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12/10/2018 "The Black Economy 50 Years After The March On Washington"

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Africa and Aboriginal Tuesday: A Shift From Poverty Reduction To Wealth Creation in Africa by Prof. Peter Anyang' Nyong’o

*Editor's note: The following is the text of the keynote address delivered by Prof. Peter Anyang' Nyong’o during the 26th Roundtable Conference of the African Association of Public Administration and Management (AAPAM). The conference was held from March 7th 2005 to March 11th 2005 at the Whitesands Hotel, in Mombasa.

It is my great pleasure to be invited to come and give the keynote address to this conference, particularly on the topic of wealth creation. As some of you may know, Kenya is at the moment in the second year of implementing its Economic Recovery Strategy for Wealth and Employment Creation 2003 to 2007, usually shortened to the ERS. Therefore the topic of wealth and employment creation in Africa is of special importance to us in Kenya, and I am very pleased to be asked to come and speak to this distinguished audience.

Indeed, when we were preparing our economic recovery strategy framework early in 2003, we in the Ministry of Planning and National Development were taken to task by many NGOs and development partners over the idea of “wealth creation” as the central focus of our recovery strategy. Against tremendous odds we persisted, knowing full well what the political economy of capitalist development entails in terms of wealth creation and employment generation. I will speak more on this later.

But let me begin by congratulating the AAPAM for joining the paradigm shift towards discussing and implementing “wealth creation” rather than “poverty reduction” or “poverty alleviation”. I feel obliged to urge you to shun the use of terminologies like “pro-poor policies” and shift our focus to policies that enable us scale up investments in agriculture, social welfare and infrastructure development so as to create the wealth from which economic growth springs and poverty is reduced and eventually eradicated. This indeed has been the history of many nations since Adam Smith wrote his “Wealth of Nations”, Karl Marx his “Das Kapital” and Milton Friedman his “Capitalism and Freedom.”

I think I should start with some thoughts on this, because I have seen that you have devoted an entire session to discussing wealth creation by poverty reduction or alleviation, a debate that we already had and concluded in this country.

This debate has become more than a matter of semantics. In my view, it has to do with a basic understanding of economic history and an appreciation of the political economy of development in the globalized economy of today, replete with the ideologies that seem to be more concerned with the inhuman effects of underdevelopment rather than the eradication of underdevelopment itself. It is the debate on these ideologies to which we have paid more attention in Africa rather than on the much more challenging task of eradicating underdevelopment through wealth creation.

To some people, wealth creation is a bad term, it denotes “trickle down”, that is, the wealthy get even richer, and the scraps come to the people at the bottom. For such people, the politically correct “bottom up” term is “poverty reduction” or “poverty alleviation”.

Using an analogy, if poverty were a disease, these folks prefer to tell the patients to get themselves less sick, i.e. reducing or alleviating the sickness. The result is a handout mentality and worldview, that sees governments, development partners, and charities handing out “poverty reducing” goods and services to helpless people in the developing countries.

To others, like ourselves in the NARC Government, we see wealth creation as a good term. We define wealth creation as increase in assets, however modest this may be. When my mother’s goats increase from three to five, her liquid assets (or rather assets on hoof) have increased by two thirds! Her wealth status, with five goats is better than when she had three! The idea is to turn the five into eight, the eight into ten, the ten into twelve, and so on! Finally, when the goats are too many, to sell some and use the money to buy shares in the stock market in Nairobi. This is what is called the accumulation of capital, a process that cannot be set in motion without wealth creation.

The result is an asset building and endowment mentality or worldview, that sees governments, development partners, and charities working together to reduce poverty in the context of measure, policies, and programmes that increase assets (including human capital) and incomes at the bottom of the pyramid.

You must ask yourselves the following hard questions. First, do the poor have resources at their disposal that they can put to better use if they are facilitated? Second, what do the poor lack in order to be productive members of society? And third, who can work with them to address their capacity constraints?

Addressing these challenges does not really require “handout approach”, but a facilitative and capacity creation approach.

I think this difference, between creating a handout culture that comes along with its dependency syndrome, and creating an endowments culture that is accompanied by a self-reliance attitude and a wealth creating economy is critical if Africa is to get beyond the dismal picture that is painted in the Aide Memoiré that AAPAM has prepared for this conference.

I want to believe that AAPAM can make a difference because, as you are constituted from the top leadership in public administration and the private sector, you are the people who make society tick. Some of you here are the heads of public service and cabinet secretaries in your countries, which in effect make you the chief operating officers of your governments. Others are permanent secretaries, while others are top public and private sector managers. If AAPAM, which comprises the cream of African administrative and technocratic leadership cannot make the difference in Africa’s transformation from the poorest continent, afflicted by all the apocalyptic horsemen found in the Book of Revelations, then who can?

