Applying rationality and intellectual muscle 2
To foster a sustainable national economy, existing well-tested and trackable principles must be adhered to, and specific strategies and tactics must be devised for implementation. The first crossroad on the journey is to decide on the economic principle on which to base the economy. Most African countries are oscillating between one extreme and the other, combining economic principles without a reasoned strategic basis for making economic decisions. This must become a thing of the past because it doesn’t make sense to make decisions that impact millions of people without a sound, rational basis that drives them. That is the definition of socio-political incompetence, which has been the bane of the countries of the African continent.
There have been two central economic systems in world history: capitalism and Communism. Each of which has evolved several variants. Communism evolved into a socialist model, while capitalism evolved into a pseudo-command style that incorporated political guidance of policy and incentivization. A mixed economic system, a less celebrated variant of both systems, has also been applied worldwide. It originated in countries that formed the Non-Aligned Movement during the Cold War and spread to countries that gained independence from colonial rule. It retains a presence in the world, albeit a less prominent one. A key feature of the mixed economic system, a characteristic of many African countries’ economies, is the coexistence of public and private ownership of the means of production. There is a very plausible reason for newly independent nations to choose this path. The first is precedence. Nations in Asia and South America, whose independence preceded that of almost all African countries, in the main, had opted for a mixed economy. The second plausibility is that new nations had to have government control of key elements of production because the private sector was embryonic and lacked the capacity needed to effectively mobilize the factors of production, including finance, skilled management, and capital accumulation, necessary to establish or take over large-scale ventures.
The second plausibility goes to the dearth of rationality and intellectual muscle that African leaders brought to bear on the issues facing their nascent nations. In hindsight, ample evidence has shown that African countries could have explored deeper solutions and perhaps, in the process, discovered the path that the Asian Tigers were already paving contemporaneously. Instead, Africans adopted the recommendations of former colonial administrators, who reasoned that the best option was for newly independent governments to purchase the companies being offered for sale by citizens of the departing colonial powers at grossly inflated prices. One of the architects of the “empire by other means” strategy was Sir Anthony (Tiny) Rowland, founder of Lonrho, the London Rhodesia Company. The strategy, in effect, compelled the countries to implement the same mixed economic system that had come to dominate Western European economic policy after World War II and the advent of Keynesian economics.
The hidden agenda in this policy is that it enabled former colonial powers to maintain their empire by other means. The price for the companies that African governments purchased was set by the sellers. The sellers also set the terms. This was the start of pay-for-play kickbacks to African political leaders. It was also the foundation of bad debts that African countries committed their nations to. Finance for these purchases was readily available from multilateral agencies and the former colonial powers. Repayment was based on earnings from commodity exports. The financial calculus for the purchases would not have passed rigorous scrutiny if it were available. This means that virtually all companies purchased in this manner were doomed to fail in due time. Newly independent countries embarked on economic development through projects. There was no strategic plan. As opposition politicians learned of the kickbacks that ruling politicians were receiving from various government purchases, access peddling, and license awards, the political environment in the newly independent countries devolved into chaos and, in many cases, into coup d’état and civil war. In this environment, the country’s welfare became a secondary priority. Self-enrichment took center stage, a position it has not relinquished more than fifty years later.
