscapes such as walled and “gated” communities, as against shacks in slums have become the “dividing” lines. In Lima, it is called the “Wall of Shame” (BBC World Business Report, 2015). The “rich” live in one side, with modern facilities and social amenities while the “poor” live at the other side with nothing to irk out a decent and dignified life.

As unusual as this may look, this phenomenon is not common only to “broke” and emerging economies. Even advanced economies like the US, is also bedeviled with such huge socioeconomic inequalities. New York is a classic example. While the Manhattans are filled with skyscrapers and plush surroundings, just some few metres away, inhabitants of the Bronx are struggling to get by. That is how unacceptably unequal our societies have become.

For me, the most devastating aspect is the accompanying “immobility” that comes with the levels of inequality. From entrepreneurs to political office holders: how many “outsiders” have managed to break the cycle? Only a handful has made it. Since independence, especially in sub-Sahara Africa, apart from the “sons and daughters” of those whose parents laid the foundations for them, how many individuals outside such “clique” have risen to positions you would describe as “enviable”?. It has been (and will continue to be), the sons and daughters of these “same old people of the establishment”. How many African nationals can have the “Audacity of Hope” (without hesitation) to rise to any enviable position like Obama did in the United States of America? That is what I am talking about. Even education, that is hugely touted as a “leveler” is no longer a viable option. Take the example of a village school girl and her counterpart in a British curricula-run private school in the same country. Whose future is more promising? That is the “uncertainty of the poor” I am talking about.

I once listened to an American billionaire; Nick Hanauer argue that, not until governments start taxing the rich more, the process of income redistribution would somewhat continue to hit a cul de sac: by bringing us back to square one. He even went further to demonstrate how such measures “would not take anything away” from the rich since: people’s purchasing powers would create the requisite atmosphere and opportunity for further investment. What it does, according to him, is to make everybody happy; so that, the situation where some selected-few alone lived in absolute “wellness” while others live in absolute “squalor” is curtailed for the good of the world.

Advice to the managers of sub-Saharan economies

The thing is, the faith and confidence we had in the Structural Adjustment Programmes (SAP) have yet to produce the desired results. Even at the time when these economic re-engineering strategies were being adopted, some observers expressed their worry about how the entire exercise was used to “award” loyalty among political and their ruling elites. According these observers, some of the activities characterizing SAP were sometimes fraught with underhand dealings. Dubious channels were used to acquire industries and corporations at no cost, by politicians and their cronies. What I am saying is, let us be careful with the “wholesale” manner with which we adopt and implement socioeconomic policy prescriptions by the IMF and the World Bank.

I don’t really see the necessity and haste in adopting such policy prescriptions when they have yet to deliver us very tangible and desired development results. For nearly four decades, we have adopted and implemented these policies without scrutinizing them for “fit-for-purpose” test. We are consistently being told to privatize our industries and other economic sectors for efficiency purposes-at least so we are told. Have we thought of how we can make our economies become efficient without pandering to the whims of any “highest bidder” anywhere?

Some of these policy prescriptions may look good on paper, but do we have the “genuine-minded” experts to undress these policies in our national interests? I mean experts who would not play “sucker” for their personal parochial gains. If the IMF and the World Bank are admitting that some of their policy directives have been “fatally flawed”, what are we doing to reorder our socioeconomic and development priorities to wean ourselves of the antics of the Bretton Woods institutions? If the Asians can do it, then we too can.

By: Inusah Mohammed Awall
Twitter: @Wagoooni