How to achieve economic freedom in developing countries

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Full text of lecture delivered by Chief Obafemi Awolowo at the First Lecture in the UNIVERSITY OF LAGOS ANNUAL LECTURE SERIES on Friday, 15th March, 1968.

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Besides, the capitalist system, under the guidance of the ‘invisible hand’, is always either breaking down or threatening to break down. From the birth of the industrial revolution in Europe, Britain has witnessed more than twenty-five trade cycles, and innumerable strikes and labour disputes and strifes; which means that those countries, with which she has trading intercourse, have also been afflicted by the same maladies to a more or less extent.

Various causes, beginning with Jevon’s Sun-spot Theory, right down to Keynes’s Savings/Investment Theory, have been assigned to explain the phenomenon of trade cycle. A careful examination of all the theories of trade cycles however, will reveal that its basic cause is economic MALADJUSTM ENT: maladjustment of supply of goods to demand, of supply of money to available goods, and of savings to investment. This maladjustment is endemic because of the inescapable lack of coordination (1) among the producers inter se, (2) between the producers and consumers, (3) between the producers on the one hand and the Monetary Authorities and Banking Institutions which handle savings on the one hand and the investors, or buyers of savings, on the other.

Furthermore, the injustices which arise from the processes of production, exchange, and distribution, are too inherent and deep-seated in the capitalist system for such injustices to be eliminated or even satisfactorily minimised.

Land and labour are the primary agents of production. In the beginning, all capital flows from the union of labour with land.

This was done by the combined processes of deliberate and inevitable abstentions from consumption. As time goes on, however, more and more capital is produced by the union of labour with land, aided by the agency of pre-existing capital set aside for the dual purpose of assisting these two primary agents in producing more wealth and capital.

This being so, the total wealth produced by the union of labour with land should, after necessary deductions for input depreciation and new capital, go to labour. That is, labour of all kinds and gradations, including skilled and unskilled, and technical, managerial and administrative labour-power. But under the capitalist system, the lion’s share goes to the so-called landowner, owner of capital, and the absentee shareholder in the forms of rent, interest and profit.

The operations of supply and demand or of the marginal concept clothe practically all transactions relating to exchange of goods or services, with legality but with manifest social injustice and inequity. As we all know, exchange takes place between, shall we say, A and B, when either of them has preference for what the other is prepared to exchange. But the sole determinant of the quantity and value which the one is obliged to give to the other in exchange for that other’s goods, in order to make the exchange effective, is the forces of supply and demand and of the margin. If at any time A produces more or less than B requires, he will get less or more value, in the course of the exchange; and vice versa. If, for some reasons with which we are all quite familiar, the conditions of demand relative to supply favour A more than they favour B for a considerable length of time, A may become fabulously enriched at the expense of B, whilst the latter becomes miserably impoverished. This will be the case not because A works harder and more efficiently than B, but simply because the law of supply and demand and of the margin favours one more than the other.

It is a notorious fact that, under the capitalist system, abundance is punished, and scarcity is rewarded; so much so that an economic recession may occur simply because people have produced too much of the good things of this world. Indeed, the Great Depression of 1929-31 has been aptly described as the ‘Crisis of Plenty’.

Inherently, the capitalist system generates strikes, lockouts, and various forms of labour disputes which whilst they last are extremely wasteful to the economy. But the interesting phenomenon which we would like to emphasise here is that, in spite of the achievements of capitalism in improving the lot of workers, these industrial strifes continue to take place in an ever-rising crescendo. It is evident that the more the efforts put forward by capitalism to meet the particular and pressing demands of labour, the more acute, the more acrimonious, and the better organised is the next industrial dispute.

In its dealings with other countries, every capitalist nation in the world has followed very closely and vigorously in the footsteps of its indigenous capitalists who also invariably hold the reins of power. As a result, there is as much cut-throat competition in international trade as there ever has been in domestic trade. In the struggle for survival, each nation has had to resort to all manner and kind of malpractices. These inevitably have reduced international trading from the high ideal pedestal of mutual benefits and complementary advantages among all the nations of the world, to the low harrowing level of veritable nuisance and bane. Dumping, tariff protection, devaluation, begger-my-neighbour policy, are among the malpractices which have been introduced by all the nations of the world in the pursuit of the narrow national self-interest of each against the others.

In this fierce and savage struggle, the strong and rich nations continue to wax richer and more powerful, whilst relatively, the weaker and poorer ones continue to wane in their weakness and poverty. Consequently, the gap between the rich and the poor countries widens with the times.

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