Global Mega Trends and Africa
One of the critical challenges of strategic policy making is to strike a balance between the short term issues facing the society and the long term challenges and opportunities. The former typically preoccupies the politicians who have to survive the rough and tumble of day to day politics. The electoral cycle further reinforces this tendency. The latter forces, however, are more subtle and yet as relevant for the society’s long term prosperity. But more often than not they are largely neglected in policy and public discourse. In part it is because the long term structural trends are much less visible, often appear speculative and their impacts surface over a period way beyond the terms of office of those in power! These so called mega trends ultimately shape the political economy structure within which power assumes meaning and evolves over time. Currently, there are three major global mega trends at play, namely, the demographic factor, the environmental issues, and the changing nature of work place. Jointly, these trends are bound to reshape the national socio-political structures the world over and exert substantial influence on the international geo-political configuration. The medium to long term success of countries would much depend on the degree to which their public policies are alive to the impact of such forces. The demographic mega trend is possibly most subtle and potentially disruptive insofar as it exerts influence on many fronts including the inter-generational dynamics within the societies, and the issues of diversity management across nations. Political and business organizations are affected by this mega trend in many diverse ways. The power base of the political organizations and the market structure of business corporations are profoundly shaped by this mega trend. The spatial configuration of the global population also affects the international geo-politics. The environmental mega trend is most visible, and increasingly recognized as a force that requires much higher degrees of international coordination than countries are used to thus far. The threats emanating from this mega trend transcend the defence capabilities of all the nations, weak and strong alike! Not only the submerging of some island states in the Pacific Ocean, but also recent weather-induced events in New York, USA, in Australia, in China, in Philippine and in Europe are but examples of the damage that environmental forces can exact on any country. More subtle and no less destructive effects of the environmental mega trend may be seen in prolonged draughts and sustained flooding of various regions- which in turn affect land fertility and crop production worldwide. Possibly the least talked-about mega trend is the changing nature of the workplace and its potential consequences for social welfare. The fact is that the digital technologies have gradually but irreversibly changed the nature of the workplace. Over time the workplace has become much more skills and systems intensive. Whilst the labour-intensity of business operations has declined steadily, the production process has become a great deal more automated and spatially segregated. Historically labour-intensive activities such as farming and mining operations have been particularly affected by these trends. Mechanized fruit picking and sorting, as well as crop spraying via drones are becoming common place in many commercial farms across the world. Likewise in the mining sector technologies exist that can obviate the use of unskilled labour almost altogether. The effects of technological and digital changes in the services sector are equally profound. The spatial fragmentation of the workplace and the production processes is under way. In effect, the workplace is evolving rapidly with material impact on social welfare. In particular, if the education systems, or more...
Read MoreThe World’s Emerging Political Economy Risks
As the world economy is recovering from the prolonged recessionary consequences of the 2008 “great recession” new geopolitical risks have surfaced rapidly, and somewhat unexpectedly. The military developments in Syria-Iraq in the form of the rise of ISIS militia, the instability and social issues growing in Nigeria, the widening reach of Al’Shabab in East Africa, the continued instability in Ukraine, and ongoing tension in the Middle East, together with territorial disputes between China and some other countries of the South East Asia region are the key and high profile sources of risk and instability in the world economy. Alongside these visible risks are the subterranean activities of cyber attacks, and other threats based on digital technology across the world. This has thrown the world economy into a new era of rising uncertainty and potential instability. Once again the world resources are spent proportionally more on military and defence expenditure rather than on other socio-economic needs. This means limited global resources are being spent more on less productive, counter-productive and/or destructive ends. As this process takes roots, global productivity falls. The upshot of it all is a material decline in the world potential GDP. At the same time, the rise in military and defence expenditure leads to a worsening of the quality of public services as public resources for such socio-economic programmes typically contract. At the end of the day, the poor suffer because the poor are more reliant on public services. In the face of an already high disparity of wealth and income within the world economy, and within most societies, the new trends are likely to worsen the relative position of the poor within the society. There are clear and predictable socio-political consequences for this trend. For Africa, in particular, these new global developments have far-reaching consequences. It is critical that Africa’s growth and development remain on sustainable path. Yet the rising level of insurgency and military actions on the continent is bound to divert the resources from socio-economic ends towards military hardware. In this manner, the continent’s resources and surpluses are channeled to the armament manufacturing countries in the east and in the west. In the process, the inaction by the African Union structures is highly problematic. The ineptitude of the AU with regard to safety and security remains the most obvious fault-line of the organization. A similar fault-line is evident at the UN structures. The existing global safety and security infrastructure is woefully inadequate and inappropriate for today’s world circumstances. Much has changed since 1945, and yet the UN system has remained largely intact. More importantly, the nature of international threats has evolved considerably. The emergence of global terrorist groups spanning different territories and regions of the world has made the old style inter-state hostilities less of a threat. The regional and global multilateral organisations, therefore, need to respond to the changing circumstances. For such responses to be effective, national leaders ought to reconsider some of the age-old notions of “self-interest” and “national interest”. In such re-definitions, new realities of limits to national actions towards safety and security need to be recognized. At the same time the very notions of ‘safety and security” need serious re-definition. Optimum and cost-effective measures of safety and security in today’s world call for a considerable re-think of the trade-offs between national and regional/international structures. As the nature of global risks changes, effective responses require creative and new measures of regional and global coordination. Unless the new risks are effectively mitigated, the world economy will remain vulnerable to underperformance. This is not good news for...
