State sponsored approaches to development: Alternate model to economic development

This paper questions the current project of modernity unfolding in Africa.

Through a critique of the dominant theories of development, the paper will re-visit strategies for African development. The paper argues that nations like China, Singapore, Malaysia and Brazil crafted alternate models to counter the prevailing developmentalist ideology of unguided free market principles. Revisiting the history of state sponsored development, beginning with Nkrumah’s development plans, the paper argues for self-conscious state-directed development without negating the space for a private sector transformational development.

When I read Why Nations Fail, Acemoglu and Robinson's proposal and prescriptions to transform developing nations into developed nations, I knew that it was short of vigorous scholarship and lack empirical theory and methodology. It was propagandistic in posture,ideologically loaded and driven.

First of all, they suggest that the failure of development in the third world was due to the wrong expert advice given by UN developmental theorists who rejected the Western model of modernization. In effect they equated westernization with modernization. In a way, they proposed a one size fits all approach to transform poor nations. They echoed the words of Sach and Sen, admirers of the western model. The western model is anchored in free market, democratic capitalism,emphasizing the role of individual as opposed to the group in democratic governance, with the independence of the judiciary and rule of law.

One needs to interrogate such an approach because, recently developed nations like China, Singapore, Chile, Malaysia and Brazil have used alternate models to be successful. Moreover, there is copious literatureby Robert Chang, List, Lee Kwan Yew thatexplains the success of the alternate state sponsored model.

Acemoglu and Robinson cite the failure of Zimbabwe under Mugabe and Nkrumah's Ghana and surprisingly China as an example of failed nations. Yet, China has emerged as the second largest economy in the world about to surpass the US. They rejected state supported developmental approaches even though in the last eighty years from the 1920's - 1930 and 2009 - 2014 vaunted capitalist system in the US and Europe collapsed. And state directed bail out and stability was restored respectively under Roosevelt's Keynesian state intervention and Obama's bailout policies.

I think they must supplement or update their literature of development by reading Stieglitz, Reinert,Chang and Yew. Using Nkrumah attempt at transformation as a starting point we can critique their development agenda. What did Nkrumah do? A perusal of his Five Year Development Plan suggests that Nkrumah's vision was anchored by centralized planning in which the state played an active role in promoting the educational, industrialization and financial infrastructural development of the nation. Nkrumah’s developmental agenda did not inhibit active private participation; rather, he set up parallel state institutions in finance,banking industries and factories, because the colonial regime discouraged the emergence of Ghana's entrepreneurs. The few who existed were marginalized and could not compete with external corporations set up by colonial regime.

Acemoglu and Robinsondis agreed with how Nkrumah treated the farmers in the purchase and sale of the most important product, cocoa beans, the main foreign exchange earner. They indicate he should have allowed the farmers to directly sell their products - raw cocoa beans, on the world market. Instead, he set up a state corporation to buy all cocoa beans, and he paid the farmers a decent price and used the profits to fund infrastructure projects - roads, rails, factories, schools, universities, a dam, a harbor and new townships.

Conceivably, windfall or excess funds in the hands of cocoa farmers could be have been used either way: investments or on conspicuous consumption. Being a Ghanaian with a deep and intimate knowledge of the social structure and her people and knowing my relative farmers, some would have used the windfall for excessive living, polygamous marriages, funeralsand not soo much the anticipated investments. Nkrumah’s approach benefitted most if not all Ghanaians in laying the foundations for productive projects and factories, to begin the process of Ghana’s economic development.

When Yew of Singapore came to compare notes with Nkrumah in 1963, the Ghanaian president strongly suggested that he reinforce state participation in development in Singapore, but also encourage private enterprise development as he had done. In Singapore,the state owned 80 percent of housing, a successful airline and other businesses.
Nkrumah's approach went against western interest at home and abroad and his nationalistic tendencies and neutrality in world affairs during the cold war was inimical to western trained local elite interests. Nkrumah’s demise was through the coup in 1966 sponsored by western powers and supported by local elite.

Directed state sponsored development according to Yew, Reinert and Changhelps to accelerate a country's socio-economic development.e.g. Singapore, China, Chile.

Historically we know that it took the western world, led by England two hundred years to develop. Russia took seventy years beginning with Lenin plans and Japan took fifty years for accelerated development. In their totalitarian one party state, China, Malaysia, and South Korea took one generation all under state sponsored planning and control. Asage once said while these countries were running the old developed west was walking.

There is always an alternate route to Western development. China, Singapore, Malaysia, all used alternate routes, how did they do it and what lessons do they offer?

__ Among other things:

__ They were virtual one party developmental states.

__ Elite consensus existed

__ FDI was welcomed buton conditions

__ Centralized unions existed where workers gaveup exorbitant wages in return
for fair wages and industrial peace.

__ There were agreements on technology transfer with FDIS

__ Foreign corporations had access to local financial markets.

__ Education was upgraded to include learning at high levels of technical and technology training. A well educated work force was needed to improve productivity and production.

__ Factories were built to process and add value to raw materials.

__ Infrastructure development was a priority for the government
This is how new developed nations developed and not buy in Acemoglu's and Robinson's prescriptions.

Prof. Steve Panford (Rtd)
City Tech, City University of New York (CUNY)