There is no alternative to broad based economic growth ,stages of growth and Velocity of growth including times forecast.Here the blogger Ibikunle Laniyan in the treatise below examines the causal link between public expenditure and economic growth on one hand and on the other hand unveils reason behind the causal break between the two leading development indicators and proffer solution.First,it critically examines growth models as substructure sometimes institutional disincentives and critique them.Enjoy the reading.
The intricacies of art and development,go beyond the territorial limit of intellectual,practical and theoretical orthodoxies in a fast changing mordern turbulent market environment and keep evolving its anatomy of theoretical forays till a tested formula is procured.Nevertheless,we barely have the aptititudinous capacity to thoroughly examine the strategic impact of public expenditure on output growth in Nigeria either maximally or minimalist in a strangulated horizon where there is fractious break between the Public expenditure and economic growth.Distortionary taxation and destructive expenditure significantly distorts and structurally impairs both the short aqnd the long run impact on growth and development to make productive spending an aberration in Nigeria.
We shall have to understand the strategic imperatives of growth modeling,method,growth management and development market to create a sustainable leverage for productive spending,in the right proportion to generate sustainable development and capital development respectively.
In the classical growth theory a nation's economic growth tends to decrease with limited resources especially when it is faced with exponential population growth .That a temporary increase in real GDP per capital often leads to population explosion ,that would limit a nation's resource and consequently decline GDP growth.The Ricardian growth model was dominant in classical economics especially domineering in the chart explanatory structural model movement between y-axis of total production and x-axis point of It predict a limit to economic growth though economic stagnation can be post poned and not finally avoided.Causal movement between OW,ON,OP,NR and RG.
Moreover,the classical models of economic development comprises of four schools of thoughts.first the linear stages of growth model dominated by theorists of the fifties and sixties and viewed development process as stages of economic growth which countries must pass in successive series and growth cycles .It entails right mass of savings , Investment and external aid to enable developing nations experience growth like advanced climes.Therefore they equate development as rapid aggregate economic growth.The linear stages was replaced in 1970 when two fierce competitive theories mainly theories of structural change and International dependence theories emerged.As the saying goes on African soil ,we barely subscribe to structural change models given much more to serfdom of the latter.The latter tends to emphasize the dependence syndrome including external and internal institutional, political and economic restraints on Development .One finds it hard to believe what emphasis can we place on new Poverty eradication policies for massive employment opportunities and reduce income inequality that is driven by such dependency syndrome?A sole reason behind the operational futilities of structural change engineering factors that guarantee monumental economic growth.Such mechanistic transformational impulse to transit developing countries from subsistence economies into industrialised climes witness perpetual setback and posit the policy makers to obtain vital reflection for national transformation and social change.Two well known samples Include the two sector surplus labour theory of Sir Arthur Lewis first black Nobel laureate on economics and development patterns'empirical analysis of Hollis B.Chenery and his cohorts.The growth model by neoliberals or neoclassicals or free market counter revolution prevailed till in 1980s and 1990s although neoclassical wage theory ceased to be relevant in the great depression,when it was outwitted by keynesians.They dominated Breton woods till date
Contrary to neoclassical growth model that conclude aptly that government spending only affects economic growth in the short run;this assumption marsolist classical growth model disgrees and enthuse differently that it affects the bottom line both in the short and long run.
Sequel to the soft landing of this treatise,we re bound to cursorily reflect on this review to some extent including the fundamental economic growth models to which the author love to cavil.In this context, much references to neoclassicals is required as we explore the strategic,technological viability of these models to the nigerian environment and unveil why the causal link had persisted beyond the hardship of moral decadence like corruption and tribalism in our soil.
However ,In the Neoclassical growth theory ,growth is based on several indicators to manipulate economic forces .It is an economic growth model that depicts a steady economic growth rate outcome using three economic forces mainly labour , technology and capital to achieve output growth.The most popular version is the Solow and Swan growth model.It postulates the varying amount of labour and capital produces short term economic equilibrium to play significant role in the production process.It not only argues technological change influences total economic growth but also outlines vital factors to achieve the change.It differentiates however short term equilibrium from long term equilibrium and that it barely requires any of these factors to accomplish economic goal.Whereas in the endogenous growth theory which states that economic growth is internally generated factor and not externally generated item or by exogenous forces and contrast neoclassicals ' use of exogenous forces like technological progress as sources of economic growth.The deception by this school to reduce government size belong to classical and neoclassicals.
It is absurd to adopt Adams Smith's concept of minimalist government intervention in the provision of public goods in the developing countries comprised with non-existent, malstructured and poorly performing private sector.Infact neoliberals may not like it abit,it is anathema to adopt such framework in advanced countries in the absence of ideal equalitarian macroeconomic architecture.And provided massive taxation Investment brazenly ignored,it could lead to egregious and alarming rate of high inequality of wealth .The despondent episode of the great depression of 1930s,in which the keynesians saved the day disputed the reverential logics of classical thoughts.While the keynesians supported the intensive use of public expenditure to stimulate agregate demand,the neoliberal school differs extremely to implies that underdevelopment arises from poor resource allocation based on incorrect price policies and government intervention in economic activities.They advocate free market services,free trade promotion and export growth.
