Business and government industrialisation
We hear now and again that Africans do not benefit much from exports of primary products because they are mere raw materials. The raw materials should be processed first and then get exported as manufactured products. For a country to move from low income to middle income, industrialisation is the answer. Agriculture alone would not do. Look at the countries of Asia; Singapore, Taiwan, South Korea and Hong Kong which were once at the same level of underdevelopment as African countries. They are now vying with the West and Japan in prosperity. They have diversified their economies.
Malawi, like most African countries south of Sahara nowadays, looks to Asian countries as role models in the field of industrialisation. How did they start and how did they proceed? Three of these were motivated by external threats. South Korea was in constant fear of being attacked by North Korea; a communist State, Taiwan under the Generalismo Chiang-Kai Shek was living in fear of communist Peoples Republic of China while Singapore had been expelled from the federation of Malaysia which was now threatening to cripple it. Countries which had gone through traumatic period of defeat and destruction rose up with single determination to build on the ruins. First it was western Germany and then Japan which had come out shattered by World War II.
In Africa, we have Mozambique and Rwanda both of which are developing at a faster pace than we are. From all these countries, we notice the need for a national will or determination. When there is such a common will, people do not allow small difference to frustrate their efforts. Is there such a common will in Malawi?
Political leaders of Asian countries were highly committed to developing the countries. They selected technocrats on merit by advertising vacancies. Once they appointed those technocrats, they trusted them to do their best. So long as they were dedicated to duty and were producing results, the technocrats enjoyed security of tenure. The technocrats studied professional books written by scholars of the West. They studied the writing of Adam Smith, F Y Hayek, David Ricardo and others. They accepted some of the teachings of those economists, but decided to implement their theories while taking into account their own culture.
Economists like Hayek regarded State participation in the economy both socialism and a threat to people’s liberty. Beginning with Japan, leaders and technocrats saw close cooperation between business [private sector] and government as the foundation of development. Without such cooperation, there could be no meaningful development. Singapore, South Korea and Taiwan had no time for Marxist socialism. They believed in fair State, but not a welfare State. They entrusted their elite to set institutions through which there were constant consultation between the government and business.
In economics textbooks, we read of the evils of monopolies and the virtues of perfect competition. The theories did not work well in practice. The South Korea government felt that big industries were the answer to the development of the country. They identified those industries and indirectly subsidised them by allowing them exclusive access to cheap credit. The products of these industries were shielded from domestic and foreign competitions.
In Taiwan, the State generally intervened though direct investment was not given preference. Major businesses were owned and managed by the nationals of the country. There must have been reservoirs of men and women with the necessary background in business. Perhaps this was due to Japanese influence since both Korea and Taiwan had been Japanese colonies up to the end of World War II.
It makes sense to establish a business that is fraught with risks, if there is assurance of being rescued when things go bad. This is the role governments played in Asia. Businesses were owned and managed by private people, but they were backed by the State. In situations like this, naturally businesspeople were not completely free to do things as they liked. They had to be in constant touch with the bureaucracy. The secret of developing countries like Malawi lies in establishing institutions and staffing them with people highly committed.
