My Ten Cents

Tuesday, December 30, 2014

Don't Fear Oil Prices and Deflation

Most Americans are happy that the price of oil has tumbled, helping consumers while hurting nasty regimes abroad. There are always worriers among us, though, and what has them alarmed today is that this decline will tip the U.S. into a damaging round of deflation. There's no need to join them in their gloom. Deflation isn't something we should fear.
What matters is what's causing prices to decline: an increase in productivity or a decline in economic activity. Only in the second case is there a serious danger that the Federal Reserve should try to respond to. Similarly, rising prices can be a sign that monetary policy is too loose, but can also reflect declines in productivity.
And so changes in the price level, or prospective changes in it, can easily lead central banks astray. A run-up in oil prices, much of it caused by supply disruptions, made the Fed excessively concernedabout inflation in 2008, which is one reason it was slow to react to the financial crisis. (When Lehman Brothers Holdings Inc. collapsed that year, the Fed was so concerned about inflation that it initially declined to cut interest rates.)
The current fall in the price of oil is creating a bias in the opposite direction. It's stirring up fears of deflation and leading to calls for looser monetary policy. This reaction is less likely to prove catastrophic than the error of 2008. But it is still an error. If inflation expectations are falling because markets expect the Fed to run an excessively tight policy over the next decade, or predict a long depression, it's a reason to loosen monetary policy. If they're falling because markets expect more abundant energy, on the other hand, it's just a reason to celebrate.
There are, however, two wrinkles worth noting. One is that although the fall in the price of oil doesn't appear to reflect any weakness in the U.S. economy, weakness abroad may be a factor. But that's a reason to loosen money elsewhere, not in the U.S. A second is that there is areasonable argument that monetary policy in the U.S. has been a little too tight even leaving aside this price decline. If that's correct, then some added pressure for loosening, even if that pressure is based on a mistaken worry, might not be such a bad thing.
If money has indeed been too tight, then it might not be a bad thing for fear of deflation to exercise a countervailing pressure on the central bank. That fear, however misguided, might make the Fed less likely to raise interest rates prematurely.
To contact the author on this story:
Ramesh Ponnuru at rponnuru@bloomberg.net
To contact the editor on this story:
Timothy Lavin at tlavin1@bloomberg.net

Friday, December 19, 2014

Dr. Alex Otti: Is He The Messiah Abians Await?