Ladies and gentlemen, if AAPAM is to play its role in creating the necessary momentum for the wealth creation paradigm, this conference must be part of the effort in identify what works, how it works, when it works, and where it works in terms of the critical elements, institutions, and instruments that will endow our people with the physical, social, and economic capital to become prosperous, and take their place in the global market.

This is not as formidable a task as it sounds. The elements are known, and you have identified some of them such as owning the wealth creation process ourselves as Africans instead of depending on donors; implementing and upholding the rule of law; having strong and enforceable property rights for all including the informal sector; creating and strengthening the institutions that enable the creation of wealth and employment opportunities; and turning the public service into a vehicle for enabling opportunity, prosperity, equity and good governance for all in Africa.

I hope you don’t simply recite these things as a matter of ritual, but that you believe in them and you have intellectually internalized them to the extent that they guide your actions, policy formulation and policy execution. Development is not a routine thing; it is a process that is consciously thought out and executed over time. That is why 5-year or 10-year development plans are still a necessity in our development nations, as the Indian case now shows very clearly. Ever since the Nehru-Mahalanobis third development plan of the late fifties, India has systematically built on her achievements, undertaking reforms within a specifically Indian paradigm, always ensuring that the goal of wealth and employment creation is not lost. The tremendous growth rate, the $130 billion foreign exchange reserve and the 60 million tons food reserves in a population of 1.3 billion people where nobody goes without a meal is something that Africa should take serious note of.

In reality we know what works. Therefore, Africa’s problem is not in knowing what it must do, we have listed these things and discussed to death in thousands of papers, speeches, workshops, seminars, and peer reviewed journals. Our problems begin with the how to do it, when to do it, and where to do it. When it comes to how to do it, we as Africans have abdicated our thinking and doing caps to the development partners and charities from the West.

Let me challenge this distinguished group to tell us why it is so difficult for an African country to determine the “how”. Why is it that Africa’s “how” has always been based on donor driven fads and paradigms. In the 1970s and 1980s, we were all excited and funded for “basic needs” and “integrated development”, but before we could get our act together, these fellows had the Berg report, and pronto, we were moved to “structural adjustment”. We struggled with “structural adjustment” in the 1980s, without adjusting any structures, oil economies remained that way, coffee and tea economies stayed that way too!

Towards the end of the 1980s and into the early 1990s, just as we were getting fed up of these programmes that were impoverishing rather than adjusting our economies upwards, a new fad came by “privatization”. So in the early 1990s we all went into privatization and for most of that decade undertook privatization in ways that produced mixed results at enterprise level but did not change our ordinary people’s lives for the better. We closed the 20th century and entered the 21st with the “poverty reduction strategy papers”, most of which have not led to any change in the poverty status of our countries, which is why now in the 2005 to 2015 we will need to be targeting the “millennium development goals” or MDGs which have been declared unattainable for Africa anyway!

If this is not bad enough in terms of the enormous damage wreaked on our economies and societies by the truncated development arising from the conflicting and often contradictory changes in the development fads, we also allowed ourselves to be told “when” to do what needed to be done, and “where” to do it. This often came in the direct form of “conditionalities” that were time-bound, or in the more disguised form of technical assistance that was attached to the loans and grants.

The sum total of this situation is that while we can truly blame ourselves as Africans for the mess we are in, this is because we abdicated to do the “what”, “how”, “when” and “where” to develop and prosper ourselves. We as policy makers since the 1960s, that is presidents, prime ministers, ministers, permanent secretaries, and top managers of public institutions bear collectively (with our predecessors) the greatest blame for the sorry state of the continent. We underestimated our internal capacity to get development right, and overestimated that of outsiders!

Now forty years later, we have the chance to make things right, to rightly estimate our capacities and abilities to deliver democracy, accountability, the rule of law, strong and enforceable property rights that fully include women and the informal sector, sound and well maintained infrastructure, strong and well manned public institutions, and equitable endowments and opportunities to all of our people. We know that outsiders cannot do it, and yet we still persist in seeking their assistance. We know that Asians did it by themselves, why are we as Africans afraid to do it by ourselves?

Even if we fail in some areas, we have nothing to loose, we have failed so badly in the past. However, we have so much to gain, because really, we have never exerted ourselves as leaders and managers to do our very best for the people of our countries, which means that our chances of succeeding beyond our expectations are very high if we make a determined, disciplined, diligent, and consistent effort to turn our countries around and at least achieve those MDGs! We cannot afford to be the only place on earth where life continually gets worse rather than better with the passing of the days!

