Prof. Sam's Corner

Home-Grown Economics: The Asian Example (Part I)

By Professor Sam Amadi

President Buhari while inaugurating the Economic Advisory Council (ECA), charged them to focus on developing what he called ‘home-grown economic policies’ for Nigeria. He repeated this charge while speaking at the Nigerian Economic Summit afterwards. This is a wise and urgent charge. The problem is: do we understand what ‘home-grown economics’ looks like? Or better still, do we have the pedigree to go this contrarian policy track? Helpfully, we can look towards China and other Asian countries for example of how focused and smart leaders have transformed economies under more difficult contexts than Nigeria finds herself. Asian is not a uniform success story. There are massive successes and major failures. We need to know what worked and what did not work in Asia.

The Trinity of Export-oriented Agriculture, Manufacturing and development Financing:

First, the success of China and the rest is not about geographic determinism. Some scholars have pointed out that Africa’s parlous economic story is because it is a malaria infested tropic. Of course, a lot can be said about the impact of the environment in economic development. But the impact of the environment can be superseded. The fact that no Africa country has superseded that impact is not a proof of environmental determinism, but rather a proof that African economic policymakers have made notoriously bad choices, especially at the beginning of independence.

There are not many significant geographical variations between China, South Korea and Taiwan on one hand and Malaysia, Thailand, Vietnam and Hong Kong on the other hand. They share a similar past of poor, rural and agrarian economies with massive social injustice in terms of land barons who excruciatingly pauperized tenants and peasants who worked on their land. Each of them tried some form of agrarian reform. But the successful North East Asian countries were the ones that included redistribution of land and fiscal and policy support to ensure higher productivity and increased rural prosperity for former tenants.

Second, redistribution is critical to economic development in rural and poor economies. Nigeria cannot become a real economic powerhouse unless it unleashes the potentials of its rural communities. Here, the divergent results from Asia tell a good story. The unsuccessful South Asian countries like Thailand pretended to execute a land reform that reinforced rural inequality and reduced farm yield.

Their agrarian policy did not boost the rural economy and therefore cut off the oxygen for industrialization, which enhanced domestic consumption. Whereas, North East Asian countries provided credits to poor farm owners in order to stave off repossession by the land grabbers, the unsuccessful South Asian countries allowed, and in some cases reinforced cultural, social and economic institutions of rural inequality.

It is therefore no magic that in North East Asia we saw high economic growth resulting in lower inequality. In South East Asia, lower economic growth produced more inequality. In Latin America, even lower economic growth produced even higher inequality. Contrast with the United States which made its transition to industrial economy in the late 19th century with sets of progressive policies by Alexander Hamilton, the Secretary of Treasure, including land purchase and distribution to poor families. These policies resulted in equitable economic development. This is another proof that economic equality is good for economic growth.

Nigeria’s agro-industrial policy should focus on rural industrialization, or at least pay enough attention to agro reform in the rural communities. This is supported by the Asian experience. It is policy choice that made the difference in Asia, not geography, and not political context. All these countries passed through hash and predatory colonialism.

But each of those that succeeded as industrial economies were hard-nosed in selecting the right economic policies that reformed rural agriculture, ruthlessly promoted industrialization and focused financial transactions towards promoting export-oriented agriculture and manufacturing. Notably, they refused to create a financial market that bubbled wealth into the pockets of entrepreneurs but left manufacturing plants without access to finance. The unsuccessful one promoted few privately-owned plantations in the name of agrarian reform, promoted merchandise and assembling plants instead of manufacturing plants and turned their banks into financiers of skyscrapers and shopping malls that created billionaires but impoverished the country.

To be continued next week

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Prof. Sam's Corner

Home-Grown Economics: The Asian Example (Part II)

If Nigeria is to succeed in home-grown economic policymaking it must wisely manage economic ideologies. China and the successful Asians took note of ideology and avoided the pitfalls. Latin American and African countries closed their eyes to ideology and drowned in the pool of ideological waters.

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