allAfrica.com: Rwanda: The Asian Miracle - Lessons for Policy Makers. Part 2 (Page 1 of 2)

As pointed out in the earlier article, the failure of African state holds clues to the dismal performance of their economies in comparison to their Asian counterparts where the state was the main agent for development, at least in the early phase of their development, although later on, the private sector took on its agency role to spur development of Asian economies.

Thus, Aron, (1997) pointed out that, redefining the institutional framework, including the quality of public and private economic institutions, particularly governance structures (or polity) and the extent of social capital or civic engagement, holds the key to turning round the development of African economies.

He in particular emphasizes development of strong institutions which supersede political systems and individual political elite in matters of economic and social management as crucial to the sustainable development of African economies and that, what African economies have been beset with, is a form of uncertain and unsustainable political interest groups (instead of systems) ranging from colonial groups, that mentored post-colonial African political elite of dictators, and despots, and finally to democratically elected leaders who bore the legacy of their despotic fathers and mentors.

In short, African economies did not evolve a political economy that could serve the common good as an end in itself, but rather evolved one that served political elite in the name of serving common good.

Good news is that, despite a number of pessimistic views advanced by western economists who view Africa as one country (and a hopeless case for that), and in a few cases rightly so; a number of African economies are awakening to the call of political economy unusual, and this is bound to last as long as human capital development taking place in Africa keeps up the pace, thereby demanding their rights and claims to all spheres of political, economic and social endeavors of their economies.

More so, the young generation of African leaders who in many ways have not had mentors from old school of political thought, are making their mark on a number of economies.

These are leaders who have the zeal and courage to oppose and/or challenge the (Washington Consensus that will in part, not escape the blame for the failure of African economies) to foster sustainable development of their countries. Rwanda, can proudly count it self among such countries.

These leaders represent the hope of a developing continent as long as they uphold democratic values so as to avoid "Mugabe syndrome".

Nonetheless, policy failure accounted for the tragic performance of African economies, much as right policy mix accounted for the success of their Asian counterparts so much so that, whereas both regions had the intention of facilitating private sector as engines for growth (at least for the so called capitalist economies of Africa) policy differential explains the difference in policy outcomes.

For instance, policies in capital formation and investments pursued by the two regions were quite parallel. The two regions (on average) recorded similar capital formation relative to GDP until late 1970s, after which Asian economies out-performed African economies in the 1980s and thereafter.

This also can be said for the different approaches used to induce this capital formation. Asian economies promoted more private savings through budget deficits whereas most African economies' deficit financing was aimed at financing public sector.

This is a fundamental policy choice differential that would later define Asian and African economic paths, as public investments proved to be a total failure to the latter, and private investments a success to the former.

Thus such policy choices taken by African countries meant that, a large proportion of public sector investments were financed by domestic savings primarily through budget deficit. In effect, this tended to crowd out the private sector from gaining access to resources for their investment needs.

This was compounded by the fact that, such deficit financed consumption at the expense of development expenditure, and more often than not, such funds financed defense which was then seen as the anchor of early African despots and dictators.

This gave rise to the highest development opportunity cost, Africa has ever paid that depressed growth rates for decades which are essentially lost decades.

The problem is that, a number of African economies have not redressed this problem and still promote public investments with little regard to the promotion of private investments through one of the best known economic tool- i.e, reasonable budget deficit.

Furthermore, Asian Tigers which, like African economies started as predominantly agro-based economies, later accelerated their value addition in agro-produce so much so that they pursued an outward oriented policy of export based economy.

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