Juxtapose that with what the Asians were doing contemporaneously. Singapore was brainstorming with a UN-appointed economic adviser, Dr. Albert Winsemus. “In the late 1950s, the country began to seek out people with the knowledge and experience to help raise Singapore to a higher level of development. The government ultimately chose a mission led by Dutch economist Albert Winsemius, who was also the father of Pieter Winsemius, the Minister of Housing, Spatial Planning and the Environment from 1982 to 1986. Historian Frans Stoelinga has written his PhD dissertation on Albert Winsemius and his remarkable work in Singapore. Stoelinga’s interest was first sparked when he noticed how swiftly Singapore had developed in the 1960s and ’70s.”[1] Singapore did not just brainstorm. They implemented ideas that emanated from brainstorming sessions. One of which was to build a unique, export-oriented economic engine that featured attracting then-high-tech US companies to invest in Singapore to manufacture for export to their Asian markets and even their home markets. The Economic Development Board spearheaded the initiative. The EDB created Jurong Industrial Estate, now known as Jurong, one of the most successful Industrial Estate projects in the world. The mastermind behind the establishment of the EDB and Jurong is a man whom I have referred to in my writings as a “Super-Minister,” the late Dr. Go Keng Swee. The EDB embarked on a road show to the US and European countries to promote. An essential element in attracting companies during the road show was their affirmation that Singapore was not seeking a handout, but rather an investment partnership. Singapore provided build-out-ready shells for factories in Jurong Industrial Estate and was also willing and able to invest in the companies that relocated to Singapore. This gave companies a boost of confidence to make the move.
Lee Quan Yew, as the conductor of the orchestra of a political symphony that engineered the economic miracle of Singapore virtually from nothing, surrounded himself with a very competent and focused group of leaders. “Lee Kuan Yew performed a miracle transforming Singapore from one of the poorest countries in the world in the 1960s to being among the most advanced today. His main contribution, and the key to his success, was that he understood that in order to put Singapore on a sustainable growth trajectory one needs much more than sound economic policy. Any policy can be reversed, any incentives for growth can be dismantled. Mr Lee built a country whose institutional set-up is unparalleled. This includes the rule of law; efficient government structures; the continuous fight against corruption; and overall stability. [2] There were other direct, tangible benefits to Singaporeans and their country. Singapore’s per-capita income is one of the highest in the world. Going from $265 per annum in 1961 to more than $70k today, as the short video illustrates. [3]
It is easy to juxtapose Asian Tiger leaders’ attitudes and inclination to development with those of Africans. The average per capita income of African countries is approximately $2,000 today, after about fifty years of independence, while the Asian Tiger economies have reached around $40,000 during the same span. There is no reason why African countries, deploying a rational approach to crafting an effective development strategy and imbued with intellectual muscle, cannot create the next economic miracles over the following two decades. There is an opportunity in the global economy. A window that is not going to remain open for very long. Western societies are reevaluating their economic and security challenges and strategy. The situation has created a dynamic environment in which new trade and supply chain considerations are being made rapidly in real-time, as companies cannot afford to overlook any situation that exposes their operations to existential risk. African countries can rise to the occasion and fill the void. There is also a conflict that requires measured and strategic thinking. It is the relationship that China has painstakingly cultivated with African countries over the last two decades. They have done an exceptional job of it, to be sure. However, herein lies the conundrum. China aims to utilize African countries as a market for manufactured goods to supplement its Western markets, as the handwriting is clearly on the wall that, under its current leadership, competition with the West has taken center stage. African countries cannot be a dedicated market for anyone because they cannot afford to be, as they are the poorest countries in the world. The poorest countries in the world should not be supporting manufacturing jobs in more affluent countries. It is unseemly. It is the definition of exploitation as perpetrated during the colonial era. This is the essence of Real Politics, and African leaders must ramp up their knowledge curve to take advantage of the once-in-a-lifetime opportunity presented in the global marketplace.
African countries need a strategy that will create an environment where Western companies are more likely to seek supply chain partnerships. There is a lot to be done before the opportunity materializes, but that work should start immediately, if it hasn’t already. China should remain a crucial partner for specific areas of interest, but job creation —the path to economic prosperity —lies in aligning with the breach that has materialized in global affairs due to intense competition and the threat of conflict over Taiwan with Western countries. There are many reasons why the continent of Africa stands to benefit if leaders play their cards right. Labor is abundant and cheap, and monetary policy can make it even more affordable. The continental free trade area will enable foreign companies to access more consumers than they can in their immediate environment. Western companies are attracted to scale. The main competition for African countries is from Asian countries, but it should not be perceived as such, as there are more than enough opportunities for both…To be continued in the next edition of Unleash Africa Newsletter.
