1st Joint Annual Meetings of Addis Ababa, Ethiopia Special Guest Statement
Opening Remarks First and foremost, I would like, with all my heart, to wish the United Nations Economic Commission for Africa happy golden anniversary. The people of Africa and their governments – the member states of the Commission – have every cause to rejoice. ECA is, after all, Africa’s first ever pan-African institution. May I also heartily congratulate the distinguished Executive Secretary of the Commission, Mr. Abdoulie Janneh and all the members of the ECA Secretariat who are today witnessing this landmark occasion. I am also grateful to Mr. Janneh for not only inviting me as a Special Guest to the 2008 ECA Conference of Ministers and Commemoration of the 50th Anniversary but also for requesting me to deliver a statement on Growth, Employment and Poverty at this opening session. I have no doubt that your conference will seize the opportunity presented by this historic occasion to look back on order to move forward. The nexus between growth, employment and poverty is so painstakingly obvious that one wonders why it is often forgotten or ignored by policy makers in our world of today. Put simply, the answer can be found in the fact that throughout the history of humankind, the economics of development has been intertwined with political ideologies and values and economic history. Neither the science of economics in general nor of development economics in particular has ever been value and culture free. Indeed, right from the very beginning, the study of the nature and causes of the wealth of nations (as Adam Smith titled his publication in 1776) pursued a bold and expansive outlook. And, long before him, Aristotle (384-322 BC) had argued that wealth was not the main concern of the study of economics but what that wealth does to the people in enabling them to lead flourishing lives or for that matter, in disenabling them and forcing them to be mired in poverty and underdevelopment. Not surprising, therefore, Thomas Malthus, in the 19th century admitted that “we shall be compelled to acknowledge that the science of political economy bears a nearer resemblance to the science of morals and politics than to that of mathematics”. Little wonder that throughout its early formation, the focus was both on the quantifiable and non-quantifiable factors of production. In other words, in addition to natural resources availability, skilled labour, capital and investment and entrepreneurship, the political, social, cultural, psychological and institutional factors were deemed to be equally important. In other words, the founders of modern economics realised that development never proceeds in a cultural and moral vacuum. On the contrary, they constitute the prime and basic building material for the political and socio-economic construction and reconstruction of any society. In putting forward in the 1970s and 1980s and at the beginning of the 1990s the series of human-centred holistic development paradigms, the ECA returned to the foundations of economics. Thus, the Monrovia strategy (1979), the Lagos Plan of Action and the Final act of Lagos (1980), the African Alternative Framework to Structural Adjustment programmes for Socio-Economic Recovery and Transformation (AAF-SAP 1989) and the African Charter for Popular Participation (1990) were all consistent with the fundamental principles of classical economics. The United Nations Development Programme (UNDP) also joined the ECA in upholding those principles when it launched the publication of its annual Human Development Report at the beginning of the 1990s. And most surprising of all, the World Bank in its 2007 World Development Report has at last opted for the ECA’s and UNPD’s holistic human-centred development paradigm. Finally, the African Peer Review Mechanism (APRM) which is NEPAD’s seminal output is putting all its effort in ensuring that human-centred development becomes a reality in Africa by focusing on the following four thematic areas in the country review exercises that it conducts: Democracy and Political Governance; Economic Governance and Management; Corporate Governance; and, Socio-Economic Development. May I seize this opportunity to acknowledge publicly and with appreciation the role of ECA as one of the strategic partners of the APRM. The other strategic partners are the African Development Bank and the UNDP. All these institutions should now be in a position to join hands with the African governments in exploiting to the fullest extent possible the nexus that links growth, employment and poverty. Facing the challenge posed by the juggernaught of neo-liberal developmentalism and consumerism It must be admitted that the disconnect between the human factor and economics arose with the emergence of neo-classical economists just before the middle of the 19th century in what had become industrialised Europe. These economists demanded that the discipline of economics should be narrowly focused on quantitative economic indicator and aggregates and by so doing they were able to globalise and universalise their theories, hypotheses and research findings. They were able to imitate the physical and chemical scientists. The neoclassical economists were, of course, concerned with the political economies of Western Europe and North America during the second half of the nineteenth century and up to the first World War when they could take for granted such conditions as political stability, a firm will to develop among the people, strong habits of thrift, given tastes, an adequate supply of skilled labour and managerial talents, atomistic competition, a high degree of domestic factor mobility and a rapid flow of economic knowledge. But these are precisely factors that cannot be taken for granted throughout the world. The neoclassical economists also viewed development as a process that is generally harmonious and beneficial to all sectors of the economy. Further, they assumed that the development forces operated in a gradual, continuous fashion. In such an economy, where a high degree of certainty is assumed to exist and rational calculation is deemed feasible, the price mechanism becomes the principal device foe determining the rational allocation of resources while the rate of interest is the determinant of investment. Neo-classical economics assumes full employment! This imitative approach was decried by Professor Hayek in his 1974 Nobel Memorial Lecture as being unscientific since it involves a mechanical and uncritical application of habits of thought to the social sciences. By focusing only on those indices that are amenable to quantification, by chasing material things and neglecting the people and by