In the linear stages of growth model, Rostow's stages of growth incorporate development growth model into five stages from the traditional society,the preconditions to shoot into self sustaning growth , the take off,the maturity drive , down to the age of high mass consumption.Rowstow's lack clarity though he himself clarified the stages do not generalise factual observation of the sequence of growth into mordern society.You barely needed to understand unclarified stages that might change too quickly but rather the stages as well as the process as embodied in the development cycle transition.
In the 1930s RF Harrod and ED Domar formulated Harrod Domar model that suggest savings provide funds borrowed for investment purposes.It states the rate of economic growth is determine by savings rates, Investment productivity.The model was proposed for business cycle analysis and later adapted to examine economic growth.
Nevertheless,it is ideal to rationalize that every nation devise most ideal method that perfectly fits its environment and such model must be homegrown devised by local researchers.Take Russia for instance, Marxism was the flagship of growth ideology.Between 1880 to 1914 Czarist Russia grew rapidly than the rest of Between 1917 to 1933,old Soviet Union experimented different socialist models , before settling on Marxism and Central planning.Between 1960s and 1990s old Soviet experienced stagnant growth,chronic shortages and inflation erupted.Marx had argued the only power that gives value to a commodity is labour power.That labour is the producer of surplus value appropriated by capitalists.An Injustice of stolen and unearned income that can be corrected by transferring this surplus value back to the workers through the ownership of factories.He saw capitalism as unavoidably proceeded into communism.Capitalism according to him could not continue unabated with Imbalanced growth leading to high inequality of wealth.
Main features of Marxism Include government ownership of production; Central planning;equal distribution of income;theory of surplus value etc.Let me repeat according to the shaping of Western Civilization my foremost book,what the rest of Europe did for almost hundred years ,old Soviet did in a decade.Most western theories hardly work for nigeria.Wagner's law for instance ,in the theory of government expenditure, proposed by Wagner in 1883 ,it states that as per capital income rises the sum total of government expenditure or public spending on GDP also increases.This kind of growth also have direct impact in public good provision and social welfare and in turn improves industrialisation as well as boost agregate demand.
Every nation has monumental challenge of development hurls on her neck in the tedious and intensive practice of national building and capital development.Ever since Wagner's law ,there has been more debate on this gigantic responsibility of public spending.Infact with the advent of Simon Kuznets'theory of economic measure that later metamorphosed into Gross national product and the solid platform it provides it grew in significance .This indicate the methodologies behind public expenditure must be self critical and open to innovation at least every decade perpetually evolving too as the economic and political system evolves.This is necessitated by two factors mainly growth in theoretical innovation and the main challenge in terms of exponential growth in population time bomb,the final adversary of mankind.To abhor this fact,is to risk growth perdition and balloon monumental growth of social underdevelopment common in African countries like Nigeria today.Otherwise the strategic impact of public spending over output growth could be demoralising , demeaning and heavily stunted.This brutish nightmare leads to the breakdown of causal link between public expenditure and economic growth.Such spectre of public expenditure is a mirage before which simply abhor the knowledge of this assumption.The breakdown in the link between public expenditure and sustainable economic growth and development is quite unaffordable and a major abettor of checkered antecedence of massive underdevelopment in the land.
The assumption of fundamental classical marsolist economics disagreed with scions of Adam Smith's school.Churchill,Ugur and Yew(2016) posits that large size of government is detrimental to growth and development, lampooning classical and neoclassical growth models.The study states public expenditure is anathema to growth and cannot increase growth when economic reaches maximum capacity.Obviously ,depending on the nature of macroeconomic model at hand,when nations apply Wagner law and Kutztnets'formula for economic progress as bespke resources of ideal growth cycles, exploring resonance nothing is impossible and not much institutional and ideological cluelessness can be found in the region that no longer parade weak and heavily disorganized private sector.The political corporate system model that underpins public sector governance should be so designed to incorporate most ideal type of macrostructural and bespoke macroeconomic architecture to make it work.Otherwise cumulative backward regression returns deeply turnovers chronic underdevelopment as was the case with Nigeria.
A Nigerian study by Ebong et al (2016) that examined the impact of capital and recurrent expenditure back up with empirical evidence over the period 1970-2012 reveals positive growth in infrastructural development in favour of capital expenditure in both the short term and long term.Whereas Onifade et al(2020) using ARDL model as well as 1981-2017 shows recurrent expenditure affects national our put negatively in sharp contrast to capital expenditure.Taking a cursory look at the budgets of 4.9tr.and 4.6tr.over the period 2011-2012 with 69%and 71% in favour of recurrent expenditure and close to 3trillion naira gulped subsidy per annum,attest to Onifade's as foolproof evidence. In the breakdown of 2020 budget signed into law in December 31st have the capital expenditure of 5.4 trillions as oppose to recurrent of 6.9tr.What is the keynesian multiplier effect of such spending?Does it make sense to build airport in jigawa compared to Lagos which has comparative advantage over air travel and where international air travel consumed 70percent of air traffic? The funds invested in the commercial capital will have better multiplier effect than in jigawa.Infact capital expenditure must be tied to competitive advantage and positive multiplier and anything less is financial waste.Government expenditure should create proportional growth in overall income for population. The most ideal place to cite yam processing machine is Zaki biam market in benue and to the oil and gas Investment niger Delta is best place to invest.Anything to the contrary is a waste like recurrent expenditure.
