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It's More Than Just Economics, It's Culture
on November 22, 2009
There is much good to say for the excellent work in refocusing country development from Aid to Business which is unheard of in the dev/biz. But unfortunately, the authors solution, an applied Marshall plan, will fail. There is a huge difference between current Africa and 1948 Europe/Japan in their respective positions along the "development curve". This difference, as referenced in "The Aid Trap", was infrastructure, technical and business/experience resources but did not address differences in cultural development from tribal, political, ethical and religious perspectives.
Recently the U.S. and EU have effectively been cut out of Africa by China and to a lessor degree India. As Engineers and Constructors (E&C's) working with equipment manufacture/suppliers we cannot compete with Asia in Africa. This situation has been changing and we now have been reduced to technical goods and services limiting direct participation in the market. Africa is being exposed to Chinese business culture, especially second and third teams, rather than the highly developed business culture of the U.S. The Chinese are some 30-50 years behind in cultural development with significant corruption. All is not bad, however, Africa has benefited from Chinese built infrastructure (good but not great) projects at greatly reduced cost. The Ethiopian $500M Tekeze hydro electric project built by the Chinese for $300M is just one example. What developer wouldn't smile to have a constructor chop 40% off a feasible project with the same revenue.
Historically observing and experiencing country development first in Japan from the 1930's, then Korea and now China has shown the rate of growth is dependent on the cultural environment. Africa is being handicapped by Asia. No amount of business Czar's (ECA) wisdom, as proposed by the authors, will be smart enough to overcome the cultural change required to support growth in Africa. The excellence of moving from Aid to Business, overcoming the devastating damage of enabling welfare will fail because it's not the U.S./EU business but Asia's business. China's business culture is developing with significant difference between eastern, central and western China -- Africa will not see a first team for many decades. This is to say nothing about the almost impossible tasks of a Marshall Plan selecting from top-down the right businesses at the right time to develop from nothing.
But there's always a way.
While Africa is reflecting on it's economic/political environment, tribal issues and country boundaries governing trade to enhances regional markets, African business leaders (and the authors) may want to look at India's "Bottom-of-Pyramid" business development approach. India is taking advantage of low cost redesign and manufacturing, microlenders, market development working with large multinationals. This gets to the real needs of the people and most importantly, learning the environment for a successful ethical business culture in competition, risk and profits. This was nicely summarized in the front page of the WSJ article, "Moving Up in India" Oct 20th, 2009 and also addressed in detail in C.K.Prahalad's book, "The Fortune at the Bottom of the Pyramid", with references to McKinsey business consultants. Cultural development through business plus farming expansion and agriculture research will provide, in the long term, the foundation to develop competitive offerings through trade.
The Aid Trap business approach puts some real sense into country investment; it needs time and cultural development to be successful. An applied Marshall plan doesn't fit. In Europe and Japan their cultures and industries were developed; in Africa it's going to be a process. A business approach can overcome the destructive dependency of welfare Aid while significantly improving culture under the proper circumstances. When the slack tightens in the worlds labor markets, Africa's opportunities will significantly improve. Cultural development through business is best done by African's themselves with help in consulting/tutoring by developed nations, especially the U.S.
David F. Latta