First Things First in Development

Posted by on Oct 24, 2013

First Things First in Development

When exploring the various elements of the sustainable socio-economic development, it is vital that we are guided by the golden rule of “first things first”. To this end, the following five factors are the foundational building blocs of any successful socio-economic policy framework.


First and foremost is the creation of a capable state, vastly different from what most developing countries have at present. An effective and efficient state, with appropriate skills and requisite structures, is an indispensible architectural component of a successful economy.


In nearly all developing countries, the failure to create a public service working environment, based on merit and performance, has resulted in the deepening of a culture of mediocrity within this sector. This managerial culture generates inordinate amounts of inefficiency and exacts a heavy welfare loss, particularly on the poor. Furthermore, in times of sustained economic growth, an ineffective public sector widens the income distribution gap, thereby deepening the structural unemployment and prolonging systemic poverty in the country.


The second basic requirement is to deal with the drivers of the country’s systemic poverty. Poverty, and more precisely the iniquitous pattern of income distribution, will never change until an effective human resource development is put in place. Over the medium to long-term, in the fight against poverty, there is no substitute for an effective education system. The creation and augmentation of human capital is essential for breaking out of the vicious circle of poverty. Historic evidence suggests that it takes at least one generation to make a real dent in systemic poverty, provided a sound education system operates within a well-integrated national human resource development framework. This in turn requires a well-integrated education and training systems.


The third basic need of sustainable development is a well-defined industrial strategy that is rooted in the country’s comparative advantages and enhanced by an appropriate mix of factor prices and implementation institutions.  The golden rule of any industrialization strategy is to begin with the country’s “initial endowment”. After that, meaningful and extensive consultation across key social stakeholders is vital. It is important to state the obvious that industrialization happens primarily through the private sector. As such it stands to reason that the private sector should have substantial involvement in the process of identification of target industries and the implementation of the set goals.


The fourth essential requirement is the alignment of and coordination among the cross-sectoral and inter-generational infrastructure programmes. The economics of limited resource use requires alignment and sequencing. This is more true the more complex an organisation gets. It is stating the fact that the public sector is the most complex organisation in almost any country. As such, the role of cross-sector alignment is so much more critical. Yet, more often than not, the operations of the state departments and state-owned-enterprises are fragmented into various silos and do not favour coordination and alignment. As a result large scale losses occur. Such losses take the form of actual as well as potential lost opportunities.


The last, but not the least, of requirements is the toughest of them all. It may be argued that the most critical challenge facing the sustainable socio-economic development is the absence of a set of well-defined and generally accepted ethical and moral values. As the forefathers of modern economics have convincingly argued, no socio-economic system is sustainable, let alone prosperous, without a set of moral values that are generally internalized across the society. The introduction and internalization of a value system is much easier in a homogeneous environment than in a setting where diverse cultures, religious beliefs and ideologies are involved. In such environments, there is a serious risk of value inconsistency creeping into business practices, government operations and societal structures. Special care should be taken to avoid a socio-economic milieu that admits and promotes ‘duality of values’.  Such ‘duality’ obtains when the stated (formal) values diverge from the practiced (informal) values. An environment filled with a duality of values is conducive to operational inefficiency and ethical inconsistencies.


The world over, private and public finances have been shaken to the core, the global economy remains precarious and nearly all societies are in search of remedial policies and effective governance modalities. In such a milieu focussing on the basics is methodologically sound. Whilst the temptation may be strong to want to focus simply on some or other elements of macroeconomic policy, the fact is that it is long overdue that we put “first things first”.