universalising particularistic social and economic phenomena of the West, development economics has proved grossly inadequate to the task of providing the analytical and policy framework for propelling underdeveloped economies forward and for launching the process of socio-economic transformation. Indeed, by identifying capital, including foreign aid, as the deus ex-machina, development economics exacerbated the dependency syndrome of developing countries thereby laying the analytical foundation for the current debt burden of these countries. It was really most unfortunate that development economics paid scant attention to the so-called non-quantifiable aspects of development and by default denied the centrality of the human condition in the final measurement of development. The plea of Professor Hayek for modesty about claims of having found permanent solution to the complex human problems of underdevelopment and poverty has fallen on deaf ears. “If a man is not to do more harm than good in his efforts to improve the social order”, Hayek admonishes “he will have to learn that in this, as in all other fields where essential complexity of an organised kind prevails, he cannot acquire the full knowledge which would make the mastery of events possible. He will therefore have to use what knowledge he has not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment in the manner in which the gardener does this for his plants. Above all, he will have to take full cognisance of the differences that exist among societies, cultures, beliefs, attitudes and responses to external impulses as well as differences in political and economic structures” Even long before Hayek, Keynes had debunked the basic assumption of neo-classical economics of full employment. The Keynesian analysis of macro-economic equilibrium is that it is unemployment and not full employment that is the norm in industrial economies. This faulty economic analysis of the neoclassical school resulted in their failure to provide effective solution to the large-scale unemployment that struck Western Europe and North America (the industrial world of post-1914 world war era) and exposed the analytical fallacies of the neo-classical school. Not only did their assumption of full employment turn to be heroic, the assertion of harmonious operation of macro-economic forces was equally wrong. In the neo-classical school, economism has displaced the discipline of economics while dogmas have replaced the analytical approach. Little wonder that the Keynesian economics held sway after World War II when full employment was not assumed but genuinely and proactively promoted through a combination of employment-generating investment made possible by saving, investment and high productivity of capital (incremental capital/output ratio – ICOR). The Keynesian economics, as amplified by the Harrod-Domar model was extrapolated to the newly independent countries in need of economic development. The promotion of employment through higher savings and investments became the hallmark of development policy. Emphasis shifted from the neo-classical economic growth back to the classical human-centred endogenous, self-reliant and self sustaining development paradigms. Indeed, the 1960s and 1970 were two decades where extensive and intensive search for development paradigms appropriate to the unique circumstances of each country and each region took place. It became clear that the one-size-fits-all development model was inappropriate, that it is wrong to have perceived development as a linear and uniform process towards western-style modernisation and that the fixation with growth to the neglect of human development and the issues of equity would lead the developing countries nowhere. Unfortunately, the opportunity for discourse and dissent became considerably reduced in the 1980s. With the installation of the Washington Consensus as the new gospel for sustainable development, poverty alleviation became the focus. Even here, the principal and sole concern was income poverty. Such factors as massive employment possibilities, education for all, availability of universal health services and social and economic empowerment were not included in the focus. Indeed, the fixation with economic growth led to the neglect of issues of equity. Of course, the triumph of neo-liberalism has been due to the absence of level playing fields. The victory of neoliberalism has been masterminded by the Establishment made up principally of the United States and the United Kingdom governments in the 1980s and the international financial and development organisations. However, given the consensus that has now emerged about the imperative of pursuing a human-centred development paradigm, there should be developed am integrated strategy for meeting the triple challenge posed by growth, employment and poverty. Fortunately, the Millennium Development Goals, agreed to by one and all, provides common take-off platform. United Nations Millennium Development Goals At the beginning of the new millennium, the heads of state and government of member states of the United Nations agreed by consensus to implement 8 goals with 18 targets and 48 indicators. This was mission impossible as far as Africa was concerned. Indeed, according to UNDP Human Development Report 2003, whereas East Asia and the Pacific and the Arab States have achieved the goals of income poverty reduction and South Asia will be able to do so by 2015, it will take Sub-Sahara Africa up to 2147 to halve income poverty; 2129 to achieve universal primary education; and, until 2165 to cut child mortality by two-thirds if currents trends persist. When the comprehensive mid-term plan for later this year is undertaken, it will be crystal clear where Sub Sahara African countries are. However, the monitoring of the human poverty index (HPI) along with the human development index (HDI) will serve as a strong reminder that eradicating poverty will always require more that increasing the incomes of the poorest. There is a global consensus that education and health hold the key to the alleviation and eventual eradication of human poverty. The high level of HPI in Africa is due largely to deprivation in education and knowledge. Recent researches have indicated that knowledge constitutes about 70 per cent of a product. Therefore, among the emerging economies of the world, the successful ones will be those that have educated their workers at least up to levels typically achieved in the West. Globalisation and technological change will continually reconfigure demand for skilled labour both in quantitative and qualitative terms. New jobs in industries will depend more and more on human skills