Occupy Nigeria – a reactionary occupy movement?

On January 1st, Nigerian President Goodluck Jonthan put into place a reform that he and key ministers have been discussing for years: he ended a 20-year old subsidy that kept Nigeria’s petrol prices the lowest on the continent. When Nigerians went back to work on Monday, the 2nd, they discovered that not only had petrol increased from $0.40 to $0.91 a litre, but the cost of private taxis, minibuses and other forms of transit had increased in price as well.

By Tuesday, the 3rd, protesters in Lagos were blocking access to petrol stations and shutting down stretches of motorways by building and burning barricades. On the 4th, protesters in Kano shut down petrol stations and threatened to burn down a newspaper they believed was supporting the removal of the subsidy. They occupied Silver Jubilee Square in the center of the city and attempted to maintain an encampment overnight, though police responded by firing tear gas and, allegedly, working with armed gangs to clear the square through violence and intimidation. The protests are led, in part, by two powerful trade unions, National Labour Congress and Trades Union Congress, who have promised to “occupy” Nigeria until the subsidies are restored. They plan a nationwide strike, beginning January 9th.

Michael Bociurkiw, writing in the Huffington Post, notes that it wasn’t obvious that petrol price increases would trigger such widespread protests. After all, there’s lots to protest in the country. Despite being sub-Saharan Africa’s largest producer of oil, most Nigerians are quite poor, the nation’s infrastructure is shambolic, and political corruption is widespread and well-documented. A rigged election in 2007 (and controversy over a mostly-clean election in 2011) led to some heated rhetoric, but little visible protest.

But petrol prices affect every aspect of life in Nigeria. The country has no (functioning) mass transit systems, which means urban dwellers are reliant on a complex system of minibuses, taxis and motorbikes, operated as private businesses. Those businesses will be sharply affected by the petrol price increase and pass the costs on to their customers. And because Nigeria’s electrical grid and power producing stations are notoriously unreliable, most businesses use generators to power their operations. Those generators have just become at least twice as expensive to operate, which is likely to increase prices at a wide variety of businesses. Complicating matters, Nigeria is least stable in the north, where tensions between Muslim and Christian groups have erupted into violence, and where the terrorist acts of Boko Haram, an extremist organization which wants all non-Islamic education and culture banned from Nigeria, have pushed President Goodluck Jonathan to declare a state of emergency in the North. Because the north is distant from the ports where Nigeria lands imports, goods are likely to increase sharply in price in the already troubled region.

Jonathan is not the first Nigerian leader to try to remove the fuel subsidy. Two of Nigeria’s military leaders – General Ibrahim Babangida and General Sani Abacha both tried to end the expensive program, and both were forced to back down due to popular opposition.

On the one hand, it’s exciting to see a Nigerian population that’s often overwhelmed into inaction taking to the streets. Stories about Muslim and Christian protesters finding agreement over shared prayer space – and images of Nigerian Christians encircling and protecting Muslim protesters at prayer in Kano – are genuinely encouraging. And there’s no doubt that making a living was a tough prospect for ordinary Nigerians with the subsidy in place and that a tough situation will get worse without it.

That said, ultimately, I think Nigeria needs to get rid of the subsidy. It’s incredibly expensive – depending on how you account for it, it cost between $8 billion and $16 billion in 2011. Nigeria’s tax authority collected just under $18 billion in 2010, and budgets for key sectors of the Nigerian economy are substantially smaller than the cost of the subsidy: defense spending is proposed at $6 billion, education at $2.5 billion, health at $1.8 billion. And while the subsidies make life easier for ordinary Nigerians, they’re a massive boon to the few companies the government allows to import refined petroleum… and contracts to import those petroleum products are a likely source of patronage revenues for corrupt government figures.

The IMF has pressured Nigeria to remove fuel subsidies for years, and Nigerian Finance Minister Ngozi Okonjo–Iweala, an internationally celebrated economist and anti-corruption reformer has been a powerful champion of reforms, offering long briefings to the President and other leaders on the importance of the reform effort. (Rumors have circulated that she threatened to resign if the subsidy wasn’t eliminated. She refuted those rumors in classic Nigerian fashion… on Twitter.)