Devarajan996) riding on a survey of 43 developing countries over two decades refuted the notion productive expenditure contribute meaningfully to economic growth.Contrary to the above ,Kneller Bleaney and Gemmel(1999) supporting Gremmer(2014) in a survey of 22OECD countries.In terms of functional classification Lin,Ali and Lu(2015) in a survey of 29 OECD countries found positive correlation between military spending education and health care expenditure.Atilgan,Kalic and Ertugrul(2017) unveils the link between social expenditure in health and economic growth.Frankly speaking ,going by the survey empirical evidence abounds to prove the causal break down with stylised prudent facts in the structural link over the years and in most cases a common ailment in the developing countries.A huge amount of public spending squandered on public expenses,overheads,debt servicing and prove a mirage of public expenditure in developing countries defeating public optimism that such spending boost economic growth.
However , the extant realities seem to suggest that Nigerian economy is not experiencing commensurate output growth from the avalanche of convertible capital This proportion of GDP between 1970-2019 had drastically declined.Average public expenditure 1970-79 stood at about 21% rose slightly to 21.57% in 1980-89 , down to 14.07% and 7.67% in the period 1990-99,2000-09 respectively.Like the case in Nigeria ,owing to World Bank deception most developing countries reduced the size of government and participation in economic activities.This was linked to the deregulation of the 80s a sequel to Structural adjustment program that came in July 1986 .Whereas the system of government bequethed to the region that enables moral decadence Including the macroeconomic framework and growth model was conterproductive.Total government expenditure ballooned in the period 1970-2019.In a breakdown of 31.70% ,23.20% ,41.24% ,15.82 and 11.82 % during the period of 1970-79;1980-89;1990-99 ,2000-99 and 2010-19 respectively.(CBN2020). Conversely ,the Nigerian GDP grew at a tardier rate in contrast to the staggering growth of public expenditure.It grew by about 7percent for the period 1970-79 dropped to 0.74% in 1980-89 ,contracted due to recession of the period.It recorded moderate growth of 2.31% , 7.68 % and 4.05 % in the decades 1990-99 , 2000-09 ,2010-19 respectively.(World Bank 2020).(CBN Journal of Applied Statistics (Vol.12 ,No.1(June 2021),139-174).
In the data methodology study using time series and secondary data for impact analysis from CBN statistics bulletin and other allied sources were situated within the model specification and neoclassical context to assume
Be that as it may what kind of economic precedence we place on the quality and quantity of the growth we desire?
I do not submit to the specific consensus of Cobb-Douglas production function as the agregate production of the Economy as specified within the endogenous model framework in the below equation:
Yt=F(kt,glt,g2t)
Where Y is output level,k is available private capital ,g1 and g2 as government components and T is time , but could be made more efficient rather as the Abraham's production function in the below equation instead:
Yt= Pct , g1t , g2t ,ti
Where Y is yield and t for time
And pc for public capital
And Ti indicate taxation Investment.
The truth is to understand growth and development in synopsis and agregation we should first and foremost examine or peruse the use of money.Getting rid of Western models on money and with monetary cycle we have a soft landing and resolve once for all the mirage of public spending in the country.It take care of the challenge of moral decadence.
Monetary cycle in the quantity theory of equalitarian money is the main resource for growth and development work alongside development cycle to abide by the growth process.Take a look at the golden growth cycle of the Abraham's equation or Abraham's golden growth cycle(AGGC).AGGC model comprises of three independent equations :
Gt=g(mc,cc,dc)mc+be
Where gt is growth +time,mc is monetary cycle,dc is development cycle + mc is macroeconomic cycle .
Mc = Mt(mp,c,ex,Ms,vm,vt,r)
Where Mt is money +time,mp is minting and production,c is circulation,ex is exchange,ms is money supply,vt is volume of transaction,r is redistribution.
Cc=cm+ti(cm1,cm2,cm3,cm4 ,cm 5,cm6,cm7)
where cc is credit cycle
Dc=ggc(c,sc,g,sg,d,sd,me)cp.
Where dc is Development cycle.
In the author's book The Quantity theory of equalitarian money and Development cycle,we explain the equation in full clarification.
With the adoption of Abraham's production function the mirage of Public spending and the causal break down between public expenditure and economic growth may finally be resolved.
In the wasaap text messages shared with prominent Nigerians,we chatted on the hope of new nigeria under the president elect.I said Nigerian GDP should grow by 2,000percent per annum skyrockets to $90tr.in five years unprecedented in world history creating three hundred million jobs in three years.I made bold to conclude that that phenomenon is possible only if the new government adopt Abraham growth model.
