The political economy of government agencies

In case you have not read this post you probably should before you continue here.

To anyone who has tried to run a business in Nigeria the story probably sounds very familiar. At every corner there are a plethora of government agencies each with some legal mandate to do something which gives them the authority to extract payments from you.

We all know these agencies are really bad for the economy. A quick perusal of the previously linked post will show that the costs associated with these agencies is significant. Businesses that are trying to compete with imports cannot do so under this type of set up.

Again this is not news. We have known this for years. So why do we, as a country, keep adding even more agencies?

The answer is politics and political patronage. You see politicians come with innovative ways to distributes rents to their loyal “subjects”. One of the easier ways is to identify some phantom problem which needs government intervention, enact a law to regulate it, stack up the boards and management with your loyal subjects, fill up the agency with the lower cadre of your support base, and give them the power to extract rents from whoever the target is. In essence, the typical government agency is set up to as a reward to political stooges.

This is not to say that all agencies are of the sort. There are many agencies doing actual work that needs to be done. Although, I would wager that those are few and far between.

It is important to understand the political patronage system because trying to resolve the issue by creating streamlined processes and e-governance platforms and all that will have very limited impact.

So how do we deal with the problem? In my opinion the missing link is that we the people do not act to prevent politicians from restricting our economic freedoms. There are no consequences to either the federal or state governments or their legislators who perpetuate the creation of these agencies. And we do not act because we do not have a national philosophy about the rationale behind government intervention. We just go with the flow. We do not have an answer to the question: when is it OK to surrender our economic freedoms?

At every turn we have politicians working round the clock to restrict our economic freedoms, be it to trade freely, or to interact internationally, and so on. As a people we do not work hard enough to protect out basic freedoms or to expand it.

In the words of Martin Luther King Jr.: Freedom is never voluntarily given by the oppressor, it is must be demanded by the oppressed.

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