As pointed out in the previous article, financial crisis and current recession have damaged The Washington Consensus, brand whose tenets will have to be re-written to suit the financial and economic panorama that emerges after the present global chaos is over.
Post financial crisis and current recession will see the emergence of another financial and economic players certainly differently from the pre-crisis period and these will shape the post-crisis global economic order.
However, this crisis has questioned the legitimacy/application of many theories/models (which is usually the case after such global economic chaos) that had been held dear by both economists and financial experts.
It has indeed questioned economics as a profession that has been relied up on to inform and form decisions of many policy makers for centuries now.
A number of respected economists and practitioners during this crisis, have not spared their own profession including Paul Krugman (The Nobel prize winner of economics in 2008), who observes that, macro economics (part of economics discipline that looks at economic issues from a global/collective decisions by individual households and producers alike) was “spectacularly useless at best, and positively harmful at worst”.
On his part Barry Eichengreen a respected American economic historian further argues that, “the crisis has cast into doubt much of what we thought we knew about economics”.
Contrast this with what The Economist’s article had to say with regard to economic profession… “And on the public stage, economists were seen as far more trustworthy than politicians.
John McCain joked that Alan Greenspan, the (previuos) chairman of Federal Reserve (USA’s Central Bank) was so indispensable that if he died, the president should prop him up and put a pair of dark glasses on him”.
During such a crisis, it is normal for public to question even the best brains in economics and finance as to why they could not blow the whistle to policy makers, nor provide clues to fix the same.
Nonetheless, there is no doubt that, the contributions of such famous economic thinkers as the Adam Smith (17th century) and his works on Wealth of Nations (how rational self-interest in a free market economy leads to economic well being) and John M Keynes ( 18th century, with his Keynesian economics which argued that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore advocated for policy responses by public sector through monetary and fiscal policy actions by the governments) have among other economic thinkers, shaped developed economies.
The financial crisis and current recession will as pointed out earlier, no doubt reshape the thinking of modern economics so as to deal with economic problems the world will have to deal with as a result of the crisis, and these are many, and highly uncertain.
On our part, despite having some of the best economists, trained by some of the respected western economists in some of the best western universities, our economic problems seems have been left to multinational institutions to solve or give solutions thereto. Such economists and financial experts have given all sorts of excuses/reasons for their inactions, most of which is self defeatism to say the least.
Their earlier assertions (especially in 1970s and 1980s) that, any argument/advice given to our political economy contrary to the Breton Wood institutions’ orthodox saw these professionals labeled with all sorts of demeaning terms ranging from Marxists/communists to anti-establishment. They also contended that, the interest of our political economy which was congruent to the post-colonial interests had no room for patriotic thoughts from independent thinkers among our own.
They further point out that, even the views of independent think tanks which are supposed to inform our policy makers is largely ignored to the extent that, it is used by western researchers as inputs for research into our failures as economies.
Whatever reasons/excuses advanced by our disillusioned professionals, the fact remains that, these very professionals largely in employment of multilateral financial institutions and international NGOs, do in fact influence our policy choices.
The only difference is that, such influence serves the interests of these institutions which may not, in all cases be in our own interests.
With regards to economic problems faced by Rwanda, which are unique given our unique environmental setting, which also has been shaped by our disastrous history, dictates that, our economists need to model these to come up with home grown solutions.
And although our country has come up with many successful innovations, that have been successful in getting solutions (eg gacaca, ubudehe, imihigo, umuganda; just to name a few) to our unique and seemingly un-modelable problems, the contribution of our economists to our economic model of development, is decimal to say the least.
The current financial crisis may even pass a harsher judgment on this dismal science (economics) by our local practitioners be they in academia or otherwise.
Development literature has always held the view that, given uniqueness of nations, most economic (add social and political) problems require unique solutions, that are home grown.
They can only originate from local practitioners who understand, and appreciate their environment better.