Read MoreSocial Capital: The Critical Factor for Developmental Success
Developmental success of nations, broadly speaking, depends on two forms of capital. One is the natural and inherited capital, the other ‘made-capital” accumulated over time. As important as the natural resources are the human-made resources and capabilities too collectively constitute a critical and dynamic ingredient of the nations’ success. In econometric literature this is often referred to as the “made-capital” of a nation, in contrast with the natural endowment of the country. For each generation, then, the national resource (or capital) endowment is made of the natural endowment plus the inherited “made-capital”. In this regard each generation’s heritage subsumes vital components such as culture, knowledge, socio-economic and political institutions, logistical infrastructure, and the effective governing legal paradigm. It may be argued that without this mad-capital, the development process is doomed to dawdle or even fail. Social capital is a critical component of made-capital. Much like the other forms of capital, social capital is subject to a dynamic evolutionary process, and over time it may be augmented or destroyed, depending on the choices that a given nation makes. More specifically, each generation’s political economy and ethical choices either builds upon the historic stock of social capital or dilutes it to the detriment of the developmental process. The reality of the social structure and its evolution over time is that both benefits and costs of political economy decisions are, more often than not, externalised. This means, neither the full benefits nor the entire costs of a given generation’s decisions are born by it or by its members. Thus, the substance of sustainable development and intergenerational equity is complex, and its operational requirements are made of both tangibles and intangibles. Importantly, the implications are not merely theoretical and academic: the future trajectory of the society’s developmental path is largely defined by an appropriate mix of the two forms of capital. Therefore, sustained commitment to the augmentation of social capital is indispensable. Prosperity of nations thus requires a blend of pecuniary and non-pecuniary variables. Important as the pecuniary variables are, so too are the non-pecuniary investments for the sustainable of development and prosperity. At one end non-pecuniary variables pertain to foundational institutions of the socio-political and economic institutions, and at the other end, they relate to the significance of promoting social and personal value systemsthat help lay the ground for defining the nation, its social culture, its internalised moral and ethical codes, and its national welfare objectives. Through the interplay of these two sub-systems of the non-pecuniary network of variables, social capital, may be created or destroyed. Contemporary research has underscored the importance of social capital as a critical ingredient of a sustainable political economy framework. The promotion of trust among diverse stakeholders is a key ingredient in the process of social capital formation. This is particularly so in heterogeneous societies where religious, tribal, cultural and racial differences abound. The accumulation of social trust augments intergenerational social capital via an array of interrelated processes that, inter alia, include trans-generational conversations within the family structures, the workplace, the community initiatives and not-for-profit enterprises. The promotion of reciprocity for the common good is a vital element of intra-generational and intergenerational social capital accumulation. A significant contributor with long term impact on sustainability of social development and human prosperity is the embedded value system that prevails within society’s operations. Such values and codes of conduct need not be legislated or somewhat formalised; rather they need to be internalized within the society’s political economy organs. With the help of such values, social trust is engendered and over time social capital...
