A Recipe for Success in the Global South Economy Part II

On the 20th July 2011, I documented my series of thoughts on what method of Political Economy I felt will be best adopted in order guide the Lower Developed Economies of the Global South out of Poverty and guide them towards a much more progressive and integrated market system. Unfortunately I was unable to conclude on what method I felt will be most realistic but seemed to be adapting to a more Classical Political Economy method of thought.

In his book the Wealth of Nations published in 1776, the Father of modern economics Adam Smith argued strongly about the strength of a liberated market. That through a more less interventionist market system (adopted by an economy), a country will be able to create an economy that can avoid market inefficiency and can promote innovation and enterprise whilst creating jobs for its citizens. Prima Facie, I must say I was quite attracted to this system of Political Economy as I strongly believe in a liberal market, solely because a non-availability of Government Interference in an economy simply means that individuals are open to invest within the country and are also open to import goods from other economies which may not necessarily be available in their economy. It means that these countries will be more likely to receive Foreign Direct Investment from other nations through Transnational and Multinational Corporations, in the process creating jobs for the locals whilst developing world class infrastructure (to lure and enable the multinational and transnational corporations be effective in the country)that will benefit both the corporation and the locals. That through Foreign Direct Investment, Universities and Schools can be built to train the local population on skills to gain employment in these corporations and also encourage the locals to in the future set up their own businesses using the skills garnered through professional and academic training. Theoretically, the idea of an economy that adapts this method of Political Economy does seem fantastic and splendid but when applied to a modern day Less Developed Country(from now known as an LDC), the end results can be quite damaging.

Truth is in order for an LDC to apply this system of Political Economy to its economy, it must first make sure that the infrastructure to encourage this sort of system is available. It is at this point that the ideas of Friedrich List must be looked at. List created a system of 'National Innovation' whose doctrine encouraged governments to be selective in industries to support and encourage productivity amongst its citizens. Not to go into too much detail, List drew up 4 stages for the economic development of a nation which I find fascinating.

1. He recognized a system of COMMUNAL LIVING
2. That this system of Communal living will encourage AGRICULTURE
3. Due to the produce from farming there will be need for MANUFACTURING
4.To generate profits, AGRICULTURE + MANUFACTURING = COMMERCE (TRADE)

As simple as it may sound, these 4 stages applied to an LDC today seems for me to be a simple but effective method of pulling LDCs out of poverty. However I must say that it will still be wise for an LDC to borrow from Smith the idea of market liberation to some extent. I believe that a government needs to intervene in that it must encourage its citizens to be productive. It must look within its economy and find the resources that it has that will be of great value on the international market and then be selective (as List encouraged) in supporting these industries financially so that they will be able to produce these goods in mass to be put to trade on the International Market. Its nation will also benefit from this in that these goods (since they are produced locally) will be sold at cheaper rates in the home nation. The Lovechild of the combination of List's and Smith's ideas reminds me of a conversation I had with my father on the train to Hull. I remember him using a Burger and Yam for example. To quote, he said that he felt that the reason why the Nigerian economy was failing him was because he felt that Nigerians have decided to adapt a very unrealistic Western way of living and eating thus increasing the cost of food. The whole conversation was sparked by a statement I made about shockingly discovering that Nigeria imports food. Using the example of a Burger he said to me (to quote) 'When you look at a Burger today you must come to terms with the fact that Burgers have been eaten by the English for centuries, only in different forms. What are the main ingredients of a Burger, Bread and Beef. Rewind the clock back perhaps about 100 years, English people consumed Burgers as Sandwiches and it was affordable for them because the main condiments are found easily in England so it costs them nothing to make it. The reason why you have your modern day McDonald's stlye Burger is simple because the government knowing fully well that Bread and Beef are easily available in the UK, invested in areas that will look into how Bread and Beef can be processed into new types of food for its locals. The same can be seen with Potatoes also easily available in the UK and has also been consumed for years. Now due to research into the different things that can be done with potatoes you have your chips, Crisps, Lasagne, Pies and so on. When you look at Nigeria, you see a system where the government have not invested properly in our own resources to make them attractable to our own people that we now look to the West to copy what they eat and it is costing us a lot of money'. Using Yam as an example, my father explained to me that it is a staple crop found easily in Nigeria and the it will be more sensible if we could look into the different things that can be done with a tuber of Yam and watch and see the results that we will gain from it. Another example he used was Palm Oil and the benefits of the government investing in Industries that will look into the benefits of using Palm Oil for items like Soap and not only as a condiment to cook. I remember laughing when we had this conversation but did not fail to relate it closely to the Ideas of Friedrich List. Borrowing from Smith, should an LDC invest in its resources through government intervention (in pumping money into industries that will conduct this research and process the resources), the final products can be placed on the International Market and draw in a lot of revenue for the market.

I think I will stop at this point to enable myself look at more systems of Political Economy to enable me (by the Grace of the Almighty) write another offering of ideas that can aid an LDC alleviate poverty from its economy but on a leaving note I will like to say, countless times we may say to ourselves that we cannot do anything to improve our home economy but this is untrue. Research into ideas that have worked for other countries must be conducted and analysed and then be discussed amongst ourselves and peers to enlighten the next person on how to make his or her own country or nation better. You may feel you are powerless but do you know the position you may be in come the next 5 years from now? Task yourself and believe!