African Countries Can Stand Tall by Eschewing the Begging Bowl Part Two

African Countries Can Stand Tall by Eschewing the Begging Bowl Part Two
by John I. Akhile Sr.

Despite the dubious results it has produced since independence, begging bowl diplomacy remains the default economic development strategy of African leaders and their governments. It is a huge poser because begging bowl diplomacy has been and remains the all-pervasive strategy in the development playbook of African countries. The most prominent and surprising example of its use in recent history is of South Africa under Jacob Zuma, kowtowing to China in order to gain cash infusion for its sputtering corruption-ravaged economy.

But begging bowl diplomacy is a symptom rather the cause. It is arguable that the greatest impediment to the development of African countries is in the nexus of poor leadership and poor strategy. A classic portrayal of the age-old, which-came-first riddle of the chicken and the egg syndrome. Did poor leadership evolve because African people are unpatriotic and evil, with a decided bent on stealing their people’s resources in order to live lavishly overseas? There is unquestionably some of that. Examples are the former head of state of Gambia, Jammer’s vast mansion in Washington D.C; Equatorial Guinea’s poster child for raping and pillaging of the people’s resources; the late ignoble former head of state of then-Zaire, now D.R. Congo, Mobutu; Nigeria’s late Sani Abacha, etc. The examples are a very small window into the maze of corrupt activities masterminded by entire governments to frustrate the chance for the economic prosperity of their nations and people. However, there is a preponderance of the evidence that African leaders are not the only or most corrupt in the world. We have the late Ferdinand Marcos of the Philippines, the late Shah of Iran, Reza Pahlavi, to mention a couple of names in a vast sea of corrupt leaders that spans the history of the world. In fact, the most egregious corrupt acts were committed by European monarchs in the medieval era that induced and suborned corruption to control and expand their realm.

The second leg in the search for root causation of endemic failure to develop in Africa is a poor strategy. If a rational conclusion is that corruption is a human condition that is not a cultural and hence intrinsic deficiency preponderant in Africa and its leaders, then the challenge of poor strategy becomes the causative deduction and hence culprit in the inability of African people to figure out a way for the countries, societies, and people to prosper. The main challenge that African leaders have confronted and continue to wrestle with is lack of a deep understanding of the mechanisms for development. In many ways, it can be said that corruption has remained front and center because leaders lack inherent knowledge of how to create the enabling environment for far-reaching prosperity. In the absence of the know-how to engender broader economic prosperity, leaders have embraced the only course that they truly understand and know: self-enrichment.

This lack of knowledge is not unique to the African people. In the Western world, there are two major sides to every society. In recent times, it has fragmented even deeper, but the primary ideological divide is between the conservative right and the liberal left. The conservative right has always reflected the interests of the business class—the rich if you will, but the fundamental belief is that in so doing they are benefiting society as a whole—poor, middle class, and rich. The liberals, or the left, on the other hand, have reflected the ideas of the masses—the poor, middle class, and rich. They believe that the fundament for prosperity is to design society in a way that addresses the challenges facing each group. At least that is the pervading hope of the ideological sides in the argument. Both sides differ on the basic question of how to create prosperity, and the division is at the heart of socio-political squabbles and rancor in Western nations. The difference in the argument in Western nations and the experience of African countries is that because of the history and evidence of prosperity in the West and in the newly prosperous nations of Asia, there is understanding of the levers. They have learned to ride the bike if you will, and when things go wrong they just return to the fundament of bike riding that has been learned. Africans, on the other hand, have yet to be reconciled to the levers, to learn the bike, let alone ride it.

African leaders need vast exposure and understanding of the global game of economic prosperity. Having an in-depth knowledge will galvanize leaders by giving them a reason for seeking political office in the first place. Appropriately, knowledge is power, and knowing the truth about how the economic world works shall set African leaders free to pour their energy into a process that, with the understanding they acquire, can be affected by their actions and the choices of their governments. There are specific resources that governments wield in crafting development. It includes the resources of the commercial community, people at large, and that of education and research community. The crux of implementing good economic development policy is to know which levers of resources really work and why it does and most importantly, how to exert maximum pressure on the appropriate resources at the right time to derive the most optimum results for their country. One of the great levers of economic development that has been deployed in many countries throughout the centuries is the joint stock company. In modern times it’s the corporation or Limited Liability Company.

The dominant commercial legacy in world history is that of Europe. Europeans built the era of trade that flourished under the propellant of a business concept known as the joint stock company.1  A joint stock company is a business entity in which shares of the company’s stock can be bought and sold by shareholders. As a method of business arrangement, the earliest record of the joint stock company is found in China during the Sung Dynasty (960 to 1279). The first appearance of the joint stock company in Europe was in France, in 1250. The Society of Moulins du Bazacle (Société des Moulins du Bazacle) was founded in Toulouse by the citizens of the city, seven centuries before the Industrial Revolution, to share the operation of a series of mills installed on the site of the Bazacle. The mills were used to process wheat harvested from the Toulouse Plain into flour.

In 1602, the Dutch invented the tradable joint stock company when it listed the Dutch East India Company on the Stock Exchange. The joint stock company is the precursor of the modern Corporation or Limited Liability Company.  Every major commercial venture of the “Age of Discovery” and “Exploration” was created by use of the ubiquitous joint stock mechanism.2 The joint stock company was a way for many interests to participate in the profit potential of a venture while limiting their risk to the investment capital committed to the project. Sort of a community venture. Out of it has evolved a type of organization that pools peoples investment and manages it by investing the resources on behalf of the owners in business, commercial and government ventures. Part of the manner in which the concept of Joint Stock Company is being used today is directly attributable to how governments are empowering their business class and society at large through incentives. Through incentives, public policy is used to pull levers that exert positive pressure on society to respond to profit-making opportunities.

The “Begging Bowl” is an end. People, organizations, and government are supposed to pledge their money to a good cause and walk away. It does not create a recurring opportunity because there is no return on capital. It’s dead money! There will never be enough dead money to lift African nations from poverty because the world does not willingly give up its money to be buried forever. That is the fallacy of economic development by the begging bowl.

On the other hand, the world responds to investment opportunity where the goal is the propagation of capital. There is a feature in this edition of Unleash Africa Newsletter on Larry Fink, CEO of BlackRock Inc., a global American investment management corporation (neo-Joint Stock Company). BlackRock is currently the world’s largest asset manager with $6.3 trillion dollars under management.3  Many of the great companies and projects in the world today have been arranged under one of the many iterations of the Joint Stock Company. The Suez Canal is an example.

African leaders would do well to study the use of this mechanism over the centuries and apply it to the economic development of their countries. African countries can drink from the tiny resource spigot of aid through “Begging Bowl Diplomacy” or from the massive “pipe” of resource flows represented by organizations like Larry Fink’s $6.3 trillion asset management behemoth, BlackRock.

  1. https://sites.google.com/site/economicsandageofexploration/joint-stock-companies
  2. http://www.ushistory.org/us/2b.asp
  3. https://en.wikipedia.org/wiki/BlackRock