Read MoreAfrica Within a World in Transition
The world is indeed in the throes of one of the most profound transitions in history. Not only do technological and economic changes have world-embracing effects, but also the prevailing socio-political dynamics has no historical precedence. This is not to say that in the past the world has not had periods of deep and game-changing transitions. For example the advent of industrialization in the 17th and 18th century culminated in the dawn of a new world order in which the West emerged as a dominant economic, military and colonial power. The ancient civilizations of India, Africa, China, Ottomans and Persians were subjugated for a few centuries to come. Yet in comparison with the contemporary transformative forces, the industrial revolution had limited reach and its impact was slow. The many forces of contemporary transformation in human and social life may be broadly divided into two categories. One group tends to integrate socio-political, economic, and cultural life across regions and continents. Such integrative forces tend to narrow the gaps across communities and nations, build bridges within and across cultures, and create rising levels of social capital even in the midst of very diverse and segmented groupings. The emergence of a global and fully integrated financial market is a case in point. Within the socio-political arena, the rise and growth of “borderless associations” such as ‘doctors without borders’, or ‘environmental activists without borders’ (Green Peace), and the like are all but part of the same dynamics. The other category of forces is inherently disintegrative. Whether in socio-political arena, or within the religious, cultural or economic sphere, such forces are inherently disruptive and conducive to the spread of mistrust within human communities. More often than not, such forces are driven by historic and failed ideologies of narrow self-protection and deep-rooted fear of “otherness”- I call this “otherphobia”. At present, the integrative and disintegrative forces are at play in every land simultaneously. Interestingly, modern communication technologies and social media platforms have facilitated the spread of both these forces and processes. Access to the worldwide web in real time across the globe, the international availability of technology nearly in all sectors, and the rising awareness of what is possible, viable and desirable, have helped create a variety of new communities- mostly virtual. Such virtual and deeply connected communities are a real threat to the establishments across the world. Globally, financial, economic, cultural, religious, social and political establishments are vulnerable to attacks by these virtual communities. Fairness and transparency, accountability and value-consistency appear to be the watchwords of the majority of these emerging virtual movements worldwide. Increasingly, to them the national boundaries and the conventional sovereignty considerations are of little importance. In this milieu, Africa is facing a multi-layered challenge. The continent’s economic growth has taken roots for the first time, and all indications are that industrial diversification could lead to sustainable growth. Yet on many other fronts the continent is struggling to establish institutions that are the effective conduits for channeling growth into social development and human welfare. Far too often, the post-colonial political establishments clash with the emerging social quest for accountability and transparency. A few exceptions aside, political institutions on the continent are largely extractive by nature. This means political leaders regard the machinery of the state as a means of self-enrichment and control. This, of course, they do in the name of sovereignty and political leadership. Legal and judicial institutions are equally and far too commonly bureaucratic, slow, and at time politically compromised. Economic and financial establishments are likewise typically dismissive of social and environmental care. Often...
Read MoreModernizing Food Security in Africa
One of the glaring ironies of Africa remains food insecurity and hunger in the midst of plenty. The continent has plenty of arable land, much of it is not used for cultivation and whatever is cultivated it is done so, by and large, without modern technology for production and with little, if any, consideration of optimal financial structuring for the farmers and for the society at large. Consequently, in effect when it comes to food security, much is left to chance and too many risks are unmitigated. Of course, commercial farmers on the continent do the best they can to insure against some of their risks. Te private sector insurance against agriculture is, however, known to be an incomplete market, it is as such inadequate and sub-optimal for meaningful risk mitigation in the sector. Food security has a substantial ‘public good’ dimension. When droughts, floods, and disease wipe out production, the farmers do suffer, but so does the society at large. Food shortages and sharp price increases are hard to manage for most in the society. Significantly, in the process, the poor suffer the most- many of them go hungry. Widespread malnutrition and even death do obtain. More often than not, socio-political instability also follows. Given the continent’s rapid growth over the past decade, and in view of the expected rise in living standards, it is a fact that food consumption is set to rise considerably and consistently. Meanwhile, worldwide food production has not kept pace with the acceleration in demand arising from the rapid increase in the standard of living of the population in the emerging economies. In South East Asia alone, an estimated one billion people have joined the rank of middle class with vastly different levels of food consumption. Africa’s own middle class is rising too. It is not surprising that access to land and investment in agriculture