Diaspora and development: Externally induced‘stages of economic growth

25Nov 2018
Miki Tasseni
Dar es Salaam
Guardian On Sunday
Diaspora and development: Externally induced‘stages of economic growth

THERE is a formulation in psychology that is often used by preachers, that ‘attitude makes altitude.’ Meaning the state of the mind of an individual determines precisely what trajectory that person follows in life, and the likely rate of achievement thereby.

Looking at what happens in the way countries move from poverty to wealth or advancement, there is an apparent gap between what is most favored in institutional analysis, namely the movement of technique (scientific discovery, training, application, transfer of technology) and the reality.

All these factors are usually present in any economy with a minimum of external exposure but don’t appear to make a difference; for instance Haiti has remained poor after 200 years of independence.

The Haitian example serves as a reminder to African countries that the fact of accumulating decades of independence doesn’t mean a corresponding achievement potential or likelihood, as stagnation is an option that has to be wished away, waived aside by systematic policy.

That is where the difference comes up, that not all countries can specify the day they decided to break with the past and take up modernity, to catch up with developed countries, the way Japan decided in 1868 with the Meiji Restoration, and several countries of the Far East in the mid 1960s and 1970s. Something similar to that is happening in the Gulf zone but here attitudes haven’t changed greatly, and state options are generously funded by oil revenues.

This point is vital for local and regional economists to take up on account of the point made in seminars in the past few months, for instance by former World Bank chief economist Prof. Joseph Stiglitz, that conditions don’t exist for African countries to repeat Far East industrialization feat of the 1980s and 1990s.

He pointed at two handicaps, that of automation which has progressively reduced the amount of manual labor needed to produce large amounts of commodities (in which case industrialization in Africa can’t provide the millions of jobs that idle youth needs).
The other aspect is artificial intelligence, which duplicates automation for mental labor tasks, like ready-made manuals, text editing, that tend to cut staff.

There are other aspects in the industrialization debate that are also relevant to Africa, for instance export orientation when the major markets in the West are plainly shrinking in proportion to their portions of the world market, owing to lower population growth.

At the same time the newer industrializing countries do not reproduce the ‘high mass consumption’ of the older industrialized states in Western Europe and North America, meanwhile as the number of countries wishing to practice export-led growth, their rising populations and the crops or processed products they put up are massive.

No traditional markets exist for this kind of dynamic whereas at an earlier period small countries in the Far East could be neatly absorbed.

Another aspect that can be added to the Stiglitz problematic and which basically misses out in the older evolutionary conception of economic growth (Walt Rostow, The Stage of Economic Growth, 1958) is the source of capital.

Tied to the source of capital is the nature of capital and the manner in which it will have to interact with the recipient state in order to induce fast rates of growth instead of fuelling the same stagnation while expanding consumption.

It underlines the difference between Africa and the Marshall Plan (the European Recovery Program - ERP), an American initiative to aid Western Europe, in which the United States gave over $12 billion (nearly $100 billion in 2016 US dollars) in economic assistance to help rebuild Western European economies after the end of World War II.

Hasn’t Africa used more in aid funds since independence, and why is it that results are paltry or negligible compared to Western Europe?

The basic operational difference between aid funds and the Marshall Plan was the question of agency in using those funds, that in Africa aid is meant to improve the capacity of governments, favors extended for alliances during the Cold War and has remained a habit.

Right now disputes pile up as to whether China is putting Africa in a debt trap, whereas Europe did not enter into any debt trap from the US program which took four years, the cash was repaid, and Europe was on the fast growth path again. Why?

The aid supplied banks with the cash they needed to loan out to investors purchasing assets, rehabilitating them.

As African governments can’t become agents of cash from aid organizations to put into banks so that the private sector is loaned to buy assets and take control of local markets, the Diaspora becomes the key.

China industrialized using its Diaspora which was pouring in an average of 20bn to 40bn dollars per year from 1978 to 2008 via joint ventures and partnerships with Hong Kong, Taiwan, Macau and Shanghai based billionaires to change the face of China. Unless Africa changes its attitude, stagnation will endure.