Promotion and Management of Economic Development

This essay discusses the ability of the governments in developing countries to promote and manage economic development. In essence, the essay discusses the fact that the governments of developing economies understand the problems they face and have a set of priorities, and that the heads of government may have personnel educated and trained abroad who are familiar with recent economic thinking, plus the possibility of support from international institutions. However, they may lack the resources to implement policy, elements of the economy may be outside their control, they may have corrupt bureaucracies, may lack competence at different levels of government and may set anti-developmental priorities. In addition, the problems they face in managing their economic development may be the result of external factors beyond their control, and the narrow base of the economy may make them very susceptible to external shocks. In addition, policies once implemented may face conditions, either internal or external, which cause them to fail. In general, the essay considers that East Asian economies supply examples of competent economic management, while sub-Saharan Africa has a record of failed economic management.

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Africa has heard calls for democracy for many decades, both from internal and external sources, and due to external and internal factors (Darga, 1997), however, especially in this climate, where nations go to war in the name of fighting for democratization, it is important to realise that governance and democracy are not the same thing. Governance, i.e., governing the people in a responsible manner which leads to equal economic prosperity for all inhabitants, is not the same as democracy, which can be defined, in its simplest terms, as “rule by the people”, and these two ideas have very different practical applications and outcomes, although they are interrelated, and both have emphases which can be political or economical. The World Bank defines governance as “the manner in which power is exercised in the management of a country’s economic and social resources for development” and it is under the terms of this definition that the present essay shall move forwards, even though this definition does not specify that democracy is a pre-requisite for governance.

As can be seen from any analyses of the present state of the economies of these two continents, Africa and East Asia are at very different developmental stages, in terms of social, economic and also political development, perhaps because, in Africa (for example, Zimbabwe), leaders have often failed to deliver on their promises for enhanced economic performance, with changes of regimes also failing to improve economic or social conditions; on the other hand, in East Asia, for example, in Japan, which came very late to industrialisation, under a Western framework, a market system was created which has led to sustained economic success for this economy. Further examples from East Asia, such as Taiwan and Korea show that strong governance, in the formation of rent creating avenues, such as fiscal incentives and protection and promotion, can lead to the formation of an environment that is conducive to private investment, which propels the country to economic success (Darga, 1997). Thus, governance is of fundamental importance to the economic success of a nation, and nations without strong governments cannot promote and manage economic development, at least not in the long-term.

Thus, the need for positive governance is fundamental, in terms of developing architectures which allow future economic prosperity, but it can be seen, across the less developed world, that even if the governments of developing economies understand the problems they face and have a set of priorities for tackling these problems, and even if those heads of government are assisted by personnel who have been educated and trained abroad and who are familiar with recent economic thinking, these governments may well lack the resources to implement policy, elements of their economy may be outside their control, they may have corrupt bureaucracies, they may lack competence at different levels of government and may set anti-developmental priorities. In addition, the problems they face in managing their economic development may be the result of external factors beyond their control, such as payments to impossible external debts, and, as such, the narrow base of the economy may make the country very susceptible to external shocks.

A case in point here to illustrate this is Colombia. Colombia is very rich in natural resources, and indeed the government has just begun the process of privatizing its oil resources, through Ecopetrol, but the country has massive external debts, which cripples its economic structure (Solimano, 2000). In addition, the country is beset by other problems which do not allow progress in economic development: it is in the middle of a civil war, between left-wing guerrillas (the FARC and ELN) and the right-wing paramilitaries, said to have been formed as counter-guerrilla movements by the current President, Alvaro Uribe (Solimano, 2000). On top of this, which does not allow the country to flourish, economically, as many people who are able to work cannot do so due to the fighting in large parts of the country, or due to the fact that working in the illegal drugs industry is more lucrative when you need to feed your family, the country is being coerced in to signing a free-trade (the TLC) agreement with the United States, which, under the guise of ‘free trade’ and ‘trade liberalization’ would basically mark the end of Colombian agricultural production in some sectors, due to the expected influx of massive amounts of highly subsidized goods from the United States (Solimano, 2000).

