Thursday, May 1, 2014

Is the Western development model appropriate for Africa?

The measure of development

In the Western conception, underdevelopment is seen as an objective condition, identifiable by a set of criteria or indicators such as red spots on the face allow the physician to diagnose measles. These indicators show a poor performance compared to the situation of countries described as developed. Some indicators used to quantify underdevelopment are per capita income, literacy rates, life expectancy, birth rate, distribution of the labor force between agriculture, industry and services, etc.

The indicator most commonly used because it summarizes all of them is the per capita income, that is to say the relationship between national income measured by the gross domestic product (GDP) and total population. For the record, the GDP is the market value of all officially recognized final goods and services produced within a country in a year. The GDP per capita then is a measure of the wealth produced and available in average per capita. To facilitate international comparisons, it is expressed in a common currency: the U.S. dollar.

Countries whose GDP per capita income is less than $ 1,500 are considered underdeveloped. Until the 1960s, a large gap separated the developed countries from the underdeveloped countries. Today, there is an intermediate category,  the “newly industrialized countries ", with a per capita income of 1,500 to $ 5,000 sometimes called the emerging markets. Included in this category are "dragons" in the Far East and the major Latin American countries. Despite their relatively high income per capita, these countries still have characteristics of underdevelopment, especially in social and income distribution.

Underdevelopment perceived as a "lag"

The development of the “Western world" has often been identified, including by economists, as technical progress, increasing the production of goods, to raising the standard of living. And there is no doubt that the implementation of the great discoveries and modern technology has allowed, in two centuries, to multiply by more than twenty the per capita product, which is unheard of in the history of the planet.

"Modernization" of the West is carried out according to an economic and social "model" proposed as an example, namely liberal capitalism, which is characterized by:
- Entrepreneurship
- Rational economic calculation
- A profit-oriented mentality
- The spirit of competition between elites
- The critical importance of private enterprises as an engine of growth
- The role of the State or the close cooperation of the latter with private enterprise.

From there, underdevelopment was naturally conceived as a “lag to catch up “, which is a Western-centric vision because it idealizes the Western model. Development would therefore be for the developing world to "modernize, that is to say, first implement the factors that made the success of the West, including its techniques and management methods; secondly, remove obstacles that oppose it like traditional religions, archaic social structures, etc. ; you can’t make an omelet without breaking eggs!

Such a model "justifies" the language of developed countries, and the forms of aid they offer: “helping” underdeveloped countries to "catch” the developed countries.

Taking apart the Western development model and measure

In the GDP/Capita fraction, the numerator and denominator do not count the same amount of people. The income is earned only by those who work while the denominator represents the total population, including children, the elderly, and the unemployed. But the relationship between "active” and" inactive” population is very different in developed and developing countries. For example, the population between the ages 15 to 64 which represents the number of people who could potentially be economically active is 67 percent in the USA versus 54 percent here in Rwanda. In sub -Saharan Africa, 43 percent of the population is below age 15 compared to only 16 percent in Europe. In addition unemployment is higher in developing countries, particularly in Africa, than in developed countries as indicted on rate of unemployment maps. Therefore there is a big difference in the denominator between developed and underdeveloped countries to the detriment of the latter ones.

As for the numerator, some elements are not counted in the GDP.
This is particularly true of certain personal services. In the West, the entry of women into the labor market has generated a range of services that are counted in the GDP. The more a country is "developed", the more personal services are marketed: hair salon, laundry, catering, entertainment, etc. In underdeveloped countries, these services are executed by housewives and are not counted in the GDP. For international comparison, it would not matter if the percentage of goods and services ignored by the national accounts was everywhere of the same order of magnitude. But far from it, and unfortunately the GDP of underdeveloped countries is systematically undervalued.

On the other hand, some elements are not subtracted from the GDP.
The development is ambivalent: it has its downside. GDP should be estimated using the accounting rules, i.e. having assets and liabilities, and only the balance should be taken into account. Unfortunately, macro economists do not know the sign “-“, they always add.
But in the so-called developed countries, huge amounts are spent to repair the damage of the “Western Development”:
- Car accidents;
- An unbalanced and too rich diet (too much sugar, fat, alcohol, tobacco) which generates medical costs due to tooth decay, cancers, cardiovascular diseases, etc.;
- Adverse effects of television that have an impact on crime, school performance, sociability;
- Pollution in all its forms;
- The absence of both working parents in the family cell that creates social problems among youth who engage in drugs consumption.
All these give rise to nuisance activities that are recognized positively in the GDP. Again, from the point of view of international comparison, it would not matter if the same phenomenon appeared with equal intensity in all countries. But it is not so: those problems increase with the GDP, perhaps at an accelerated pace. To the point that the Club of Rome sounded the alarm in a report with the provocative title “The Limits to Growth“ by Donella Meadows. One should in any case make a clear distinction between GNP (gross national product) and NNP (net national product), and for a number of countries, this may call into question the growth, at least in its current forms.