Ideally, the Nigerian government would use the monies freed by eliminating the subsidy to address some of the country’s chronic problems: weak road and rail infrastructure, unreliable power, run-down refining facilities. It’s possible to imagine a Nigeria where imported petroleum products were less necessary, if the country had functioning rail systems, a reliable power grid minimizing the need for generators, and refineries that could produce diesel and gasoline locally. Given the history of corruption in the Nigerian government, it’s not hard to understand why many Nigerians are skeptical that the monies released from the subsidy will go anywhere other than in politicians’ pockets. As the BBC observes, many Nigerians feel like the fuel subsidy is the only government service they actually see.

If you want to understand opposition to removal of the subsidy, an oddly partisan view can be found on the Occupy Nigeria wikipedia page, which is quite far from NPOV, but a very interesting read nevertheless. Statements from Central Bank of Nigeria Governor Lamido Sanusi make the case for subsidy removal in a piece on Bloomberg News. His basic argument: Nigeria needs to borrow a lot of money to build infrastructure, and responsible lenders won’t give the country money as long as it keeps doing boneheaded stuff like subsidizing oil consumption instead of building infrastructure.

Even though I think Nigeria needs to end the subsidy, I would be surprised if Jonathan can sustain these changes in the face of a sustained strike. There’s tension already over the idea that this isn’t Jonathan’s “turn” at the presidency – there’s a popular notion that Nigeria’s presidency should rotate between northern Muslims and southern Christians. The previous president, the Muslim northerner Yar’Adua died in office, and Jonathan finished his term. Some believe that, by this rule of thumb, the 2011 president should have been a northerner… Some northern activists and some labor activists have made threats that they will make Nigeria “ungovernable” during a Jonathan administration. It’s not hard to see how protests over fuel could make Nigeria vastly harder to govern.

I’m interested to see Nigerian take on some of the rhetoric and tactics of the Occupy movement, including the occupation of a public square in Kano. I’ll be intrigued to see whether any of the global energy over Occupy goes to support the Nigerian protesters. The irony, I fear, is that while the global occupy movement seeks to equalize income disparities and fight government corruption, the Nigerian movement is currently pursuing radical and important reforms, and the Occupy Nigeria protesters are fighting against that change. Read one way, Occupy Nigeria is a conservative movement fighting to keep a dysfunctional status quo in place, which seems at odds with other branches of the movement.

An Alternative Explanation to the College Bubble

Direct and indirect federal subsidy is often offered as the primary reason for the occurrence of the current college bubble. Most effects of the college bubble are traced back to federal funding, in the forms of student grants and subsidized loans, not to mention research grants as well as general academic funding and diversity grants (wherein a college or university receives federal funding for certain campus offerings, mostly related to making women and minorities feel good about themselves). Basically, federal money is the cause of the college bubble.

This view is not altogether incorrect, but it seems to ignore the role of federal regulation and the role of shifting cultural/societal views regarding student self-esteem. The two generally go hand-in-hand and feed off each other, and so trying to delink the two is impossible. At any rate, what’s neglected in the discussion of the college bubble is the concept of grade inflation.

Grade inflation has occurred primarily for two reasons. First, as mentioned before, the relatively recent self-esteem movement has encouraged the dumbing down of the general curriculum in order to make subpar students feel good about themselves. The history of this movement is dodgy, relative to political intervention. There is no doubt that the government has latched on to the self-esteem movement, but it is not clear if the government was the first mover. Even if it weren’t, private desire and public policy has basically become a self-reinforcing feedback loop, so the point is basically moot. At any rate, the effects of the self-esteem movement are clear, in that students perform moderately well, relative to the world (see Steve Sailer’s take on PISA scores, eg.), while being told that they are highly intelligent. Fortunately, the self-esteem movement does not have as much momentum as it once did, at least from my perspective.