Ladies and gentlemen, let us go beyond more papers and discussions! Let us propose and recommend deliberate actions that will be used to take back the “what”, “how”, “when” and “where” to ourselves, which is the essential message of the New Partnership for Africa’s Development (NEPAD). What I am suggesting is that let us have Africa’s top technocratic leadership which is gathered here reassure us the politicians that “we can do it” by the end of this conference. Let us be assured that we have the capacity to be totally in charge of the development agenda that will create wealth with equity in our societies, and that we can develop our own frameworks that allow external partners to work with us towards our goals rather than us work for them towards their goals, which has been the reality of aid for so long.

I say this because I know that it can be done. Reading Lee Kwan Yew’s “Singapore Story: From the Third to the First World”, we get to see what it takes to create wealth, abolish poverty and enter the high road towards being members of the First World within a matter of two decades.

Singapore has a clear and focused political leadership, from the head of government downwards, with a civil service and political carder that is well trained and well remunerated, and that exercises its mission free of corruption and is committed to good management of public affairs. Working in partnership with an enterprising private sector, the Singapore state enables wealth to be created and employment to be generated. This is no rocket science; any African state today can become a Singapore just as they can become a Netherlands of Africa.

Malaysia, thanks to the focused leadership of Mahathir Mohammed that spanned two decades, will say goodbye to poverty within the next five years, and meet all the MDGs. In the 1970s, the economy of Malaysia was doing much worse than that of Kenya; when they decided to take off, we decided to retrogress into corruption, the mismanagement of public affairs and the impoverishment of the majority of our people. Over time we destroyed the wealth we had created by looting the National Social Security Fund and most pension funds. We privatized state owned enterprises not to make them create more wealth, but to enrich the wayward comprador bourgeoisie. Except for the successful story of Kenya Airways, other privatization initiatives do not have very good stories to tell in Kenya.

Yet we know that it is from the proper management and investment of pension funds that Singapore built a formidable education system, provided houses for all her peoples and guaranteed retirees life after retirement. Malaysia, likewise, is currently leapfrogging into the era of information technology through an education system that produces world class Malaysian engineers as the basis of the success of her multi-media corridor in Kualalumpur.

How do we manage what we have? How do we invest it? How do the results of our investments stimulate other investors from within and without?

Wealth and employment creation are the outcome of success in investments, not simply the infusion of aid into our economies. Aid that is not synchronized effectively with investments and capital accumulation remains simply what it is : aid. Aid can help the state to develop the capacity to deliver certain services that improve the environment for private sector investments. For example, the Roads 2000 project in Kenya that is financed by the Swedish government can help build rural access roads that will make it easier for farmers to deliver their commodities to the market. With improved market access, farmers can be able, like the case of my mother that I referred to earlier, to create wealth and generate employment more successfully.

If we remain focused on wealth and employment creation as the foundation for rapid economic growth in Africa, then we shall be able to remove all kinds of cobwebs from our eyes and se our future more clearly. We shall then also be able to see why we need regional economic integration, and the vital role that infrastructure plays in this, as a way of fortifying the home market for enhancing wealth and employment creation. We shall also seek to reduce the transfer of our wealth to the OECD economies through such sinister processes as debt servicing for debts already more than over paid, tied aid and over valued technical assistance, unequal exchange in the international trade architecture and the continued pillage of our raw materials by multinationals as is currently happening in the Democratic Republic of Congo.

If indeed the OECD governments accept that the 21st century must be a world of global partnership so as to secure the century for all humanity—which we must—then all of us should revisit that speech that Secretary of State George Marshall gave at Harvard University in 1947 with regard to reconstruction and development in Europe after the Second World War. He called on the USA to grant Europe billions of dollars to reconstruct its battered economy, infrastructure and social services. Marshall feared that if this was not done, Europe would continue to be a threat to global peace and prosperity. But the European states had to be democratic, respect human rights and be properly managed.

I do not think that the devastation that Europe underwent during the Second World War is any greater than what Africa underwent from slavery, through colonialism to imperialist underdevelopment that has continued to bedevil us since the end of that War. Chancellor Gordon Brown seems to have reconciled himself to this historical reality, and has rightly called for Africa’s Marshall Plan (or should we call it “Gordon Plan”) if indeed the OECD has to graduate from giving Africa inconsequential aid to joining Africa in a massive onslaught to eradicate poverty in our lifetime.

These, I would hasten to add, are issues that we cannot ignore when we are talking about wealth creation and development in Africa. But once more, let not our deliberations be ritualistic; let them be aimed at feeding into our concrete politics of development and the concrete “action plans” that we shall recommend to our governments, private sector and well meaning development partners.

Thank you ladies and gentlemen.

Hon. Prof. Peter Anyang' Nyong’o, EGH, MP, serves as Kenya's Minister For Planning & National Development.

Peter Anyang' Nyong’o

Tuesday, May 3, 2005

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