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| STRATEGY AND ECONOMIC ANALYSIS | |||
LESS THAN10% ANNUAL GROWTH-RATE?
THAT'S
PEANUTS FOR EMERGING COUNTRIES
WE NEED DOUBLE-DIGIT
GROWTH-RATE
(Part
1)
This
delivery is the continuation of the paper titled:
"Strategy
for African Countries "
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| Yearly
economic growth-rate less than 10 percent- for any sub-Saharan African country - is
not enough to trigger a dynamic developing. | 
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Part 2 | Part - 3 | Part - 4 | Frequently Asked Questions
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Since
mid 1980's, most African countries are submitted to Structural Adjustment Programs
(SAP), sponsored by the International Monetary Fund (IMF) and the World Bank.
Burkina and Ghana
stand as examples, which were recognized and praised, by the IMF and the World
Bank, as SAP' success stories. Both countries sustained - over a period of 5 to
10 years - annual economic growth-rate in the range of 5 to 6 percent.
Ghana
received US$ 9 (nine) billion financing input between 1988 and 1998. And yet,
President Jerry Rawlings stepped down from power on January 7, 2001 -
after 19 years of exclusive power - without any tangible economic success as far
as Ghana's economy and the prosperity of Ghanaians are concerned.
In spite of an average of 5.5% (over five years) annual growth-rate, Burkina-Faso
is listed 172nd (out of 174 nations) on UNDP - United Nations Development Program's
poverty-scale (Source: UNDP 2000's report on "Human
Development"). In that country, 45% of the population live with less
than US$ 93 (ninety three) per year.
Ghana
and Burkina are not
exceptions. The gloomy economic situation is similar in several African countries.
Indeed, no African country had been able, to date, in spite of annual growth-rates
in the range of 1 to 10 percent - under SAP or otherwise - turning around the economy,
taking off and reducing poverty.
The percentage of the populations
under Poverty Level defined
by UNDP increased in most African countries. That fact is testimonial that Structural
Adjustment Programs (SAP) failed in assisting African countries bridging the developing
gap.
SAP' sponsors - the IMF and the World Bank - now perfectly aware
of the failure are busy trying to elaborate another assistance policy. They now
implicitly recognized the annual growth rates of 5% to 10% are not sufficient
to drive upward African countries' economy and reduce poverty. They are obliged
to admit that the sole implementation of SAP cannot assist African countries improve
their economy and take off.
It is true Structural Adjustment Programs
were necessary in the 1980's to restructuring Africa's devastated economies. They
help floating up shaky financial systems and bankrupted states. SAP helped African
governments to achieve macroeconomics equilibrium on the monetary market and in
financial resources, and to practice good governance.
Nevertheless,
at the beginning of the new millennium, one remarks these macroeconomics good
results are no more sufficient to promote the economic development in African
countries. Another approach is necessary to moving Africa forward, reduce poverty,
take off and join the circle of developed nations.
One reads, here and
there, that the IMF and the World Bank's new assistance policy will put emphasis
on Education and Health. At first glance that sounds a good policy. However,
one could remark that Education and Health - in developing countries - are not
economic sectors that directly produce wealth. In the contrary, they spend revenues
generated by other economic sectors such as agriculture, industries and other
services. Therefore, focusing financial assistance direct
on Education and Health would not trigger any development process. That would
only inject survival financial means into African countries' economic system.
Finally, the result would be the same as with SAP: No poverty reduction would
be achieved and the economic situation of African countries would further deteriorate.
What is rather needed to better the economic performance of African countries
is a long range strategic planning, which tightly integrates agriculture development, industrial
transformation of crops and related services - storage, insurance and transport.
Each component activity of the strategy interacting in fusion with each other
to generate double-digit annual economic growth-rates. That is a strategic planning,
which triggers off a sustained growth of the economy to creating descent living
conditions and prosperity fall all: food in abundance, descent housing, electricity,
running pure water, health assistance, education, global security, freedom of
movement and jobs.
