Thursday, April 4, 2013

Development by Romeo F Kasengele


By Romeo F Kasengele

Increased national wealth and wellbeing is the ultimate goal of any progressive state or society. Achieving this most noble of goals can however prove a great challenge. It necessitates the adoption of certain strategies which need to be employed consistently and vigorously if economic wellbeing is to be achieved in the shortest possible time. The strategies to be employed for this purpose include the strengthening and providing greater autonomy to a states institutions, the identification of goods and services the local economy can produce at a comparative advantage, the education of the workforce with a bias to courses that are directly linked to the production of these goods and services and encouraging the setting up of small businesses which are directly involved in the production of these goods and services.

Any society that wishes to be progressive and excel economically must have strong and effective public institutions .From the great civilizations of antiquity to today’s modern economic superpowers all of which achieved immense economic wealth and social order, strong, effective and efficient public institutions were and are the cornerstone of their prodigious success. The strength and independence of public institutions is positively correlated to the strength and wealth creation capacity of an economy in that public institutions provide the framework or foundation in which the economy and all economic agents operate. Hence a weak foundation or framework is likely to support only weak performances and results whilst a strong framework is as likely to support strong economic performances and results. Public institutions with regard to economic activity refer to all institutions that provide frameworks for economic transactions. From the legislature which creates laws which directly affect economic activity and wealth creation, the judiciary and courts which enforce these laws and settle any contractual disputes amongst economic agents to institutions which deal with business registration, revenue collection, labour regulation and compensation, price of capital, consumer protection, property rights e.t.c  The decaying of these public institutions through inefficient service delivery, corruption ,laziness and other immoral vices certainly leads to weal social and economic frame work within in which the economy operates and by extension weak economic growth and wealth creation capabilities.

Every civilization, state and society is endowed with a unique and abundant resource or resources of which if exploited efficiently and sustainably can result in accelerated economic development and social well being. The Japanese and German economies were in disarray after the Second World War but by identifying and concentrating on their most abundant resource available to them namely technological knowhow and ingenuity, they succeed in transforming their devastated economies into regional and world leaders. China also after decades of mediocre economic performances decided to exploit its most abundant economic resources, labour and succeeded in developing the fastest growing economy in the world. Exploiting a nation’s most abundant resource can accelerate development in two ways. Firstly, the production of goods and services that make use of a nation’s most abundant resource tend to have an increasing decrease in cost of production over the medium to long term than those that don’t.  That is goods and services produced from abundant resources are likely to achieve economies of scale faster than those produced from less abundant resources given that the resources are exploited correctly. An analogy of this is a nation with vast fertile land and a large unskilled labour force is likely to achieve economies of scale faster in the agriculture produce industry than in the electronics manufacturing industry. This is because agricultural production intensively uses the nation’s most abundant resource, fertile land and thus output is able to grow faster to achieve economies of scale as opposed to electronics manufacturing which relies on resources i.e. technological know how, not readily available in the economy. As a result of the economies of scale, production costs as well as the price of the final goods would decrease making them more competitive in the international markets. Secondly, production of goods and services that mostly utilize the nation’s abundant resources are likely to have a steeper learning curve. That is, due to these goods and services ability to achieve economies of scale, they are able to charge lower prices due to lower costs and hence generate higher demand.  Higher demand will necessitate higher production and this increased production will result in a downward movement along a steep learning curve. That is, the more of that particular good is produced, the more efficient its production becomes resulting in goods and services of lower cost and higher quality. Also the better a society becomes of these goods and services, the higher the possibilities of innovations with regards to the production processes both up and down stream yielding goods and services of even higher quality in the long run. This guarantees a better product for trade in the international markets.

To successfully take advantage of the most abundant resources available to a society, its labour force needs to be able to effectively exploit these resources. This can only be done by equipping the majority of the labourforce with the necessary skills and knowledge to effectively and sustainably exploit these resources. This can be done through educating the labour force in skills and knowledge which directly relates to the development of these resources. For instance, if a particular society’s abundant resource is financial knowhow and ingenuity, then education in this society should focus on courses of study that are financially inclined. Also, if a society’s abundant resource is fertile land or mineral wealth, then the society should focus its educational system in equipping its citizens in skills and knowledge specific to developing these resources from its raw material state up until the production of the finished unit. 

Given a strong institutional framework, identification of an abundant resource which can be developed and education of the labour force in skills and knowledge to successfully develop these resources until the resource is a finished product, it now becomes imperative to encourage the setting up of indigenous small business enterprises that will exploit the opportunities presented by the resources.  The involvement of small businesses in the development of a society’s resources is of vast importance if the society is to achieve any tangible and long lasting benefits. This is because small business, when encouraged, is capable of employing a vast majority of a society’s labour force and hence stimulates consumption and tax revenue. More than 80% of employment in the world’s most developed economies is accounted for by small businesses. Thus small business with its huge potential in generating employment when channeled to exploit opportunities in industries that utilize a society’s abundant resources, a society can not only create substantial employment and increased social and economic wellbeing but also high quality products at lower prices because of the competition prevalent within that industry. The huge employment potential of small businesses can be attributed to their huge potential for expansion. As the name implies, small businesses are business operations in relative infancy. As such they have great potential for growth. If managed correctly, small businesses will grow, expand operations and increase production. As the business and its output grow, the business will require more labour to participate in the production process. This increased demand for labour will compel businesses to recruit workers which will lead to an increase in the employment levels in the economy. Increased employment will result in a larger tax base from which government can derive revenue as well as increase consumption which will further stimulate production output in the economy. Hence as small businesses grow they increase output in the economy which leads to a decrease in unemployment. Another major reason why small businesses are able to generate such a huge percentage of employment is because they find is easier to hire as compared to large corporations. They find it easier to hire because of the lack of bureaucracy involved in the recruitment process as compared to large corporations. That is, the recruitment process in large organizations involves a number of departments and has to be approved by a number of individuals before an individual can be hired whilst in a small business this process is cut significantly because of the shorter chain of authority.

Economic progression, wealth creation, social order and well being are goals all societies aspire to. Achieving them can be arduous but with fortitude and discipline success is assured. Ensuring that a state’s institutions are autonomous, strong and efficient is the first and most important step in achieving the above objectives. This is because these institutions provide the framework within which the economy operates and hence a strong framework will be able to support a strong economy. Identification of an abundant resource which can be exploited for the production of goods and services will ensure that the society will swiftly move down the learning curve and economies of scale will be achieved rapidly. Educating the labour force in skills and knowledge that directly relate to the production of the goods and services derived from the abundant resource will ensure that the resource is exploited efficiently and sustainably whilst the setting up of indigenous small businesses which are directly involved in the production of these goods and services will ensure employment generation and greater economic wellbeing as these businesses grow.

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