Second, the government has certainly played a role in grade inflation due to the increasing federalization of public schools. The federal government loves uniformity, particularly of outcome, and school outcomes are no exception. As my recent book review pointed out, in brief, the increased bureaucratization of public education has led to a situation where students perform better on an admittedly arbitrary class at the expense of learning things that aren’t on said test. NCLB, in particular, is responsible for this recent effect, and it is part of a larger trend. This trend has led to the inflation of grades in two ways. First, the decreased role of non-test subjects has led to less classroom time dedicated to them, which means that grades in these subjects are based on a smaller sample size of work, and teachers are likely to cut kids slack when grading (at least in my own experience). Second, teachers have cheated on the tests in order to make sure that the kids do well, which sometimes makes students seem smarter than they would otherwise.

Primary and secondary education simultaneously suffered from dumbed-down curriculum and grade inflation, shortchanging intelligent children. They needed some way to fight back and prove their higher intelligence and cognitive abilities, which is where college comes in. While direct federal subsidy of post-secondary education is blamed for the current college bubble—and rightfully so, I might add—this is not the whole picture. The dumbing down of public education has also contributed to the need for college because it now provides the surest means for intelligent students to finally get ahead.

If education is viewed as a way to signal work fitness, then a high school degree has become essentially meaningless. Graduating from high school is no longer a guarantee that one is proficient in math and can speak and write in plain, understandable English. Many colleges tacitly admit this fact with their offering of basic remedial courses. Thus, having a high school education no longer signals that one can be counted on to be a reliable employee.

Thus, intelligent students have two options: drop out of or avoid high school, or go to college. The former is not a good signal for future employment prospects, and thus should be avoided by all but the most entrepreneurial of intelligent students. The latter option—going to college—is the most viable option to demonstrate employment fitness. Thus, intelligent students can no longer simply graduate with good grades at the top of their high school class, they must also get a post-secondary education of some sort as well.

Therefore, while the current increases in college enrollment are undoubtedly the consequence of direct and indirect federal subsidy, it is both foolish and dangerous to ignore the effect of the self-esteem movement and federal regulation, and how both have distorted the signal of secondary education. As such, popping the college bubble won’t be as simple as ending federal regulation. Popping the bubble will also require federal deregulation, and a more appropriate view of the role of self-esteem in a child’s educational development.

Today's Inquiry into English Usage and Basic Mathematics ...

This one’s from the New York Times

And as the Pentagon confronts the prospect of cutting its budget by about 10 percent over the next decade …

… but you can probably find it in just about any newspaper article discussing the upcoming “budget cuts.”

So, just how deep are these horrendous, army-killing cuts?

Well, if “sequestration” goes as forecast, the federal government’s non-war military spending will only increase by 10% instead of by 18% between 2013 and 2021.

No, that is not a typo. The “cuts” are not cuts in actual spending, they’re cuts in the previously projected growth rate of that spending.

Most federal government spending proceeds on rails due to something called “baseline budgeting.” The “baseline” is the previous year’s spending. Under “baseline budgeting,” that previous year’s “baseline,” plus an increase based on a formula, happens automatically unless Congress decides to tinker with it.

This “sequestration” thing — triggered by Congress’s inability to agree on “deficit reduction” targets last year — imposes across-the-board reductions in that rate of automatic growth of spending, not in spending as such.

Neat trick, huh? Your congressman can brag to you that he’s cutting spending at this morning’s town hall, then — this afternoon, over cognac and cigars — brag to your local defense contractor or other corporate welfarist that he’s increasing that same spending.

Hint: He’s lying to one of you. And it’s not the guy pouring the cognac and lighting the cigars.

Economic Events on January 9, 2012

At 3:00 PM Eastern time, the Consumer Credit report for November will be released.  The consensus estimate is that there will be an increase of $7.6 billion in the consumer credit available in November, after an increase of $7.7 billion in the previous month.