Post-Communism and Developing Countries - Literature review Example

Post-Communism and Developing Countries: Future of Liberal Markets in Developing/Transition Countries (Nigeria) Leaders across Europe are struggling to restore confidence in a single currency while the economy in the United States is still limping forward at quite a slow rate. Consequently, the economy of North Korea continues to enjoy alarming growth and developments. Cuba and North Korea are among the few countries around the globe still under the authoritative umbrella of governance as most are living past the Great Communist experiment. Nigeria, on the other hand, is a country full of natural resources, mainly oil, but in transition at the moment. Despite the rich oil mines in parts of Nigeria, Dimgba (2004b) argues that internal wars and political instability have negated the growth and development process in the country. This paper explores the state of the economic market in a developing nation recovering from wars and clashes that have destabilized the economic growth and development process of the country. Free and liberal markets are characterized with stiff competition in the market system, a characteristic which results in development of new ideas (innovation) in order to cope with the prevailing market situation. In a state-controlled market, there is no room for competition as there is a monopolistic control of the resources and the general market. It is in this perspective that this paper is based i.e. there is a need to establish a competition law in Nigeria. By so doing, it will mean there is the opening of doors to liberal markets, since it is only a liberal market that a competition law can flourish. The major concern in Nigeria is the politically influenced state control of the major resources and sources of revenue. This makes it clear that the establishment of competition laws in Nigeria would be acceptable politically only if they address the concerns of the public interests via creative destruction. Analysts have argued that authoritative states have developed a form of destruction that is rather creative (Dimgba, 2004a). This process invests liberal markets with a vital momentum that regenerates itself by enabling workers, ideas and resources previously invested in an industry that is dying to recombine artlessly and produce products to satisfy the demands coming forward. Dimgba (2004a) goes further and argues that the greatest weakness of an authoritative state is the inability to sustain creative destruction. Those behind the idea of creative destruction have the fear of creating a program that is beyond the state’s control for if this happens; the state will be in turmoil. The implementation of competition law in the liberalization of developing economies like Nigeria’s is a key instrument of market liberalization. In the wake of the Maoism collapse, many liberal democracies began adopting market-oriented economies and this became a dominant ideological model forming part of the reasons for establishment of competition law (Pijan & Thomas, 638). In addition, other factors like increased need for anti-competitive practices across borders, and increasing rates of economies integrating with the World Trade Organization (WTO), and a requirement by the International Lending Institutions that each country in need of a loan must adopt a competition law, and appreciate and support the immense role it plays in the development process of the country. What is a Competition Law? Up to now many might be asking themselves what a competition law really is. Well, here is a brief explanation of what a competition law is: it represents a set of disciplines; rules and judicial decisions that are state-maintained related either to agreements between concentration of, and power abuse by private firms, or agreements that restrict competition between firms. Provision of this competitive framework is aimed at creation of a more effective market in Nigeria. Vigorously competitive markets are believed to be the mother to rigorous development. Competition avails the best deal to the consumer. Furthermore, it brings about innovation in respective competing firms by reducing relaxes, petting pressure on reduction of costs and via provision of incentives for the efficiently producing organizations. Pham (2006) remarks that: “Whereas richer countries can rely on functioning competition law systems in order to protect their own markets, developing countries are for the most part newcomers to the market economy. With their national economies still in transition, they do not just have to draft laws; they also face problems like a lack of acceptance of the competition idea among local firms, authorities and the general public (548). The problems began when the competition bill was received with hostility in the Senate when introduced back in September 2006 (Dimgba, 2004b). This left the then government no choice but to withdraw the bill. This reveals the fact that no matter the better side we see competition to lead the country to economically, not all is happy about its introduction. If properly maintained and balanced, this law can be beneficial for Nigeria for a number of reasons: i. Competition has become a basic requirement for market-based reforms as it limits the unwanted power interventions in the market place experienced in authoritative governments with control over majority of the economy. For decades, Nigeria has been undergoing the liberalization process with no success, and thus, the implementation of this law will ensure new dangers are not created unawares (Dimgba, 2004b). Liberalization would mean government monopolies are replaced by private sectors with no social constraints and driven by profit. When they grow, nothing can come in their way to stop them from taking part in obnoxious behaviors fixing prices, division of the market, excessive pricing etc. In addition, absence of suitable policies and guidelines will mean such practices are legal regardless of their severity to the society and the