From now on, Africans should have this as motto: "Economic
Growth Together With Adjustment." Africa's institutional partners: the World
Bank, the IMF, UNDP, and bilateral development partners will certainly agree.
They too will be given credit for Africa's economic successes if such integrated
developing strategies our carried out in African countries.
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Let us consider the current economic situation in African
countries.
- What are the characteristics?
- 1°- In most of African countries the economy is either sluggish or in deep comatose
state. There is no linkage, whatsoever, between the various economic sectors:
primary (agriculture); secondary (industries) and tertiary (services.) To the
contrary, in African countries, most of the times, there is a structural distortion
that is very damaging to the African community in terms of creation of riches. That is
the emphasis put on import of goods and commodities. African businessmen are more
inclined to importing all sorts of products and commodities - the profit margin
is more important and no management hassles - instead of manufacturing goods.
- 2°- The endemic
and high percentage of unemployment, which leads (1) to the tragic aberration
of highly trained people ending jobless on the marketplace; and, (2),
to the rural exodus, which is swelling up the populations of small, medium
and big African cities.
The sad reality prevailing in any of the 48
sub-Saharan African countries is this: 20% to 60 % of the population is jobless;
and 90% of people with jobs earn monthly salaries in the range of US$ 30 to 200.
Click here to review one of
the consequence of the low level of salaries and wages.
- What are
the consequences of all above mentioned facts?
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1°- The lack of sufficient financial means. African states cannot levy enough
financial means through income taxes and duties. The bulk of states' revenues
evolves from customs taxes that quickly dry out when import-export business slows
down. |
Most African countries are obliged to rely - sometimes at 100% - on external
financing to undertake fundamental infrastructure investments. The disbursement
period and utilization's conditions of external financing (provided by international
financial assistance institutions) are often full of hurdles that slack down projects'
execution. Consequently, the developing process is hindered or performed too slowly.
Things move faster only when a country relies on its own financial means. Ivory
Coast stands as example, in French speaking West Africa, establishing - between
1960 and 1985 - a good network of roads, only because it has an investment's budget
(BISIE,) dedicated to infrastructure, which derived from proper national financial resources
originating from cocoa and Coffee's exports.
In brief, the economy
is at standstill in most African countries in spite of annual growth-rates
in the 5 - 10 percent bracket.
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Let
us review the apparent causes of the insufficient level of economic activity
- 1°- Inadequacy of African countries' schooling and training
system. Over decades, before and after the independence, African countries'
education system provided a majority of trained clerks for public service. There
was not either a policy to develop technical schooling to train specialists for
the industry sector; or to promote entrepreneurship through managerial academia.
Until the mid 1980's, most of established black entrepreneurs (mainly in the trade
sector) were either autodidacts or "uneducated" people.
- 2°- Archaic
agriculture system. A small percentage of black farmers, trained to using
modern agricultural techniques and methods, are established to develop rural areas
in African countries. African governments have not setup a global and coherent
rural development scheme to modernizing agriculture, improving existing crops,
diversifying the cultural productions, increasing crops' yield and animals' production.
- 3°- Scanty industrialization. Rare industrial units are established,
which anyway are either badly managed, operating under capacity for lack
of raw materials; or closed for bad maintenance due to lack of spare-parts.
In brief, African countries' economies are in a standstill state - some
are even "frozen in time" - because economic activities are badly organized.
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All above-mentioned causes, however, are secondary ones.
There is only one veritable cause for the insufficient level of economic activity
in African countries: Disorganization
Let us quickly consider the problematic of "Organization" and
"Disorganization" with regards dealing with adverse conditions.
Alighieri Dante, the famous Medieval (1265-1321) Italian poet, author, writer
and politician, in "The Inferno" / "The Divine Comedy" (Click
here for more) wrote: " We are not born to act and live as fools,
but to follow the ways to virtue and knowledge."
We shall paraphrase
Dante and say: " We Africans are not born to live as
dependent and needy, but to follow the ways to prosperity and happiness."