The last time I rooted for a candidate in a Nigerian political election, that candidate turned out to be a disappointment, after twelve years in the senate. That candidate was Senator Uche Chukwumerije. I had hoped that with his level of education, experience, and personal integrity that he would bring considerable political pork to Abia state, especially his senatorial zone; unfortunately, he did not. What has that to do with Dr. Alex Otti and his desire to be the next Abia state governor, you might rightly ask; a whole lot.
Time was, when I used to worry about the direction Nigeria is going; especially, given its huge potential (yes, that word again, in use for the past 54 years) to make its mark in both the regional and international economic, social and diplomatic community. Though some of that potential seems to be on the path of realization, though gradual, it has been largely in the wrong direction. However, when one recalls the universally approved/acceptable sequential order of progressive development – home>community>city>state>nation – one is forced to lower its expectations of a greater Nigeria and focus on the local governments and states. So, in this 2015 national election; in this another opportunity to make a choice, to take their destiny in their hands, to live out that oft-used adage that “change begins from you”, Nigerians have been presented with a choice at every electoral level to, again, take their destinies into their own hands. One state in Nigeria very desirous of change, given the stunted growth it has experienced due to its comatose state for 16 years, is Abia state.
One would wonder why the fuss about Abia state. Here is why: Abia state is an Igbo state; it is where the commercial capital of the Igbo nation –Aba- is located; Igbos were/are supposed to be a progressive people, an enterprising people, and a people on the path of recovery from a brutal civil war that left almost a third of its population dead. Therefore, it was – and still is – expected of the leadership to be in a hurry not only to recover from the devastation of the civil war but, also, to apply all the other attributes symbolic of the Igbo people to move the region beyond every other region in Nigeria – something like the nation of Israel after 1948. This has not happened, even though we have had leaders from across every age bracket, academic level, and of every sector.
Since its creation during the military regime, Abia state has not been blessed with a visionary leader leading up to the 1999 return to democracy. The excuse has always been that the military are not known for their infrastructural and economic development of states and nations, a claim I find spurious at best. Evidence abounds of military administrators in many states of the nation who had proven their mettle in the states they had opportunities to govern, and some of them are still alive today. The problem with Abia state, even when one or some of its own have been military administrators, is that the wrong person, always lacking in vision, desire and drive to succeed, seems to find a way to rise to the top. This flawed system of selecting inept and incompetent leaders has continued even into the democratic dispensation.
In 1999, the state’s political leaders under the PDP threw up Orji Uzor Kalu, a thirty-something charmer and sweet-talker with friends in high and curious places, a wad of cash, and the willingness to spend it. Working in his favor was a state and an electorate with little or no experience of civilian leadership in more than two decades (the aborted attempt under IBB that gave us Ogbonnaya Onu, and Shonekan contraption cannot qualify as civilian governance), and an expectation that this young, educated – still questionable – business mogul, will bring his wealth of experience to bear in Abia state and turn it into a paradise; very lofty expectations that quickly turned into a nightmare not just for the people but for the prospects of the state for eight years. What was unfortunate and mind-boggling to an outsider was that the same suffering Abians elected, or allowed to be selected, the same man who has not performed in his first four years. Whatever excuses that may be proffered by the electorate on how or why OUK – as he is popularly known – won a second term, the truth is that people rig or allow elections to be rigged (I was in Nigeria during the 2013 elections and did witness the resigned attitude of the voters as their brothers, cousins, and uncles snatched ballot boxes for stuffing in well-known locations under the watchful eyes of the police). So, in inadvertent complicity, voters of Abia brought upon themselves the institutionalization of corruption and mediocrity at Umuahia.
Fast-forward to 2007, Theo A. Oji, a former member of Orji Uzor Kalu’s inner cabinet and, by all intent and purpose, an insider to – and continuation of – the failed immediate administration, was foisted, or allowed to be foisted, on the people of Abia state; again, with unintended complicity by the electorate. For the past eight years, TAO or Ochendo – as he is popularly known - has been busy running around in circles, moving problems from one location to another, repainting patched-up houses, and construction gargantuan carbuncles dubbed Legacy Projects with little or no economic value, all over the capital city and virtually neglecting the local governments. One would have expected that having, as he claimed, been emasculated and shackled in his first term by his former boss that he, TAO, would have worked hard to convince the people of Abia that he has a different pedigree from OUK when it comes to governance. Sadly, the fruit had not fallen far from the tree these past eight years. For a career civil servant, a man who has been in the system and knows what the state needs, and how to meet that need, TAO is as equally disappointing as his predecessor; trying to prove otherwise will be a futile exercise to the many unemployed Abia graduates, the unpaid civil servants and pensioners, and the many women who suffered miscarriages plying the deathtraps called roads in the state.
So, what now? Why Alex Otti? Good questions! The “what now” is that the opportunity to effect a political change of leadership, which presents itself every four to eight years, is here again. Abians, again, have the opportunity of choosing between continuation of nepotism, mediocrity and the status-quo, or take a leap of optimistic fate and go for the unknown. After all, if you have taken the same medicine for 16 years without positive results why not try something else. The February 2015 elections presents an opportunity for Abians to convince the world that they are not, and can never be, comfortable in their present state of regressed development; an opportunity to exhibit some backbone, to show that they have a stake in the survival of the state, and that they would not stand by, or in ignorance, while a few visionless miscreants run roughshod over their state, or deny them of their rights to make their votes count.
