Editorial Comment
In Search for Growth Sustaining Economic Policies in Africa
John Kuada
Editor, AJBER
The overarching economic issue in Sub-Sahara Africa (SSA) today is to ensure a broad-based growth that lifts millions of Africans out of poverty. African countries are therefore consistently compared with high growth Asian countries such as Malaysia and South Korea which were at similar levels of economic growth as African countries for barely five decades ago. But while the Asian continent now enjoys the accolade of “economic miracle”, the African situation is usually described by such adjectives as “disaster” and “tragedy” due to decades of non-growth experienced by nearly all SSA countries (Akyüz and Gore 2001). The search for growth sustaining economic policies for Africa is therefore as urgent today as it was half a century ago when the torchlight of de-colonilisation was set ablaze in Ghana.
Hitherto, the preferred explanations for the non-growth syndrome have been sought within purely “economistic” or political and ideological paradigms. There are many African intellectuals who still subscribe to the emotionally seductive arguments of external (read Western) victimisation to explain Africa’s weak economic growth. Western development economists, on the other hand, are quick at pointing to the numerous policy mistakes and implementation difficulties combined with institutional and structural constraints to explain African poverty. There is no doubt that the atrocities of the colonial era combine with the negative consequences of global capitalism, trade restrictions and global politics to constrain the developmental opportunities available to the least developed countries of the world. But it is equally important for Africa to reflect soberly on the internal circumstances that hamper growth and development.
As the differences between African and Asian countries continue to widen over time, it becomes increasingly clear that development is the outcome of a combination of a complex set of endogenous and exogenous factors. This awareness legitimises the consistent appeal to African politicians to adopt pro-investment and pro-poor policies and to build critical human and institutional capacities to mange development affairs of their countries.
According to developmental state theory, governments in developing countries must interact closely and co-evolve with the industries in their countries in order to achieve economic growth and poverty reduction. Their reference point should remain overall national rather than private business interests, but these governments must at the same time refrain from adopting policies that harm business. As Fafchamps et al., (2001) explain it, enterprise development is necessary to reduce the levels of real unemployment and to strengthen individuals’ capacity to care for themselves and their families. It also generates revenues necessary for anti-poverty policies of governments. In other words, the grand dynamics governing the economic development process of nations today are best seen jointly from an institution and enterprise partnership perspective and firmly rooted within a social and cultural context.
This observation is consistent with views expressed by leading development scholars including Balasa (1979), Abramowitz (1986), and Adelman (1999), who have all argued that the rate of economic growth is intimately linked to changes in social, institutional, cultural and political structures of nations.
In the same vein, Granovetter (1985) argued vehemently that economic actions take place within the networks of social relations that make up the social structures and cultures of nations and continents. He therefore made an impassioned plea to economists and sociologists to theorize economic action in ways that acknowledge its strong linkages to social structure. Thus economic development is not only concerned with economic transformation. It also entails social transformation.
It is against the backdrop of these theoretical observations that the contributions made by each of the five papers in this volume of AJBER must be assessed. Together, they provide us with significant insights into the internal conditions in selected African countries that hamper growth. They also inform us about efforts currently made to address some of the difficulties and the numerous challenges that lie ahead of these countries.
The first paper is by Okpara and Wynn. Its focus is on job satisfaction and employee commitment within the banking sector in Nigeria. The authors remind us that Nigerian organizations are plagued by poor performance and low productivity, presumably due to employees’ negative work attitudes which in turn are attributable to cultural influences. The results of the study suggest that cultural factors are positively and significantly associated with job satisfaction and organizational commitment.