responsive to a shift in demand, thereby requiring a labour force that is literate, numerate, adaptable and trainable. Combating human poverty in African countries needs more than additional budgetary allocations to education, public health and potable water supplies. Crucially important as this is, it requires no additionally no less urgent repair of the serious damage that has been inflicted on the quality, content and the moral bases of these services. The quality we have in mind is more than just scholastic or academic achievements as far as education is concerned. Quality pertains also to how well the educational system prepares students to become responsible citizens and instils in them attitudes and moral values relevant to a modern society and conducive to a development-oriented nation state. The decline in recent years has led to a low cognitive achievement by world standards. Investment in human capital includes – in addition to learning general cognitive skills – acquiring specific job-related skills and developing reliable work habits and positive attitudes towards work of all kinds. But above all, education at all levels should be empowering – empowering the individual to be; to control his/her destiny, greed, avarice and violence: empowering the person to nurture, heal and care for others and to fight for justice, ethics and morality as well as develop inner growth leading to wisdom, tolerance and compassion. The methodology for educational development should be participatory. All sectors of the economy and sections of the society should have the opportunity to participate in determining its goals, priorities, direction and content. By so doing, the poor will be encouraged to search for knowledge themselves. In other words, the equity aspects of education must always be borne in mind. Since it was first introduced, the Western-style education has been a vehicle by which intelligent and able children of poor families have managed to move to higher levels in society’s occupational and income structure. Therefore, increasing access to education means ipso facto extending the facility to the disadvantaged elements of society – the poor, the rural people and girls. However, jobless education has caused a lot of disillusionment. The growing army of unemployed school graduates and particularly secondary school graduates and university graduates have undermined the importance of education to the extent that in some countries parents are withdrawing their children from school and sending them straight to acquire vocational skills in the informal sector. Therefore, in order to avoid this, education at primary and secondary levels should have a very heavy dose of vocational training. At the tertiary level, the mismatch between curricula and national needs must be corrected, graduating students must be oriented predominantly to seek to become employment-creators rather than job-seekers, innovators and entrepreneurs rather than bureaucrats and white collar employees. In other words, education must be turned once more into a major accelerator in the process of development and poverty alleviation. Growth, human and social development To further achieve the integrated approach we are seeking between growth and employment and between these and the policies for poverty alleviation and eradication we must embark on two inter-related and mutually supporting strategies. These are (i) establishing dynamic relationships between growth and human development on the one hand and between growth and social development on the other; and, (ii) integrating the market economy with the social economy with a view to ameliorating the market forces of inequity and marginalisation. At present, there is hardly an African country where the relationships between economic growth and human development on the one hand and economic growth and social development on the other are well articulated particularly as they concern the challenges of unemployment, inequality and crime. There is no better and more decisive way of doing this than to regard social grants not as a final output for alleviating severe poverty but also as an input for empowering its recipients to progressively become self-reliant. This means that social grants and subsidies will be perceived and treated both as a short-term measure for poverty alleviation (particularly for satisfying the urgent and immediate needs of physiological deprivation arising from lack of access to such basic needs as food, shelter, potable water and basic health care but also as a means for participating in income-generating activities and projects. In other words, (and turning the alleged Chinese saying around) the approach should not be either providing a fish or fishing net but one of providing both simultaneously so that overtime the poor can exit from total dependency and poverty. In this connection, I will like to draw attention to the Accelerated and Shared Growth Initiative for South Africa (Asgi SA) introduced in March 2006 to complement and supplement its Growth, Employment and Redistribution Strategy (GEAR) which it had to introduce in 1996 in replacement for its more radical Reconstruction and Development Programme (RDP) of 1994. While GEAR largely succeeded in bringing about macroeconomic stability, it failed to provide employment and alleviate poverty. It achieved very little in redressing the sharp social and economic inequalities in South Africa. Asgi SA as an attempt to respond to some of the weaknesses of GEAR, focuses on how to fast track the development process and, especially, address the problems of unemployment and skills development. Accordingly, its objectives are to:
The social economy and the market economy: working in tandem? Ensuring that the market economy and the social economy complement one another is a very difficult but not an impossible task to achieve in a community that is determined to forge ahead in building a just and egalitarian society. As we have argued so far, the only way forward in halting the pauperisation of the people is to combine market competitiveness with community ownership and the motivation of the poor to be willing to participate. In other words, the market economy will be supportive of the social economy. However, for the market economy to be able to support the social economy,
Concluding Remarks In conclusion, let me urge that Africa must serve the consensus that has emerged to go back to the roots of the science of economics. These have always been developmental, holistic and people-centred. Returning to the roots will make possible full focusing on the triple challenge of growth, employment and poverty. The AU, ECA and AfDB should lead this encounter. |