How is it that countries add those nuisance activities to the positive side of the GDP? Such an attitude can be explained – I didn’t say justified - for several reasons:
- The increase of GDP is used by governments to measure their performance; politically they will not give it up easily;
- A clear perception of nuisances should logically lead to policy development, heartbreaking changes: for example, favoring public transportation to the detriment of the automotive industry, but 2.5 million citizens living in the US, - voters and their families-  are working in that industry;
- Logically, the cost of the removal of pollution should lie with polluters, compromising their profits; but this is a politically powerful group.

The wrong assimilation of happiness with wealth

Being a " Chrysometer" (“chryso” means wealth in Greek) or measure of wealth, the GDP/capita indicator implicitly assumes that happiness depends on wealth, understood as the accumulation of material goods. This concept expresses the materialistic aspirations of a major part of the Western world in its evolution over the last century. If this chrysometer is used to measure the level of development, the Western world easily appears as “higher” civilizations than developing countries. Does it justify imposing it on developing countries? For a more developed answer see my posting on Can we impose our values to other cultures? It also calls into question these benchmarks. From the perspective of anthropology, each civilization "traditional" is considered original, capable of performing its own performance against which the West is sometimes well back. How can we not appreciate the “sociability “of the Negro-African world, compared to the western neurosis generating hyper-individualism?

The Western development model

The historical development of the development process in the Western industrial economies "should" happen again, with just a time lag in the developing world economies. This belief assumes the universality of needs (liberal theory).
Whatever the circumstances of time and place, at every level of income in a market, there should be a corresponding typical demand structure, and in businesses, there should be a typical combination of production factors. This design is unacceptable.
Beyond the basic needs (food, protection from the cold, etc. . ), to which different civilizations provide a variety of responses, it appears that it is the socio-economic system, namely the state of productive forces and social relations , which determines the needs within a given society. The Western development therefore mostly addresses the needs entirely fabricated by a system in which goods are estimated, not by their usage value, but by their exchange value, that is by the benefits they provide to the production system. Today one can doubt that the production structure corresponds to "real" needs of the greatest number. A recent paper published by Princeton researcher Martin Gilens shows that in the USA the government followed the directives set forth by a small number of individuals (the rich, well connected and the politically powerful, as well as particularly well placed individuals in institutions like banking and finance) much more often than the preferences of the average American. This might explain why mandatory background checks on gun sales supported by 83% to 91% of Americans aren't in place, or why Congress has taken no action on greenhouse gas emissions even when such legislation is supported by the vast majority of citizens.

People in the Western world have become aware of the terrible ambiguity of the liberal economic progress guided by profit maximization. While there is no denying of its contribution to social progress, what about its failures, its physical and psychological damage? It is now feared that its cost exceeds its usefulness.
Exacerbated needs: we always want more, always better and in less time. Great choices are deflected by the holders of economic power: for example, in favor of the automobile at the expense of public transport.

After having tried to lecture them, should now be the time that we get inspired by developing countries civilizations to bring back home important values we have lost: sociability, needs moderation and, finally, a way of living that leaves us less helpless before death?

The impact of the Western model on developing countries

Development policy applied almost everywhere in developing countries is inspired by the Western model. It led to a “bad development” because it neglects or disadvantages the vast majority of people.
In agriculture, cash crops are grown at the expense of food crops:
a) excessive areas are devoted to cash crops;
b) they have privileged access to modern inputs (fertilizers, improved seeds) and supporting efforts.
Why? Because they provide the necessary foreign exchange money needed for imports of luxury goods for the bourgeoisie in power.
As consequences :
a) domestically : food production is in deficit and it is necessary to make food imports, which results in people - especially urban – getting  used to eating foreign food that local agriculture will never produce : wheat bread replaces millet patties or cassava preparations; imports of food negatively impacts the balance of payments .
b) at the international level : the favor granted to third world cash crops products leads to overproduction that lower prices on world markets; therefore, what is gained on quantities, is lost on prices.

In industry, Western style development of is twice disadvantageous to developing world:
a) In terms of the  production structure:
Development policy gives preference to "import proxy " industries, under the pretext of improving the balance of payments. However imports are largely composed of luxury goods for the benefit of a minority of wealthy citizens. The local industry therefore produces cars and household appliances instead of small agricultural machinery for example.
b) In terms of the production functions: developing countries buy "turnkey " plants, following the Western model, i.e. not adapted to local specificity;
i ) Production factors are capital intensive and require skilled labor, which does not correspond to the factors available in country;
ii) As a consequence, companies have a high break even threshold and often function only at a small percentage of their capacity; as a result, their costs are excessive and they can’t be competitive, they must be overprotected; their products are more expensive and less satisfactory than imported products;
iii) The domestic industry depends of inputs from abroad (raw materials, semi-finished products, spare parts) generally overpriced and payable in foreign currencies.

So is the developing world right to be inspired by the western development model?  In many ways, it is an anti-model.

PS: This posting is mainly inspired by a course on "Economic Analysis of Developing Countries" taught by Fernand Bézy in 1990.

Seeya later alligator...