By Obadiah Mailafia
ECONOMIC growth is the foundation of all material prosperity. In our age, quantitative growth is not enough – it has to be sustainable. By sustainable growth we mean a rate of output that meets the needs of the present society without compromising the ability of future generations to their own needs. To be meaningful, sustainable growth must not only meet with the demands of planetary boundaries; it must also be inclusive as well as equitable.
While growth is a quantitative phenomenon largely measurable by GDP; it is not synonymous with development. The latter is understood as structural transformation of the economy as it translates into livelihoods and higher quality of life and standards for the generality of the populace. Sustained growth levels are good for the economy because they put the national production system in full throttle, generating higher incomes and boosting aggregate demand. Lower levels of growth, on the other hand, can lead to goods deflation, industrial layoffs, labour surpluses and higher levels of unemployment, higher public sector debt and general feelings of hopelessness.
The LSE Growth Commission on British industrial growth, headed by the economist Philippe Aghion, defines economic growth with emphasis on its inclusive and distributive elements and its capacity to empower citizens: “Economic growth is the increase in a country’s capacity to produce goods and services. We care about such gains because they lead to improvements in citizens’ material wellbeing through higher consumption, greater leisure and/or improved public services. We prefer these fruits of growth to be as inclusive as possible rather than for them to be appropriated by a small, fortunate slice of society….equipping citizens with skills gives them the best chance of participating in the process of growth.”
Growth and development are, of course, intertwined. It is inconceivable that human development could be achieved without significant and sustained increases in output growth. But this is not to say that growth will automatically usher in development. For example, many years ago, it used to be said in Brazil that “the economy is doing well but the people are not”. An economy can do very well in quantitative out growth even as the generality of the populace continue to lament worsening living conditions.
This phenomenon of growth without development is particularly pronounced in the case of Nigeria. Some years ago, the World Bank published a country report on Nigeria that characterised our development trajectory as one of “jobless growth”. Today, most of our economists are agreed that the economy is currently on the path of recovery from recession. Unfortunately, the misery index for Nigerians appears to be reaching despair levels. Growing insecurity across the country, deepening poverty, polarizing inequalities and rising unemployment, particularly among the youth, leaves most Nigerians unconvinced that their life-chances are improving.
In our day and age, sustainable growth must be seen as an inseparable part of human development. But it also has to be understood that the process is not automatic. Governments must make deliberate efforts to channel growth processes in a manner that serve the goals of sustainable human development. Policies must be built to ensure sustainable harnessing of natural resources through technology choices that protect the environment and optimise natural-resource utilisation for present and future generations. Issues of equity must also be taken into account.
Thinking of equity in sustainable growth requires us to focus on three forms of equity. First, there is what we would term vertical equity – the relationship between rich and poor and across the various segments and classes of society. Equally important is what we would term horizontal equity – the relations between various groups and regions within a country. For example, in Nigeria there is a widening economic gap between the North and the South. In our country today, poverty wears a predominantly Northern dashiki. There is also the imperative of intergenerational equity. This refers to the obligation of present generations to utilise the country’s national patrimony in a manner that leaves something for future generations. This is why countries such as Norway, Qatar and UAE have large sovereign wealth funds running into hundreds of billions of dollars. Nigeria’s Sovereign Wealth Fund has a low asset-base of US$2.15 billion, which pales into insignificance when juxtaposed with that of its comparators.
The World Bank created the Commission on Growth headed by Nobel laureate Michael Spence to report on the nature, dynamics and sources of growth for developing countries and to suggest possible frameworks for driving successful growth strategies. According to the Spence Report, the most successful growth economies are those that are hooked on to the global economy. Such countries tap into the global knowledge economy and are particularly strong on human capital. In addition, they enjoy macroeconomic stability. They tend to also possess a high level of savings while also being oriented towards strong public as well as private investments. Successful growth countries also implement effective strategies for rapid structural diversification and continuing structural transformation. Growth-driven countries also provide effective market incentives while maintaining flexible labour markets
Equally crucial is the quality of political leadership in their ability to make strategic choices while articulating a coherent growth strategy. They also have to be able to communicate the new vision so as to get buy-in from the citizenry, in view of the short term sacrifices involved in high investment rates. Leaders of high growth countries also have to maintain a persistent, determined focus on the goal of inclusive long term growth; build consensus among stakeholders; and create “pragmatic, effective and when needed, activist government over time”.
One of the most important insights from the Report is to confirm the correlation between growth and poverty reduction. There is empirically grounded evidence that growth is a necessary condition for poverty reduction in developing countries. The case is established that it is arithmetically improbable that poverty reduction could be effected in the poorest countries merely through redistributive strategies without commitment to high growth.
While these principles apply universally, Spence cautions that countries such as those of Africa may be hampered by their small size, landlocked and isolated geographical location and long history of dependence on natural resources, ethnic divisions and weak states.
We agree with Dani Rodrik of the Harvard Kennedy School of Government when he asserts that those who wish to promote rapid growth in their countries have to give ultimate consideration to “first order principles”. These include protection of property rights, contract enforcement, market-based competition, appropriate incentives, sound money, debt sustainability and good public institutions that deliver these first-order principles effectively. He also makes the important point that igniting growth is not the same as sustaining it. Igniting a growth process requires a mix of reform policies while sustaining it requires institutionalisation of mechanisms that ensure the resilience of the economy in full awareness of local constraints and opportunities while driving economic dynamism and building capacity for resilience over the long-term.
As we all know, Nigeria, like other developing countries, subscribed to the internationally agreed Sustainable Development Goals, SDGs, which covering the years up to 2030. It is a successor to the Millennium Development Goals, MDGs, that covered the period from 2005 to 2015. The SDGs comprise a set of internationally agreed targets focused on 17 Development Goals ranging from elimination of poverty and hunger to improvements in health, quality education, gender equality, clean water and sanitation, renewable energy, job-creation, infrastructure development, climate action, justice and peace.
Our own Amina Mohammed, currently Deputy Secretarial-General of the United Nations, owes the singular honour of being the person who crafted the global SDGs. I know how hard she and her colleagues worked on that project. With the benefit of hindsight, Nigeria’s performance on the defunct MDGs was not particularly impressive. I fear that, after more than a year of non-action in the successor SDGs, history seems to be repeating itself. We in this country are yet to mainstream the SDGs into our various MDAs and budgetary systems at federal, state and local government levels as expected. Public discourse on the programme is rather weak, even as political ownership and the requisite delivery systems are virtually non-existent. We seem to be on the pig-headed path to bungling it all over again. Surely, there must be a better way to manage an economy as if people matter!