It has never been hidden that wealth is unequally distributed in the society that we all live in but looking at it from the wider prospect, wealth on a global scale is also unequally distributed. It seems that the gap between the Global North and Global South seems to widen with the North getting richer and the South getting poorer. For example, Multinational Companies which are great sources of attracting Foreign Direct Investment to developing or developed nations are heavily concentrated in the Global North with only a few appearances being made in the south e.g. within the African continent. Another example is seen in the exchange rate for currencies in countries that are developing. Currencies within the Northern hemisphere have greater value than their Southern counterparts. I could go on with a list of evidence showing the growing gap between both hemispheres but that means i'd be here for a long time!
Due to a module I took up in my 2nd year of University, I've been inspired to do a lot of thinking concerning the best way for Developing countries to strengthen their economies rapidly. With evidence of growth in Export Orientated Economies such as the 1960s Taiwan and South Korea and failure in the Import Substituting Economies of 1960s Brazil and Mexico; it's rather confusing to come up with what would be an 'ideal' system of political economy to act as a catalyst for growth in the Global South region. Honestly, I've never been a very keen believer in the doctrine of 'sharing wealth' or any other form of socialist propaganda. Rather I believe more in the system of Fiscal Prudence and wealth creation as it stimulates the economy and encourages Business and Enterprise. One may try and slate my argument by stating that such a system will undermine the working class. My response........NONSENSE! If for anything, such a system moves the working class to a more stable middle class level but i'd rather not go into that argument now.
Anyhooo, So i've decided that on developing the Global south, Governments in Less Developed Nations should adopt the Economic Theory of Classical Political Economists such as Adam Smith or Structuralists Methods such as that of Friedrich List (whose Ideas i admire but I do not believe would be able to work in an economy that is not fully ridden off of Corrupt Officials). Investment in the citizens through training and education is vital to having a productive workforce. A system of compulsive education up until secondary level must be laid down with the individual having the choice to go down the path of further education or training (e.g. Apprenticeships) being provided upon completion of secondary education.
Secondly, I believe that a healthy nation is a productive nation. The Millennium Development Goals signed in September 2000 recognizes the need for the improvement of healthcare in a lot of nations. Investment in Research in medicine should be a government's priority. Every individual is entitled to Healthcare even though it is a valid argument that the provision of free health care to all is rather on the expensive side. However in developing nations, the turnout of profit from their resources such as Oil (aka Nigeria) is a so enormous that the government CAN afford to invest in a system that provides free basic healthcare for its citizens whilst it actively funds research in newer effective methods of treating illnesses.
Thirdly, a system of Fiscal Prudence. Basically the idea that one reaps what one sows. Governments in developed nations have been known to be selective in industry that they support that will encourage the country's economy to grow rapidly and to e honest this is an old trick that I believe dies hard. Selective but wise investment by Governments could be a key to unlocking development in Less Developed nations. For example, in my home country Nigeria, I believe that the dependence on Oil is a major pullback in the growth of the economy. I was shocked to read that in a country that is blessed with fertile land, we still IMPORT FOOD! I remember being taught in primary school about Cash Crops such as Cocoa, Peanuts, Palm Oil and today I honestly wonder if the Cash resource being taught is OIL. Should the government invest properly and develop a sensible Agricultural Policy that embraces modern and effective farming methods then truth be told the economy is bound to grow.
I also believe in Laws governing the workings of Multinational Corporations within a country. A multinational country moves to a host nation because it is business wise for them and obviously guarantees them cheaper production costs. However in return these companies must abide to rules that ensure that those that work for the company are treated fairly. For example employment laws must be upheld; ensuring workers are not taken advantage of in terms of wages, working hours, working conditions etc. Also Multinationals should be encourages in actually investing in their host nation as they in reality make more money than the GDP of the host nations in Southern Hemisphere economies. Investment in infrastructure and human innovation should be encouraged and perhaps could be drafted into a contract of the terms of which a Multinational can come into a host nation. The host nation in return should perhaps be able to provide credible security and play its role in providing durable infrastructure to at least attract Foreign Direct Investment into their nations via Multinationals
Well that's all I can come up with for now but I believe I should be able to complete this later
For Nigeria a major driver of economic growth will be the development of the agricultural industry. For starters the agricultural industry tends to be more labour intensive that most other industries,hence, this would provide employment for millions of Nigerians who would see their standard of living rise. The rise in standard of living of millions through agricultural reform will have a multiplier effect on other industries because these agricultural workers will spend more on food, demand more housing, transport, clothes etc, hence stimulating employment in the construction, textile, retail, automobile, and transport industry etc.
ReplyDeleteAnother subtle but crucial impact of agricultural reform is the impact it would have on inflation and borrowing cost in Nigeria.
At this point in time were soft commodities are reaching new highs in terms of prices, Nigerian citizens are paying international prices for food commodities which can be produced at home.
The monetary policies of the US Federal reserve coupled with growing demand from emerging markets means that Nigeria is not only missing out on the opportunity to earn foreign exchange at a time of record prices, but we are also having to pay these international prices for commodities that can be produced at home if the government concentrates on agricultural policies as a way of stimulating growth. The rise in these food commodities (and may I mention petroleum products we import) are having an adverse effect on inflation and causing the borrowing cost in Nigeria to become exorbitant and impractical for a type of sound investment. The high cost of borrowing means that sound investments become unviable, which in turn reduces the employment opportunities that would otherwise have been possible if lending costs were lower. High borrowing cost also has a negative impact on foreign direct investment that require local borrowing in their capital structure.
High inflation also makes a pegged currency like the Naira prone to speculative attacks as the central bank tries to defend the currency. This implies that Nigeria is more likely to attract short-term speculative capital inflow rather than long-term capital inflow for fixed investments as those with capital would view the Nigerian economy and the government's revenue stream as too volatile, undiversified and unpredictable to support long-term cash inflow.
The prospect of high and volatile inflation also makes the calculations of real returns more difficult for foreign firms. These uncertainties caused by high inflation which stems from weak agricultural and petroleum policies are a major dampener of economic growth in Nigeria.
What is even more frightening is that I have not even mentioned the other major Achilles heel to economic growth in Nigeria which is ELECTRICITY!!!