Understanding why nations succeed

Tuesday January 8 2019

Mr Elly Twineyo Kamugisha speaks during a press

Mr Elly Twineyo Kamugisha speaks during a press briefing in Kampala recently. COURTESY PHOTO  

By Elly Twineyo Kamugisha

Today I want to make a contribution to this topic. I have been seeing several articles in the media. There is a lot of discussion by academia and politicians on why nations fail. Most of them, including my own book - Why Africa Fails - have focused on why nations fail.
There is need to focus on why nations succeed. This is a positive way of looking at how other national succeeded at achieving economic prosperity.
What lessons can we learn from them? What does the success of those countries that have achieved impressive growth teach us? Can we learn from our mistakes, not necessarily from the achievements of others?
Why is it that most countries that are not developed are in the continent of Africa? Does the private sector drive growth?
A discussion in this direction will not only be important for Uganda, and indeed any other African countries, but for all those countries that wish to move towards economic prosperity.
Given a chance, I will present more detailed discussion of those factors, including the initial conditions that explain why nations succeed.
For a nation to grow and realise economic growth and later development, it will move beyond having the factors of production to consider production and productivity, technology and entrepreneurship. It will take into account more than this.
I will present the factors accounting for economic prosperity here not necessarily in a chronological order.

Geography
There is the issue of landlocked and sea access. Several countries that have access to international waters benefit from access to cheap sources of transport, among others.
Another is that your neighbours matter. Switzerland is bordered by its markets. So is Uganda.

Institutions
These matter a lot and this has been said and written about. Some recent writers, Acemoglu et al, 2012, Why Nations Fail, have actually singled out institutions as the only cause of economic prosperity.
They have looked at inclusive versus extractive institutions to explain economic prosperity. They write that where there are inclusive institutions (where every citizens has economic freedom to contribute to the productive sectors of the economy), economies thrive and that where there are extractive institutions (where a small clique of elites capture the economy and enrich themselves) nations fail.
Of course this is not true. Institutions alone cannot cause economic prosperity. However, with institutions alone you cannot grow an economy.
You need other factors that we are looking at in this articles. Lest I forget. Let us not talk of only institutions that are associated with politics.
Let us also consider those institutions that support private sector development, savings, investment, exports, and tourism.
The private sector these days drives the economy. By investing, hence creating jobs, and producing goods and services which are then consumed, used as inputs for other businesses, or exported, the private sector is responsible for most of economy’s production.

History
There are factors of history that account for the poor performance of some countries, and ethnicities even in countries such as US and UK.
It is hard to ignore the effect of slave trade and slave labour and discrimination of the blacks in different place.
Attitude towards some ethnicities shows some reality of unequal development of place and people. Colonisation, and its effects, has been discussed by several researchers and others.

Culture
Issues of morality, frugality, and savings culture are all important for economic prosperity.
Patriotism has been talked about but not strongly. There is a relationship between peoples love for their country and their contribution to its prosperity.
Initial endowments such human capital considering population and education and skills
Planning and implementing the development of human capital is important for the growth of nations.
Human capital matters. Education and skills are relevant to the production and productivity of an economy.
A country should be able to tailor its education and skills to utilise the type and nature of the resources it has at any particular time of its growth.
This is also associated with the quality of life. Quantity of population may but its quality matters a lot.
Countries like UK, USA, Germany, and recently China has benefited from this approach.

Timing
There comes a time when a country, have fulfilled initial conditions and is ready to move forward.
Time is of essence. There are missed opportunities sometimes. There comes a time when you find that you may be the well-positioned country to supply certain product at that time and get national prosperity out of it.

Factors accounting for economic prosperity

Democracy
Several writers, including politicians, have had discussions on this topic. Several arguments but related have argued that African countries are not developed because they suffer a democratic deficit.
That regular elections are important for democracy, human rights and development. In a nutshell, they argue that democracy is a cause of economic prosperity. Is this true? The analytical evidence present the contrary view.

That democracy is actually an outcome of economic growth. Analysis has found ‘no cause and effect relationship’ between democracy and growth, but it instead the other way.
Look at countries that are developed. Did they have democracy when they were developing? Let us first note that US and UK of 200 years ago.
Democracy was growing by decades. Now they are developed and democratic. Let me say this.
Democracy is good for society but it is a process not an act. We should all work towards economic prosperity and democracy.
Marketing and well function market for the private sector
This may not have been necessarily a factor when developed countries developed. But now it is.

Naomi Klein, in No Logo, tells us that a plain cotton T- shirt sells at $10 but when branded it sells for $150.
Branding is about marketing. Marketing matters for a company or the country. You need marketing research and information analysis to inform SMEs.
Information acquisitions is expensive and SMEs cannot afford this. Governments in several countries have been supporting their SMEs with market information to guide their export ventures, FDIs, and tourism.

The writer is the author of Why Africa Fails (The Case for Growth before Democracy) and the Uganda Export Promotion Board executive director

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