Culture can be described as a unique set of socially-based resources that are commonly available to work organisations located within a given community. But culture can also create serious constraints for economic growth. Okpara and Wynn argue that African family relations may tend to create economic dependency of the majority on the few workers. In simple terms, the extended family system and practices operate in a way that permits African family members who are in need to demand assistance from those they perceive to have the means to assist. Paying for the education of family members, hospital bills and providing initial working capital for small business formation are popular examples of what is classified in African societies as “needy” situations in which family members may demand and expect support from the richer members of the family. Scholars of enterprise development in Africa have repeatedly argued that these collectivist dispositions in African culture can harm business (see Garlick, 1971; Himbara 199; Sørensen 2003; Kuada, 2003). Okpara and Wynn’s study provide additional evidence in support of this management challenge in Nigeria.
In the second paper Bundoo brings home to us the progress being made in Mauritius to reform the financial sector for it to support private enterprise development in that country. He also highlights challenges such as political tampering with credit allocation, putting good corporate governance practices and codes of ethics in place and supporting further integration of the economy into the global business.
The international dimension of economic growth is the theme addressed in the other two papers. Osabuohien’s paper compares the degree of trade openness in Ghana and Nigeria and explores the link between openness and economic performance. Economists argue that open economies grow faster than closed economies. African countries have therefore been advised to replace their import substitution policies with trade liberalisation. Theoretical studies have listed the benefits of trade liberalisation to include access technological knowledge of trading partners, access to bigger markets, access to investment and intermediate goods that are vital to their development processes as well as pressure to innovate and remain competitive. The results of Osabuohien’s study show that trade openness and government expenditure have impacted positively on both economies.
Kuada’s paper focuses attention on government export sector development policies in Ghana. The paper is based on the theoretical understanding that there is a positive link between policies that develop export-friendly business environment in a country and the export performance of firms in that country. Although the paper does not explore that link directly, it reports stakeholders’ (business managers and public officers’) perception of some of the recent export promotion programmes implemented in the country. The results of the study show that although the respondents acknowledge positive changes within the business environment, serious export barriers remain and these appear to contribute to the weak performance of Ghana’s export sector.
The final paper is from Ajayi and Tongo has the title “liberal democracy, trade unionism and sustainable development in Nigeria”. In this paper the authors draw attention to the new political directions being charted by the labour organisations in Nigeria and their possible contribution to entrepreneurship and private enterprise development in that country. Their discussions suggest a growing political maturity within the labour organisations in Nigeria. This has been demonstrated in recent years in the shift in the trade unions’ conceptualisation of the social and economic realities of the country. Although there are many challenges ahead, placing entrepreneurship at the political centre stage appears to the leaders of the labour organisation to be the right thing to do in order to contribute positively to the political and economic development of Nigeria.
The contributions from these papers suggest that the social dimension of economics requires a greater attention, if we are to find a more sustaining growth strategy for Africa. Several scholars have attributed the remarkable growth in Asian countries to their underlying cultural values and effective use of social capital derived from their networks of social relations. According to these studies the Asian people tend to have a strong sense of collective social obligation – i.e. an obligation to fulfil their individual needs without jeopardising the chances of others to fulfil theirs or the entire community to survive and progress (Biggart and Hamilton 1992; Whitley 1992, 1994).
In contrast, it has been argued that one of the major impediments to economic integration in Africa is the preponderance of distrust at all levels of social and economic interaction. Distrust is the flip side of trust and it has severe negative implications for enterprise development. While trust encourages mutual suspension of self-interest of the interacting partners and thereby reduces monitoring and other similar costs of transactions, distrust produces the opposite effect and frustrates joint business development.
Thus, viewed in terms of social network theories and their derivative concepts of social capital and trust, a developmental government in Africa has other challenges than putting the macro economic policies right. It must also help promote an economic development-oriented culture – e.g. a culture of trust among business partners and between the bureaucratic institutions of the state and the business communities within and across countries. This would require government institutions to take deliberate actions to encourage social ties within and across nations rather than merely applaud successful isolated efforts by some individuals or groups. Elsewhere, I have argued that cross-national interactions must be encouraged even where distrust is potent (Kuada, 2007). Where institutional arrangements are in place, even people who distrust each other may consider co-operation worth their while.
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