Prosperity and poverty of nations: Using global models to explain and mitigate underdevelopment in Nigeria
CONTINUED FROM YESTERDAY
The adoption of neo-liberal policies under policing by Bretton Woods institutions drove the last nail into the casket of state corporatism or mixed economy as states that had played the role of capitalists by building industries, setting up financial institutions and engaging in agricultural production had to privatise these assets.
The UN millenium development goals
Enduring poverty in Africa and countries in Asia and Latin America left behind by the great economic expansion of the past three decades was to make the United Nations set social development benchmarks for the first fifteen years of the 21st century otherwise called Millenium Development Goals.
The eight goals are:
i. Reduction of extreme poverty and hunger by half
ii. Universal primary education
iii. Promotion of gender equality and the empowerment of women
iv. Reduction of child mortality
v. Improvement of maternal health
vi. Combating HIV/AIDS, malaria and other diseases
vii. Ensuring Environmental suatainability
viii. Developing global partnership fro development
Nigeria’s MDG performance has been mixed at best. Progress on the attainment of goal number one has been rated “low” by UNDP, stating that the poverty rate in the country stands at 62.60 per cent instead of the target of 21.40 per cent as at 2013.
The UN Conference on Environment and Sustainable Development held in the Brazilian city of Rio de Janeiro marked the turning point. A broad range of development experts, environmentalists, human rights campaigners had become concerned that in the attempt to develop, the world was destroying the prospects of sustained future development.
The world, especially the rich nations, were voraciously consuming non-renewable resources at an alarming rate. The environment that had sustained human civilisation, had become the most conspicuous casualty of “unsustainable” development. This was the kind of dilemma that the Rio conference was supposed to address. Hence it came up with the concept of “sustainable development.”
Part III: Economic development in Nigeria: Theory and praxis
Origins of the development debate in Nigeria
At its creation by the British as a twin political entity in 1900, Nigeria had a simple economy dominated by agrarian production. With its policy of what one analyst called “empire on the cheap”, the colonial state did not have the semblance of an economic policy for 39 years. Nigeria was created for British trade, not for nation building and the establishment of a modern economy.
Social stability was the central platform of colonial system in the country. The administration was content to have a stable traditional system from which to cream off surplus through trade as long as the existing system of peasant production met that objective.
Indirect rule was the main instrument of achieving the double objectives of stability and trade. Metropolitan colonial policy required that colonies lived within their means, providing basic administrative services and balancing the budget.
Social and economic projects could only be financed from revenue which was in excess of administrative costs. Initially government revenues in Nigeria came mainly from custom duties generated mostly at southern sea ports. This left the south with some surplus while the north was always having a deficit.
This financial consideration was a principal reason for the amalgamation of the Protectorate of Northern Nigeria and the Protectorate and Colony of Southern Nigeria into a single political entity in 1914 as the administration of the North was to be subsidized by revenues from the South.
Direct taxation was subsequently introduced in the Eastern Provinces in 1928, amongst other things, to replace forced labour and enhance government income. The resistance which the introduction of direct taxation in the Eastern Provinces generated, epitomized by the inappropriately named Aba Women’s Riot, has been the toast of Nigerian social history. Direct taxation had earlier been introduced in Northern Provinces right from the inception of British rule, and subsequently the Western Provinces. Under the Caliphate system taxation had always been a fact of life. This was the situation up to the advent of the Second World War.
The first attempt at modifying the doctrine of colonial self-sufficiency came with the Colonial Development Act of 1929. The Act, which was, in fact, aimed at alleviating British unemployment by increasing demands for British exports in the colonies provided a maximum expenditure of one million pounds a year for colonial development. .Apart from British self-interest, the paucity of the allocated fund of one million pounds per annum for the whole colonial empire of 66 million people (excluding India) ensured that the Act hardly had any conceivable impact.
The overall picture of the economic and social condition of colonial Nigeria was that of dismal poverty. By way of comparison with other colonial territories, in 1936-37, Nigerian revenue from all sources was estimated at only 5 shillings 10 pence per capita, Malaya 39 shillings 5 pence, Jamaica 28 shillings 6 pence, and 6 shillings 9 pence for Tanganyika.1
Colonial reform and the beginning of development planning
Yet by 1945, British colonial policy had undergone such a profound change that “planning” and “development” had assumed centre stage in official vocabulary while minimal government and laissez faire were being diluted by the state, which played a commanding role in the development process. That turning point in colonial policy has been traced to 1938 with the appointment of Malcolm MacDonald as the Colonial Secretary.
In “less than a month in office MacDonald ushered in the new policy of colonial reform, adopting the policy of the reformist critics lock, stock and barrel.” Under MacDonald the first attempt at introducing a systematic development policy came in 1939 with the introduction in the British Parliament of the Colonial Development and Welfare Bill and its passage into law by parliament the following year.