activities are in vogue again. On the continent there is a growing scramble by foreign investment houses for arable land. This has raised some socio-political concerns too. Given the history of colonialism and land dispossession, this is understandable. Mitigating the various risks in food security in Africa requires a number of interventions, amongst them three are the most critical. First and foremost is the clarification of land use regime. Whether in the form of private ownership or via long-term lease arrangements, the commercial use of land requires socio-political and legal clarity. Second is the application of modern production techniques and the promotion of sustainable institutional structures for ongoing research and development in the complex field of food and agriculture technologies. The third, and a vital, element is the use of appropriate public-private partnership to put in place an effective,efficient and sustainable crop insurance system. Worldwide, crop insurance has, conventionally, been perceived as a private sector activity and as such left to the insurance market to provide solutions. And, the insurance industry has provided some solutions too. However, the existing solutions are, by and large, inadequate and do not take care of the public good dimensions of food security and agriculture production. From a national and social interest perspective, crop insurance should be designed as a package of private and public risk mitigation solution. Internationally, there is a growing awareness that the existing private insurance market solutions are not effective. At the same time, governments’ support of the agriculture sector is often in the form of drought relief or some or other disaster relief interventions. These governmental schemes are typically neither timeous nor efficient. As such the combination of both private sector insurance and...
Read MoreAfrica’s Triple Challenges
Nowadays Africa is the darling of the global investment community. Report after report highlights the impressive actual growth and the promising prospects for the continent’s economic performance over the medium to long term. The so-called “dark continent” has transmuted into the “bright continent”. And, that is most welcome. However, for these sentiments and opportunities to be converted to sustainable socio-economic developmental momentum a number of key issues need clear recognition and effective solutions. Three of them loom large in this context. First and foremost, it is critical to recognize that there is a difference between the requirements of the short and medium term economic performance and those of the long term sustainable development. It is a fact that most African economies are growing from a low base at high annual rates. This is because at the early stages of growth, opportunities for investment are plenty and capital flows are insensitive to the critical role of economies of scale. However, when these short term- the so-called “low hanging fruits”- are exhausted, capital flows increasingly respond to market size, economies of scale in production, and the comparative advantages arising from well-designed and integrated infrastructural logistics- something that more often than not requires a great deal of transnational coordination and operation. In this regard Africa is way behind. Neither its political nor its institutional structures have moved far beyond the colonial mindset! The historic fact of Africa is that the colonial past left the continent with too many sub-optimal independent territories, most of whom lack the absolute or relative economies of scale. On top of it blind nationalism and even raw tribalism are still excessively prevalent on the continent. Yet, many countries are way too small a market to generate internal sustainable growth momentum for the medium to long term. In a world where increasingly global competitiveness matters, this is a real challenge that Africa has to overcome- and need to do so urgently. Even if political boundaries are kept, agreements have to be reached to facilitate investment and industrialization policies that are based on solid regional integration platforms. Second, and related to the above, is the need for industrialization across a set of industries where Africa, and sub-regions of the continent, have sustainable or dynamic comparative advantages. Once again, for such a strategy to be successful, economies of scale are vital. Strategically, the global factors are in favour of Africa’s industrialization. The continent’s resource base in some key sectors is rich, global capital markets are awash with “cheap capital”, and the required technologies are easily accessible. Examples in this regard include mining equipment industries, the petrochemical complex, food and agriculture industries, and clean energy generation. This favourable structural configuration is only the necessary condition. The sufficient condition, however, is to put in place the required long term framework that creates ample and evident economies of scale for investments in transnational logistics, market access, human resource development and capital market institutions that guarantee the medium to long term developmental sustainability. Importantly, Africa cannot replicate the industrialization templates of Europe, US, Japan or South-East Asia. The dynamics and requirements of industrialization differ at different times for different regions. In this context, the national policies within Africa are unlikely to succeed unless and until they are integrated into the continental or sub-continental industrialization strategies. The third, and most important, challenge is related to human resources development, with focus on the youths. It is a fact that Africa has one of the youngest demographic structures at present. Global projections indicate that for the next four to five decades, African demographics will be dominated...
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