When it comes to International Finance, If you snooze, you lose!!!
Who are mercantilists and what was their idea?
Not to bore you with the long details of the age-old economic theory, I'll summarize mercantilism as an idea that seeks to make a nation rich and powerful through a positive balance of trade (When exports are higher than imports). They believed that a country attains wealth and power by simultaneously encouraging production, increasing exports, and holding down imports via tariffs.¹
Imagine living in a Nigeria where our major concern isn’t the amount of debt in millions of dollars skyrocketing annually. Picture this: A Nigeria with enough money to run her affairs, without a high number of jobless “lazy Nigerian Youth” who sit at home for the lack of opportunity.
I know for a fact that I would love to see us finally earning the title: "THE GIANT OF AFRICA'' and we can only get there when we have a flourishing economy. It is not by shouting Nigerian Jollof vs Ghanian Jollof on Twitter.
Everyone deserves a decent lifestyle. However, with an increase in the middle-class population, there is a general surge in the craze for luxury: latest cars, designer clothing, imported furniture, kitchenware e.t.c. Thanks to the industriousness of our friends in China, Japan, the US, and so on, it is a lot easier to have access to products that can provide the lifestyle we crave. With the impressive technology we have today, everyone is only a few clicks away from impulsive, and sometimes, ridiculous purchases.
Remind me to tell you a story about a certain someone who would only eat food from Italian Kitchenware.
I think enjoying all of the above is completely fine. However, if we can produce them ourselves or at least produce stuff that would generate enough funds from exports to afford them, we would be doing something right. We would have good-paying jobs and economic growth as a result of high production levels, and adequate funds in reserves.
Back to mercantilists now. Even though their ideas were criticized for not considering comparative advantage (when one nation could be better off producing certain products due to conditions such as cheaper costs and favorable weather), we can agree that the end goal (wealth and power) is desirable by all nations.
I remember my excitement when I was learning about the Asian Tigers and how they transformed their economies like magic. I call it “the actual glow-up”. They managed to move from some of the poorest countries in Asia to some of the richest countries globally today. Their growth was fueled majorly through exports and rapid industrialization, and I’ve always wondered how difficult it must be to simply copy and paste.
To drive my point home, I’ll refer to the opening of the Chinese economy in the late 1970s. The country has remained the largest exporter of goods in the world since 2009 and has experienced so much growth that it threatens the United States as the world’s most powerful country.
Our beloved president made a somewhat mercantilist move by placing a ban on rice imports in 2015. Many will consider this action a win that led to a boost in national rice production with Nigeria producing 9million MT of rice in 2021. Yet, others would rather see a decline in prices with better-tailored incentives to promote increased rice production for internal consumption and export purposes.
Ondo state holds the world’s second-largest proven deposit of bitumen which is primarily used in the construction industry for roads, parking lots, and footpaths and can also be used for roofing materials and paint.
Mercantilists believed in the idea of accumulating precious metals like silver and gold from other countries as a show of their wealth and power. And the very instrument they used to make this happen? Exports!!!
If at the end of the day all our "silver and gold" has been spent acquiring things that make us appear rich, rather than being used to boost national productivity and exports, and actually being rich, then the idea of the Zero-sum game (One party wins and the other loses) becomes our reality.
The entire mercantilist idea might be an old theory, but it holds really valuable lessons (excluding their extreme ideas, of course) for us as individuals and a country. So if you find yourself in an elevator with the President by chance, or having a related conversation with your friends at lunch, kindly do the Lord's work by sharing your thoughts on how we can boost economic growth by employing some of the strategies explained above. Feel free to add your ideas as well.
¹Disclaimer: It must be noted that as a result of the mercantilist states viewing a positive balance of trade as a solely zero-sum game, they made use of violent colonialism, military force and state expansionism. These are actions that destroyed civilizations and as such, should not be desirable as tools for creating and maintaining growth