- Rationalisation of Enterprises
THE economist’s concept of perfect competition must be taken for what it really and truly is: a mere tool of economic analysis. No more, no less. For, his assumption of perfect market, in which (1) the commodity is homogeneous, (2) there is perfection in mobility of factors and commodities and in communication between sellers and buyers, (3) a large number of firms compete with one another so perfectly effectively that none of them, to the exclusion of the others, is in a position to influence the market decisively, and (4) there is a total absence of all kinds of friction, has been consistently falsified by the stark realities of economic life in all parts of the world. In the developed economies, where the conditions of perfect market, which we have just mentioned, exist to a large (but quite far from the full) extent, there is no perfect competition, not to talk of the benefits of it, on which economists have enlarged for upwards of one century.
In Nigeria, and in other underdeveloped countries for that matter, the theoretical conditions, for perfect competition are totally non-existent. Instead, we have, among the members of Nigeria’s business community, a thoroughly unwholesome and sometimes cut-throat and internecine competition.
The direct opposite of perfect competition is monopoly, duopoly, oligopoly. The advantages and disadvantages of this economic concept are well-known to us here in Nigeria, not only in theory but also in practice. They are well-known to us because we have a good numb of Government-owned monopolies as well as private oligopoli operating side by side in the country. Among the advantages monopoly or oligopoly are (1) efficiency of production, (2) economic of scale, (3) standardization, and (4) stability of output and price. The disadvantages include (a) the misuse of monopoly or oligopoly power by unconscionably exploiting the consumers and holding them to ransom, and (b) loss of freedom of choice of goods on the part of to consumers.
We have shown in Chapters 6 and 7 of The People’s Republic that the pursuit of the capitalist ideal of economic freedom or freedom of industry and enterprise, which is the fountain-head of perfect competition or perfect market and of unbridled monopoly an oligopoly, has led to enormous waste, misutilisation an underutilisation of resources, misdirected output, artificial scarcity incessant economic crises, and the paradox of starvation in the mid of plenty.
But all these evils can be prevented by means of central planning central control, and central coordination of economic activities.
From what we have said, however, and from practical experience it should be clear that it is easier-much easier-to plan, control and coordinate the affairs of a few monopolies, oligopolies, or large scale enterprises, producing or marketing a number of standardize and well-regulated goods, than those of a large and chaotic welter of enterprises-ranging from very small to very large, from to inefficient and sub-marginal to the very efficient and optimum catering to the infinite whims, caprices, and unregulated wants of vast number of consumers. It is for this reason that I am advocation the immediate rationalization of certain categories of industrial an commercial undertakings in order to eliminate wastes arising fro unnecessary duplication or multiplication of efforts, selfish and cut-throat competition, and lack of coordination on the part of productive agents in given industries and enterprises.
What this would mean in practice is that a careful review of the industries and business enterprises would be undertaken by a tea of experts. Their specific objects would be:
(i) To declare which industries or enterprises should be rationalized;
(ii) To identify the most efficient as well as the less efficient (inefficient, and submarginal firms in each of such industries or enterprises; and
(iii) To determine the higher optimum size requisite for a firm in each industry or enterprise to enable it to enjoy all the advantages of economies of scale.
Having done this exercise, the less efficient, the inefficient, and he sub-marginal firms will have to be shut down, and their interests transferred to and combined with those of the most efficient firm. It use be pointed out that the determination of higher optimum size may dictate the need for more than one large-scale firm, or a number of factories or branches under the direction of one large-scale firm, to handle all the activities in the industry or enterprise. After this determination, the surviving firm or firms would be empowered by the Government to produce or handle all the commodities in the industry or enterprise, in response to the demands of the consumers. From time to time, the surviving firms may be expanded or new ones may be established. It would all depend on the prevailing circumstances.
It should be made clear that only industries or enterprises which enjoy economies of scale would be rationalized in the manner already suggested. Firms, operating in industries and enterprises which do not, would be dealt with differently. The efficient ones among them would be allowed and encouraged to carryon; the inefficient ones would either be closed down or left to die out; and their total number would from time to time, be limited to that whose output is adequate meet the people’s demands for their respective products or services.
In the process of rationalization, some firms will be closed down, and a number of workers will be displaced. It will be the duty of the Government to pay fair compensation to firms which are compelled cease operations, and to see to it that displaced workers are absorbed in the newly reconstructed and reconstituted industries and enterprises, or in other productive activities.
To be continued
and then