How could we Africans achieve that when everything, in our current economic
surroundings, is gloomy?
Some Africans have a deep-seated conviction
that the poverty Africa's nations are experiencing right now is just a paradox,
an illusion. Yes, an illusion. They are deeply convinced that: "If no
one is capable of always fulfilling all his desires, he who dedicates himself
to accomplishing all he can do will be able to exercise a powerful drive on his
destiny." As wrote French author psychologist and motivational writer,
Paul C. Jagot, in Les lois du succès - (Success' Laws) - Editions
Dangles, Collection "Savoir pour réussir" - 18, Rue Lavoisier,
45800 St. Jean de Braye - France.
Let us take
the case of Japan as example to illustrate above assertion.
Within a times' span of half a century, Japan raised itself from an underdeveloped
state to be ranked as the second industrial power in the world. Japan, nowadays,
stands for 14% of the planet's Gross National Product (GNP). Japan distinguished
itself, throughout its history, with its capability to take advantage from adverse
circumstances; to turn to its profit bad and trying occurrences and events. Instead
of being swamped by defeatism, Japan decision-makers always do their utmost best
to tackle and conquer the adversity. That is the reason why the Japanese were
able, since last World War II, to deal with two petrol crisis, the competitive
devaluation of US Dollar versus the Yen. Instead of fighting lost wars or bewailing
one's lot, Japan decision-makers restructured their production system and reinforced
their position on the world's marketplace¹.
The Japanese organized
themselves. They are superb tacticians. They zigzag very well.
When
in 1853, Commodore Perry's US marine fleet busted through the straits of Kamoneseki
and forced the Japanese rulers to open their closed market to international trade,
Japanese were appalled to see the enormous technological gap existing between
their country and the gai-jin (the foreigners). The Shogun's counselor, Masayoshi
Hotta, wrote then, in 1887: Our policy should be:
| To
take advantage from this opportunity.
To enter and
conclude alliances. To send our ships around the
world, to trade. To imitate the foreigners for anything
they can manufacture, produce, make and do. To narrow
the gap and catch-up with the backward state of our country. To
reinforce and improve our national power and our fleet, to be in the position
to gradually exercise our influence on the foreigners. And,
finally, to have the whole world at complete peace and our hegemony accepted.
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This above
well-defined, concise and precise strategy was executed to the point - except
for the last desire. (To read arguments put forward by a
specialist in Japan's affairs who believes that the last desire will be difficult
to fulfill, you may read Bill Emmot's book: "The Sun Also Sets" / "Why
Japan Will Not Be Number One"²)
The scheme is still
the governing-strategy of Japan.
In the same register could be listed:
Taiwan, South Korea, Singapore, Hong Kong - well known as the four dragons of
Asia - and also Mauritius, Malaysia. Etc.
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Dear
reader,
The so-called "underdevelopment"
normally should be qualified as "non-development" because non-development
is a universal and permanent phenomenon. Countries, which have stepped up further
into more development, are obliged to keep up the pace. At the slightest slackness,
they are bounced back to "non-development." It is not necessary to elaborate on
that. It would take us too much place and time.
Everyone is aware of
this: since the beginning of humanity, ignorance, diseases of all kinds, slavery,
subjugation and submission of women, dependence of a group of people to another
group, malnutrition, wars and famines are common practices and occurrences that
perpetuate underdevelopment. The world had never been at peace. Hundred
of wars are fought right now all over the world - some raging since the end of
second world war II, in 1945.
So, it is not "underdevelopment," which
should be considered as a scandal; but the development process itself which is
a miracle and a very recent one. (All this is brilliantly discussed and analyzed
by French politician, writer and historian Alain Peyrefitte in his book:
"Du Miracle En Economie / Leçons Au Collège De France"
- May 1995 - Editions Odile Jacobs, 15 Rue Soufflot, 75005 Paris - France)
The rising up of Japan and other countries above-mentioned are vivid proofs
that a nation can, within a generation, narrows its backward state and jumps over
centuries. These achievements should be for us Africans deep cause for reflection
and concern. Even if mentioned experiences cannot be 100 percent imitated as such; each
country being unique; sociologically, politically and historically.
