Government using its currency issuance power to pay wages on infrastructural projects or to feed the hungry is done by the same mechanism. The mechanism is no different than how banks create money except that bank money creation is via loans. Thus, it is inherently associated with a new private sector debt. Government deficit spending is not necessarily tied to a debt. Consequently, such deficit spending may be less inflationary than private bank money creation because private bank money compels the payment of interest on the loan. Because of the interest on the loan, the real value of bank money is less than the real value of the equal sum of government deficit spending.

While the mechanisms of creating money by government and by private banks are similar, the conservative elite react differently to each. They hate government expenditure but extol private bank money creation. The different reactions cannot be attributed to the mere fact of money creation because creation of “money from thin air” occurs in both instances. The conservative objection is embedded in the discomfort that government may use the funds for reforms and projects that might help the average person and lessen elite control over the political economy. They fear the money might be used to reduce poverty and joblessness while spurring growth. Government deficit spending to help the poor and working class can amend the political economy in a progressive way inimical to elite interests. As such, their true opposition to government deficit spending is more a consideration of political power than objective economic principles.

In the end, government deficit spending has been the most reliable method to lift a nation from economic downturn or to divert that downturn. We must divorce ourselves from the myth that federal government deficit spending is wrong. For a state government or a private household, deficit spending incurs debt. High debt is impending disaster. However, the federal government occupies a different policy stratum due to its ability to issue currency. Deficit spending does not mean debt. All it necessarily means is that the government is giving the people more of what only government has the sovereign ability to create than it is taking from the people. That the people do not have capacity to issue money, the net flow of money from government to them not only seems just it makes economic common sense.

Nigeria’s level of unemployment and idle capacity is synonymous with what other countries would lament as an acute depression. We have lived in this dire condition so long that we now consider it normal; in reality, we suffer from a chronic, structural depression. As with the fiscal expansion needed to pull nations out of the Great Depression, Nigeria must engage in similar fiscal expansion to thwart the impending downspin caused by faltering oil prices. If we take the path of austerity, the contraction may intensify to the point where the downward momentum plunges us into a recession otherwise avoidable if only wiser policy had been known by those entrusted to have known.

*Tinubu is the national leader of Nigeria’s opposition All Progressives Congress