As to why Alex Otti, I ask: Why not Alex Otti? Rephrasing; why Abaribe, Nwogu, Ikpeazu, Udensi, and a thousand others who have declared their intent through one party platform or another? Assuredly, most – if not all – of these people have some kind of leadership qualities which could be beneficial to the state in one form or another. Unfortunately, they are all long-term politicians, and we have had them for sixteen years with nothing to show for it. Change means a complete deviation/departure from the norm; a 360-turnaround; a move in the opposite direction, and a rejection of the usual humdrum. That is what Abia needs now; hence, the emergence of Alex Otti.
I do not believe in divine callings when it comes to Nigerian politics; but, when a man leaves a lucrative or plum job in the business community as a Managing Director of a bank in Nigeria (unlike in US and Europe where you are really nothing far removed from the counter teller), with all its attendant trappings - and there and many - and with an assured 3 years left on his contract, to come and run for governor of a state in Nigeria either there is something mentally wrong with that person or he really has a divine calling to answer to. I am convinced that there is nothing mentally wrong with Dr. Alex Otti, so this sudden and strange career change must truly be a divine calling; one not to be missed by the Abia electorate. Dr. Otti has attained the constitutional age to run for governor, has the academic qualification needed (if any), and the good health to carry out the daily duties of the office. What he does not have is the political and administrative experience to run a government, and that is both an asset and a liability It would be a liability in a developed democracy like the US and UK, but not in Nigeria.  When it comes to running a state in Nigeria – especially one in need of a life-saving transfusion like Abia – the less political and administrative experience you have, the less encumbrances.
 Abia state needs economic development, not career civil servants with a penchant for nicknames. It needs infusion of investment capital, job-creating manufacturing projects, solid rural roads for transportation of agricultural goods; it needs to develop its share of solid minerals, to make it less dependent on monthly federal allocations; it needs a leadership not afraid to take risks, who is willing to reach out to Abians outside his political party to recruit progressive minds into his government, someone not tied at the waist with so-called political godfathers, a leadership not afraid to make bold decisions and step on big toes; one devoid of the stomach infrastructure mentality and unburdened by demands for political “settlement” from sponsors. Abia state does need a miracle, and it takes a miracle worker to perform miracles.  It is my strong belief that Abians will find all of these qualities in Dr. Alex Otti.
Those who have reservations about the candidacy of Dr. Otti point to his political and administrative inexperience as a handicap. While they may be right, one also needs to not only refer to his success at Diamond Bank, but factor in his experience as an observer of the goings-on in the nation and Abia state these past 16 years. So, it is not like he just dropped in from a galaxy somewhere, or one of the so-called “Ndi Abroad” from some foreign self-exile. He has been around and, obviously, at some point got fed up with the waste of opportunities by the previous leadership. A look at the alternatives provides the state with the same group of political octopuses ready to dip their tentacles into every pot of the treasury available; a continuation of the same scratch-my-back-I –scratch-yours, or cover-my-ass five fingers of a leprous hand that have laid the state comatose in 16 years. To continue with that lot in any way is, without doubt, a death sentence for Abians and the state.
Of course, the mere fact that Dr. Otti has offered himself for service to the state does not mean he will win. People get to a point where they are comfortable in their situation; they become afraid of change, because they are well-adjusted to a certain mental or physical state and this forces them to redefine the meaning of progress and development; that is the situation with Nigerians today, as I noticed from the conversation among passengers on a bus from Arochukwu to Port Harcourt in November. The main task ahead for Dr. Otti is to convince the people that they can do better, they deserve better, and that they can be better. Convince them that there is light outside their various hermitical abodes; that water and light can be on 24/7, that roads can be devoid of potholes, and that healthcare can be both accessible and affordable by all. Convince them that the angel they cannot rely one can be better than the devil they know. Engage the youths and the university students to get involved in who becomes the governor in their state, because they are the direct beneficiaries of a functional successful state government. It is a huge task for him, but with the assistance of progressive minds, it can be achieved.
Dr. Alex Otti may not be the best candidate in the field, but there is none close enough to being as good as him; he may not be the messiah that Abians are looking for, but he may just be the one sent to make way for the messiah. He may not have a magic wand to wave and, with fiat, fix all of Abia’s problems, but he may very well be the one who lays the foundation for a continuous progressive leadership in Abia state. He may not have political godfathers the likes of Chris Uba and Emeka Offor – because they come with hooks and strings, or the political experience of the Arthur Nzeribes and Ogbonnaya Onus; thankfully, he does not need them to run Abia state. For anyone to succeed in Abia, he/she needs to run the state as a business, and this is why Dr. Otti is the right candidate for the job.
I am joining the many Abians both in Nigeria and Diaspora who endorse the candidacy of Dr. Alex Otti. Though I may not be one of those privileged enough to cast votes in February 2015, the success of the state is equally important to me as it is to those in Nigeria.  The interaction of Abians in the social media convinces me that the people of the state are yearning for change, and not just at the adult level; the youth have finally realized that their progress into adulthood is shunted by inept and incompetent government, and a change for better is needed. I hope that, in the world of the late K.O Mbadiwe; “when the come comes to become, the happen will happen”. When it is time to vote, the citizens of Abia state will do the right thing and change their future, and that of the state, for the better.
I hope, this time around, I will not be disappointed.