Nevertheless, African countries can draw much from these experiences and organize
themselves towards prosperity through the implementation of well-planned and defined
long-range strategies.
Japan borrowed its political, economic and social organization
from European countries. The legislative body is English-coined. Common Law and
Penal Code are based on French model. State's police is structured like the French
Gendarmerie; and most of all - after a long period of strong state's controlled
and planned economy - the business world in general, trade and banks are now structured
like Anglo-American models.
Let us Africans do the same. The problem
of the choice of models is completely obsolete; state controlled economy or free
entrepreneurship (socialism or capitalism) are, from now on, questions devoid
of any kind of relevance. What counts is the pragmatism of actions to bridging
the developing gap.
Speaking of the choice of
models, let us take the case of Taiwan. To destroy a myth.
Doubtless, Taiwan followed the free entrepreneurship strategy to achieve
the remarkable development of its economy. Nevertheless, the State of Taiwan
played a powerful driving part in executing the developing policy. The state of
Taiwan intervened through a very sophisticated planned strategy without any kind
of compelling pressure vis-à-vis national and international investors. Till
mid 1970's, the Taiwanese public sector contributed for more than 50 percent to the capitalization
market. Nowadays, the government of Taiwan is still in control of one third of
the banks and one fourth of the industrial units.
Therefore, one remarks
Taiwan's developing strategy is not based on full and unbridled liberalism, which
international aid institutions are enforcing on African States submitted to Structural
Adjustment Program.
What is important for a country is to have a
well-defined development strategy to which the majority of the citizens adhere
to. A strategy that is also credible and attractive to foreign investors. Said
strategy should be methodically executed; submitted to a constant follow-up policy;
necessary changes being regularly made taking into account opportunities as soon
as they occur.
We Africans should have this constantly in mind: No
country in the world is intrinsically poor. There are countries endowed with
abundant natural resources - that are assets to establishing them within the circle
of prosperous nations - but remained, nevertheless, in permanent poverty. And
there are countries that lack everything - as far as natural resources are concerned
- which, however, became prosperous. There is no need to give examples.
Poverty or prosperity is not a question of big or small territorial area, of
big or small population size. Availability of abundant natural resources also
is not fundamental. So what makes the difference?
| OR THE WAY THE DEVELOPING STRATEGY IS CARRIED OUT MAKES THE DIFFERENCE |
In any poor country of the world there are entrepreneurs, farmers and traders
who are vivid examples that poverty is not a fatality. These people organized
themselves to becoming prosperous in spite of adverse conditions. Organization
or a "winning" strategy makes the difference between poverty and prosperity. This is true
either for an individual, a community and for a nation.
To break the vicious
circle of poverty and pave the way towards general prosperity to be enjoyed by
every class of society, in any African nation, suitable developing strategies
should be devised and implemented. Otherwise, all development efforts would end
up without noticeable results, not to speak of failure. That is obvious with
regards the disastrous economic situation prevailing in African countries at the
beginning of the new millennium - no jobs' creation to cope with demands and rampant
poverty.
Indeed, all sub-Saharan African governments carried out, since
the independence, economic development schemes. Mauritius,
Botswana and the Seychelles
stood out as the only absolute success stories. The other countries - with
the exception of South Africa a particular case-study - four decades after gaining
independence, are still struggling to survive. They have sluggish and shaky economies,
high level of unemployment (20 to 60 percent of the population is jobless,) and
are experiencing global instability.
So what is amiss? Why all these well elaborated development
schemes - including Structural Adjustment Programs - failed triggering a sustained
economic growth capable of reducing poverty?
That is the question.
