columnBy Metusalem Nakale
WHICH is the economic development policy for Namibia to follow, is the crucial question not yet sufficiently dealt with in this country, particularly at times like these when the global economy is in turmoil. The current model of economic development - the free market approach - seems unable to deliver the desired results of freeing the poor from the shackles of poverty.
There are two models of economic development: the free market economy and the developmental state. At the core of the free market policies are the beliefs that state intervention is detrimental to economic development, unless in the event of when the free market is unable to allocate the resources necessary 'to expand the quality and quantity of economic activity'.
Further, the free market is underpinned by the belief that Adam Smith's 'invisible hand' should be allowed to regulate the market and the state should confine itself to the provisions of public goods: invest in education, roads, transport and health.
However, the free market ideology has been subjected to a barrage of sustained criticisms. For instance, the 'invisible hand' has been criticised for being ineffective. For years developing countries have been waiting for the market forces to put things right, but without success. Even in industrialised countries such as the United States and Britain, the market forces are unable to correct shocks without government interference. The current economic crisis is a good indication.
The developmental state, on the other hand, is a model of economic development in which the state plays a major role in directing the country's economic activities. The state ensures performance standards are in place regarding industries that receive support from the state and creates industrial groups in strategic areas. In such economies experts and coherent bureaucratic agencies collaborate with the organised private sector to fuel economic development.
In Singapore, as an example, government spearheaded the country's economic metamorphosis with the state's active involvement. The state treated the development of human resources as critical to economic growth and constantly improved their curricula to reflect the needs of the economy. The government attracted and received huge Foreign Direct Investments (FDIs) in manufacturing. The impact was the enhancing of competitiveness and productivity of local manufacturing firms. FDIs brought the country human capital, skills and knowledge.
In addition, the state shielded infant domestic industries from international competitors. Protection was done for a limited period of time and the state made sure that the limited time was used effectively. Deviations from agreed standards were not tolerated. Although some countries pretend not to practise infant protection, the literature reveals that most countries practised it during certain phases of their industrial development.
Critics of the developmental state model say the close relationship between the state and the private sector is a 'source of evil,' the 'hotbed of moral hazards, favouritism, corruption and crony-capitalism.' But what the critics do not consider is the fact that corruption occurs where there is a lack of effective policies in place or where policies are not enforced.
Can Singapore's lessons be replicated in Namibia? Yes. Namibia can replicate government intervention in protecting local firms, and by putting mechanisms in place to ensure skills and knowledge transfer. We need to manage knowledge by taking stock of what our people are learning and designing tools to enable them to deepen their understanding and apply that knowledge in other contexts.
Nevertheless, it should be borne in mind the different historical period in which Singapore embarked on economic development. But we can design policies to compensate for such loss and ensure that we are gaining more from the current relationship in terms of knowledge and skills, or we could demand that they invest more locally.