Global Economic Meltdown

Abstract.1

The global economic meltdown is already causing a considerable slowdown in most countries of the world. Governments around the world are trying to contain the crisis in their own different ways. The reason for this crisis are varied and complex; largely, it can be attributed to a number of factors. In this speech, Professor Ikenna Onyido traced the origin of the crisis, its impact globally, its effects on the Nigerian economy generally and on the Public Service, specifically. He reiterated the challenges and opportunities inherent in the crisis, and proffered what he termed "survival strategies" for mitigating its devastating effects.

Introduction.

The term economic meltdown refers to the severe economic recession that is used to characterise the current global economic crisis. The concept epitomises the current economic scenario where virtually all countries of the world have been severely affected. Consequently, the gross domestic product (GDP) of countries has gone into the negative zone, generally characterised by severe liquidity crunch, giving rise to diverse economic intervention programmes. However, in Africa most of the steps being taken are lopsided when one considers the Chinese meaning of crisis, which aptly describes the current meltdown. The word crisis in Chinese is made up of two components "wei" which means danger and "ji" which means opportunity. Kassé (2009), reacting to the current global economic crisis, had argued that African governments have too often seen the economic crises only in the light of the first meaning whereas it is the second that is more crucial because every crisis has an inbuilt opportunity, a chance for change and adaptation. This year's public lecture by the Association of the Federal Establishments, Abia state chapter was informed by the desire to fulfill the association's advisory and enlightenment functions to the nation, based on a thorough understanding of the genesis of the global economic meltdown, its nature and how to mitigate its residual effects on the public services.

Global Economic Meltdown.

Global economic meltdown is a topical issue because of its universal effect. It connotes near catastrophic circumstances necessitating scarcity or unavailability of otherwise available exploitable resources, thereby incapacitating political leaders from meeting their campaign promises, targets, plans and programmes. It has many implications for both developed and developing economies. It is characterised by severe closures of companies, loss of jobs, the crash of share prices, and squeeze in consumer credit facilities, crumbling mortgage facilities among others. In the case of the developing countries, Nigeria inclusive, the implications are manifest in the area of crash in share prices, dwindling revenues, and declining dividends from limited direct investments by developed countries. The universality of the impact of the crisis is a direct consequence of the information and communications technology revolution, which unified the world through the internet, global electronic media like the Cable News Network, (CNN), the African Independent Television (AIT), and revolutionary technologies like the mobile phone, iPod, iPhone and so on. These have facilitated interconnectivity of banks and stock exchange markets universally given that the world is now a global village where what affects one entity quickly impacts the neighbours. Economic conditions in every country are strongly influenced by the development of the world economy. It makes itself felt through international trade, global production, and international finance. Other important sinews connecting the economies of different countries into one global entity include international migration, creating a migrant labour force, and the international diffusion of technologies. Consequently, there is a tendency for interest rates or the prices of securities, bonds, and shares in one country to be affected by interest rates and financial prices in others. So, instead of one country's interest rates being wholly determined by its own conditions, they have become the outcome of world forces (Harris, 2005).

The Root of the Crisis.

The crisis is a result of the developments in the world since Neo- Liberalism (Belaúnde 2006) became the major guiding philosophy in pecuniary reforms. It is the existence of the ingredients of globalisation, particularly globalised capitals that mastermind the financial institutions' repeated borrowing, lending and collateralising. Consequently, the real issue is discovering the conditions that led the financial institutions to lure the unsuspecting consumers to carry excessive debt burden and not why the consumers acted recklessly by agreeing to take on intractable, choking risks. The US President Barack Obama and renowned monetary experts have exonerated borrowers and everything to do with the fancy financial packaging and creative marketing techniques that the debt originators resorted to. Many of the loans and mortgages were made to look artificially alluring through teaser rates. The upward setting of the interest rates resulted in a larger debt service burden for the same size loans and the additional sums of money required to finance the newly set rates had to be found somewhere. The credit crunch affected project finance by placing constraints on the market, higher funding costs, tighter financial covenants, lower leverage, wider spreads, and fewer banks in the market, leading to increased costs of lending. Likewise, the collapse of Lehman Brothers weakened the market and had a negative effect on the project finance market. The implications of an additional debt service burden combined with relatively stagnant wages and negative personal savings rate are close to devastating and the public service was worse for it.

Economic Meltdown in Nigeria.

In these trying times, the economic meltdown has caused the crumbling of many businesses including otherwise formidable corporate giants across the world. In Nigeria, the crisis stumbled on the existing pervasive and convoluted business environment. At the pinnacle is an intractable power crisis. Other numerous factors stringent to business growth include rising cost of refined petroleum products, high interest rate, chaotic ports and intensifying crime rate. The public service sector was not immune to the destructive consequences of the global economic meltdown. As a developing country, the only attractive way the additional debt service payments resulting from the crisis can be made is to spend less on food, transportation, medical care and other