economy. ii. Nigeria has a huge wealth gap and it is only freeing the markets or competition that will help shape this gap. This will help distribute the rent held by the fortunate few in the country and reduce the widening inequality in wealth. iii. The pride of the country. Nigeria is a country well recognized in Africa and the world in general and has a bigger economy than many countries in Africa yet it lacks the competition rule. Other countries like South Africa, Zambia, Kenya and Namibia have lesser economies yet they have been enjoying the benefits of the law for years (Dimgba, 2004a). It is for the above reasons that Nigeria’s economy is capable of flourishing under liberal markets and ensures continued development in the transition government. Challenges Nigeria is a developing country in transition and obviously any introduction of any law will not be an easy task. Below are a few challenges to be faced while liberalizing the economic markets of Nigeria: i. Introducing the law for the first time in it is a challenge and should not be underestimated. As earlier noted, the idea was received with hostility in the Senate, showing the political stand of the competition law. In addition, some firms, the public in general and authorities in most developing countries do not appreciate local competition, sometimes due to ignorance. To overcome this, suitable advocating for policy should be conducted to highlight the importance of the law. ii. Corruption and Political Interference. Nigeria is a government in transition and very unstable politically. In addition, corruption in the country is living issue and thus, implementing a new law in the country is no easy task. An example is Egypt, where Dimgba (2004b) reports that various key figures had their interests deep-rooted in preservation of monopolies even after privatization was taking over. Due to lack of awareness by the general public, absence of consumer shifts resulted in failure of competition laws in the country. To ensure this does not happen in Nigeria, people resistant of corruption with independent stands should be appointed to monitor the program. iii. Large informal sector. According to a report by the World Bank, Nigeria’s ratio of informal sector to formal sector is 57.9% to 42.1% (Dimgba, 2004b). This limitation makes it hard for the implementation of the law and in other cases; the power of the market dominated by formal firms may be over-estimated as a result of an underestimate of the elasticity of demand. For this case, one has to be aware of this situation while making analyses of the economic situation in the country. The Future of Liberal Market With respect to the above arguments based on a culturism point of view, it is quite difficult to fit liberal markets entirely in a developing state in transition like Nigeria since it has become a culture for a leader to handle activities with authority and non-democratically i.e. the activities in this country are heavily defended by the state up to a point that they have become a norm, or rather a culture in the country. The Nigerian government should approach this issue from a structuralism perspective by placing emphasis on understanding all elements of culture in relation to larger structure or system so as to create a much meaningful market system that is free to everyone, including the public (Stiglitz, 2012). Liberal markets can work with no authoritative rule in the air, but suitable implementation of laws like the competition law will ensure the economy of the country is stable. In developing nations in transition, managed capitalism can be employed but it usually falls short with respect to innovations despite the fact that investments by the government can contribute largely in developing of new technologies (Pijan & Thomas, 640). History has it that state officials, over time, have no value in assets and cannot allocate resources in a more efficient way than forces of the market can do. This can be seen where the U.S government subsidized a project with the defense department that led to the innovation of the Internet. If not for the profit-oriented companies who came in, re-imagined, developed and improved the internet thus transforming the world (Pijan & Thomas, 643). On the other hand, managed capitalism does not usually work in the long run (Hartzenberg, 667). A good example is Brazil, another developing country where creation of jobs by the government is highly dependent on a government-owned oil company, Petrobas, as well as the private-owned mining champion Vale. In essence, the state leader of Brazil, President Dima Rousseff will not be able to make large sums of money from these two firms in the same way Venezuela’s President Hugo Chavez did with the government-owned PDVSA oil company. As Hartzenberg (668) reports, Brazil’s Petrobas is at great risk since it might become even much larger, accounting for a large number of employees in the country, but less efficient hence less profitable. As a result, employees will lose their jobs and go back to the same old situation of unemployment. This is what happens with authoritative rule in the long run and it for this reason that I strongly oppose the idea of incorporating authoritative rule in implementing liberal markets in Nigeria and other developing nations. Works Cited Dimgba, N. Nigeria’s competition Law: the egg that never hatches, The Guardian, 2004a. Print. Dimgba, N. The Urgent Need For Antitrust Law, This Day newspaper, 2004b. Print. Hartzenberg, T. Competition Policy and Practice in South Africa: Promoting Competition For Development. Northwestern Journal of International Law and Business, 2006. Print. Pham, A. The Development of Competition Law in Vietnam in the Face of Economic Reforms and Global Integration, Northwestern Journal of International Law and Business, 2006. Print. Pijan, W. & Thomas, C. Taiwan’s Fair Trade Act: Achieving the “Right” Balance?, Northwestern Journal of International Law and Business, 2006. Print. Stiglitz, J. E. To a third way consensus. Web. Nov. 14, 2012. Read More