Conditions of development (Part 2)

Political influence of one country over another. Stronger and richer countries can in a subtle manner influence the domestic policy of a poorer country, especially if it is a former colony. These influences can slow down development in the poor country.

Vi. International aid agencies. A country that attracts a foreign direct investment and foreign development aid will experience faster growth than one that does not receive these.

We should next look into broad and minor aspects of economic philosophy. At the beginning of the post-colonial era some African leaders were enamored of socialist achievements which were believed to be due to strategic planning. They coined what they called African socialism or ujamma in Tanzania .They saw capitalism as wasteful and exploitation of the poor.

Some countries, however, said no to socialism and followed not what we would categorise as pure capitalism. Some gurus prefer to call it public private enterprise or statism. While they allowed private enterprise, they guided it. To certain industries which were categorised as vital, they accorded special privileges in acquisition of capital. Such industries borrowed capital at lower interest rates. While the repayment period was generous, the State guaranteed repayment. This was the case with South Koreans chaebols. Industries which could export their products were given official patronage.

In the end, it was these semi-capitalist rather than the pure capitalist or socialist countries that achieved impressive growth rates. This situation should be carefully and scientifically studied by countries like Malawi which are still trying to discover an economic philosophy that would provide answers to their problems.

Recently, donors have proposed that the sure way out of the problems faced by the Malawi Savings Bank (MSB) is to privatise it. Not quite a new drug prescription. I still meet common people on the streets of Blantyre accusing ex-president Bakili Muluzi of having sold out companies. Apparently, the benefits that they were expected to follow out of privatisation have not been seen or felt by the common person.

How did countries such as Singapore and South Korea succeed in running their economic public sector? To be more specific, how did they make their public utilities and other State owned or supervised firms perform their roles to the benefit of other sectors.

There are times when economic principles must give way to political philosophy. If we are to privatise all State-owned enterprises what sector of the economy will belong to Malawians? All major privatisation of the past have gone to foreigners such as Commercial Bank of Malawi, David Whitehead & Sons Co, and recently Air Malawi.

Are we sure if we offered the Agricultural Development and Marketing Corporation (Admarc) as well as the MSB for sale, there would be enough Malawian billionaires to bid for them? The chances are that the few that would bid have strong political links. These are the people who procure public property at give-away prices.

How did the presidents of the Asian economic Tigers find the right people to manage State industries? Ex-Prime Minister Lee Kuan Yew of Singapore has been reported as saying his policy was to appoint only people of above average abilities because these were the ones who made the changes he wanted.

This sounds straight forward, but it is not. Privatising firms and laissez faire have been given credit tan they deserve. The financial meltdown in North America in the years 2007 and 2008 were attributed to the excessive hands-off policy. Business executives quite often award themselves hefty salaries at the expense of the firms and shareholders. They may be efficient but not sufficiently public spirited. Why should someone call upon the Malawi government to sell MSB without asking the Government of Scotland to sell the Royal Bank of Scotland (RBS), which has also been through a difficult period?

MSB and Admarc are flagships of the Malawi economy. Malawians own these institutions. They provide service to Malawians in distant and isolated corners of the country. A private buyer whose sole aim is profitability would not have time for the small customer.

The road to economic growth and development is still under construction.