These schemes failed because they generated annual economic growth-rates only
in the one to 10 percent bracket; in spite of huge influx of money. Ghana standing as
example. One
percent to 10 percent annual economic growth rate is not sufficient for emerging countries'
take off. The reason why? The apparent growth-rate of one to 10 percent is eaten-out by
the annual population growth-rate - in the range of 2 to 3 percent for African countries
- and inflation rate in the range of 5 to 7 percent (one being optimist!)
It is then obvious that anything less than 10 percent annual economic growth-rate
is just for survival. It will take us (if ever) up to several decades, far beyond the
second century of the new millennium, to alleviate prevailing poverty in Africa,
bridging the developing gap and creating descent living conditions for all, if
we do not target annual double-digit economic growth-rates and manage to sustaining the
pace for two to three decades running. There is no alternative.
African
countries, doubtless, need to implement economic development schemes capable of
engineering strong growth-rates in the double-digit range and take all necessary
steps, gather all resources and means to sustain it over a long period of 30-40
years.
We can hear, loud and clear, objections from skeptics who
think all that is utopia; impossible to achieve. We assure the skeptics that
it is not only possible. It is an absolute necessity. The sine-qua-non
condition for the take off. Here is the reason why: In
the so-called "poor countries" - where everything needs to be started, double-digit
annual growth-rates, over long period of 30-40 years, is nothing extraordinary.
It is only catch up.
That is what one of the most eminent economist of the century - Moses Abramowitz³
- demonstrated. He, who devoted his whole life to the study of economic growth-rates.
Moses Abramowitz³ considers three kinds
of countries:
| 1°-
Countries that just started their developing process - one can list most African
countries in that category; and those just coming out of a devastating war - many
African countries will be soon in this category. |
According to Pr. Abramowitz, the economic growth-rates of the different categories
above listed evolves this way:
| -
First category annual growth-rate soars vertically as soon as the country
really enters the developing process, to reach a high level in the range of 30%
annually, over a short period of 3-5 years;
20% to 30% over a
20-year-period and around 10 percent over
15 years. |
In few words, once the real developing process is on track, the backward country or the one emerging from a devastating war, benefits from a starting bonus in comparison to its precursors. And contrary to the common belief, this starting bonus has nothing to do with the country's socio-cultural particularities. A distinguished French economist, Jean-Jacques Rosa (Click here for more), who analyzed Moses Abramowitz's³ studies, found out that these socio-cultural parameters stand only for less than one fourth of the phenomenon.
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To comprehend and explain the "CATCH UP FACTOR" analyzed by Abramowitz³, the following have to be taken into account:
-1-
The initial low level of equipment existing in the country. |
Both deficiencies representing huge potentiality for improvement, and,
henceforth, to increasing the productivity of the economy, once adequate measures
are taken and the developing process launched. Also to be considered is the extra
workforce available rural areas and, particularly, the progressive increase
of the purchasing power of the population in general.
This fundamental
point of the increase of the purchasing power is given further consideration in
part 3 of this delivery titled: HOW TO REACH THE TARGET Click
here for more.
© Dr. B.M. QUENUM
Investment and
Business Planner
Click here for
Part -2
Your feedback / objection / contribution is welcome through this
Discussion
When
on the discussion page , click on HELP link on the top of the page
To make
efficient use of the discussion board.
(1) Dominique Nora; L'Etreinte du Samouraï.
Le defi japonais, Calman Levy, 1991
(2)
Bill Emmott;
The Sun Also Sets. Why Japan Will Not Be Number One,
Simon & Schuster, 1989
(3)Moses Abramowitz,
"Thinking About Growth: Catching Up, Forging Ahead, and
Falling Behind", Journal of Economic History
46 (1986), 385-406.
(3 bis) Moses Abramowitz; The
Catch up factor in Postwar Economic Growth, Economic
Inquiry, January 1990
TOP
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The Strategy exposed in this delivery is now available since January
2013 as an eBook, Africans, Stop Being Poor!The Roadmap to
Prosperity for African Nations Either in
Amazon Kindle format or in DNL
eBook Format. |