This situation, however complicated it is by the conflict over drugs, is not unique to Colombia: many less developed countries find themselves run by competent governors but unable to forge ahead economic development due to many adverse external factors which cripple any economic progress they try to make (Smith, 2007). Thus, whilst many in the West can blame the problems of the less developed world on the lack of adequate governance, this simply is not the case on the ground in many of these less developed countries. For some of these countries, Argentina, for example, which just passed through one of the worst economic crises of recent times, due to a miscalculation of its foreign exchange system, crippling levels of external debt, which have yet to be forgiven, mean that interest payments make up the bulk of the country’s expenses, at the expense of urgent social development programs. This leads to further problems for less developed countries: as social programs are ignored and left aside, through lack of funds, the youth become more disillusioned still, making it difficult for them to be educated fully, making it difficult for them to find work, and thus making it easier for them to enter in to crime, posing far greater social problems for the country concerned (Smith, 2007). It has been suggested that this vicious circle can only be broken when the full extent of the contribution of external problems to the problems of less developed countries is acknowledged fully, and acted upon, by, for example, offering debt relief.

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Thus, the problems of governance and how these relate to the problems of less developed countries is an agenda to be taken seriously, but not as an agenda in itself, but rather as a means to an end, especially bearing in mind that good governance can only come about when the populace has a certain level of social coherence (Smith, 2007). It is a rather obscure form of negative cultural relativism that assumes that less developed countries cannot ‘manage themselves’ solely because of the problems of government. People in less developed countries, especially those who have been educated abroad, are as capable than people in developed countries, in terms of formulating solutions to the present problems and implementing these solutions. The ability of the governments in developing countries to promote and manage economic development is generally not a function of the personnel involved, although factors like corruption and lack of democracy are, often, present and highly negative, but rather a complex reaction to a range of factors, both internal and external, which usually mean that whatever government is in place in a less developed country cannot fully solve the problems present in that country at any particular time, due to the magnitude of those external and internal problems: the ability to solve those problems, to allow for the promotion and sustenance, of economic development simply is not possible, especially in those countries with no industrial development to speak of (i.e., many African countries) and those countries with other problems (i.e., Colombia or Afghanistan, for example, where civil war, related to drugs, prevents true economic development) (Smith, 2007).

There is no panacea for how to achieve sustained economic development in less developed countries, due to the myriad of inter-related problems facing each and every one of these countries, and the idea that the ability of the governments, alone, is responsible for promoting and managing economic development in less developed countries is naïve, to say the least. Developed countries have a responsibility to the less developed countries to offer fair aid to these countries, so that they might be allowed to govern themselves, from a level playing field, towards sustained economic development.

References

• Cheema, G.S. (2005). Building democratic institutions: governance reform in developing countries. Kumarian Press.
• Darga, L.A. (1997). Governance and economic development in Africa. Available http://www.unpan1.un.org/intradoc/groups/ public/documents/CAFRAD/UNPAN008715.pdf [28th October 2007].
• Jreist, J.E. (2001). Governance and developing countries. Brill.
• Pang, G. (2005). Efficiency of public spending in developing countries: an efficiency frontier approach. World Bank Policy Research Paper No. 3645.
• Pitt, A. (2005). New forms of governance: the role of the World Bank and civil society in Argentina. Thesis, Oxford Brookes University.
• Smith, B. (2007). Good governance and development. Palgrave Macmillan.
• Solimano, A. (2000). Essays on Conflict, Peace, and Development: Colombia (Conflict Prevention and Post-Conflict Reconstruction). World Bank Publications.
• Van de Sijpe, N. and Rayp, G. (2004). Measuring and explaining government inefficiency in developing countries. Working Paper of the University of Ghent.