British, as indeed European imperialism in Africa never lacked both domestic and foreign critics which spurred a reformist movement of both liberal and radical intellectuals in Britain by the 1930s. The subsequent growth of nationalist movements in the colonial territories reinforced the voice of metropolitan critics. Enduring neglect, leading to deteriorating social and economic condition in the territories, provided ammunition for the critics. For there were fears the prevailing condition could lead to social explosions in these territories.
The anticipated explosion had already started with the Jamaican labour uprising in 1938, the gold Coast cocoa hold up of 1937-38, and a similar action on a smaller scale in Nigeria. It was feared the big bang was not far away. The Great Depression provided the catalyst. MacDonald’s reform was aimed at pre-empting the big bang. Introduced as it were during a war situation, CD & WA was partly motivated designed to assuage colonial grievances. It became urgently relevant in the conduct of the war. After the war CD & WA became an instrument of British economic recovery as the territories became sources of vital food and raw materials for the metropolitan countries. Fieldhouse estimated that between 1945 and 1951 Britain put into the colonies 40 million pounds through development assistance while taking out 140 pounds.
The Act provided for an annual expenditure of 5 million pounds for colonial development and welfare, and an additional 500,000 pounds for research. Each territory was allocated a provisional amount: West Africa 1,280,000 pounds per annum; East Africa, the Pacific and the Mediterranean 750,000 pounds; the British West Indies 1,250,000 pounds; Bermuda and the Bahamas 35,000 pounds.2
The CD & WA emphasized assistance “primarily towards planned development.”
Colonial governments were thus asked to prepare development programmes. Although the Act incorporated welfare, the long term thrust was supposed to be on economic improvement so that each colony could increasingly finance its own development.
Whatever arguments are advanced for and against CD & WA, British self- interest actually set in motion a process that was to become an enduring feature of late colonial and post-colonial Africa: development planning. CD & WA was supposed to be domesticated in the respective territories, which were now required to prepare their development plans.
The post-war years of the 1940s can, therefore, be regarded as the actual beginning of development economics. Not only a section of British intellectuals, the colonial reformers, but also those of other metropolitan states, began debating the problems of economic development in the colonial territories. Most of the questions subsequently became key issues in development literature, such as the role of the state and foreign capital in national development, the dearth of capital and of entrepreneurship, received attention during this period. Initially the debate was dominated by historians. Economists and other social scientists joined later.
Two fundamental issues confronted colonial development initiative: dearth of capital and the virtual absence of an entrepreneurial class that would pioneer capitalist development in countries such as Nigeria.
As noted, European development was market-driven under a “national bourgeoisie” (entrepreneurial class). The state had little to do with conscious development planning. We have already noted that in the advanced economies of the West market forces were the main determinants of economic development. Although the British metropolitan government expectedly wanted Nigerian entrepreneurs to drive economic development in the country, in their absence the state decided to overcome this obstacle by playing that pivotal role through the building and funding of what this writer has elsewhere referred to as “institutions of accumulation” – state-owned development, production and funding institutions.
The two objectives were to be achieved through planned development. This marked the beginning of state corporatism or mixed economy earlier discussed.
CD & WA thus became the foundation of state-centred development in the British colonial empire. In Nigeria the Department of Commerce and Industry was set up to promote agricultural, commercial and industrial development. The Department established a modest credit scheme for businessmen but the bulk of attention was the establishment and running of state enterprises.
The regional produce marketing boards were set up to raise capital for national development by being the sole exporters of Nigeria’s principal agricultural commodities. These statutory export monopolies or commodity boards originated in British war-time export control scheme, officially known as the Defence (control of Export Produce) regulations of 1939. It was first applied to cocoa as the British Ministry of Food purchased the entire West African cocoa crop for the 1939-40 season at the African ruling prices, the Uk government promising to return any profit made to the producers, while at the same time assuming the risk of acqyiring undisposable stocks of cocoa.
This arrangement culminated in the establishment of the first Marketing Board proper – the West African Cocoa Control Board at the end of 1939-40 season. In 1947, the Nigeria Cocoa Marketing Board was created, followed in 1949 by the Nigerian Oil Palm Produce Marketing Board and the Nigeria Groundnut Marketing Board (NGMB). The fourth marketing board, that for cotton which in the early 1950s constituted only 2 percent of Nigeria’s export values, was created in 1954-55.
The peasant producers were paid less than the ruling prices of these commodities in the world market. The difference constituted the profit that was appropriated by the state for development purposes through the various regional development boards – the Northern Nigeria Development Corporation, Western Nigeria Development Corporation, and Eastern Nigeria Development Corporation. These Boards became the main instruments of state-led development. This was the foundation of the policies of economic planning and Mixed Economy. The state now had to set economic and social targets that could be met through development plans.
Nigeria’s first development plan
As noted, following CD & WA the respective colonial territories were required to prepare their development plans. This led to Nigeria’s first development plan, The Ten-year Plan of Development and Welfare, 1945-1950, which was passed into law by the Legislative Council in 1945 and came into effect in 1946-47 fiscal year.
The post-colonial government followed it up with the First National Development Plan, 1962-68 (interrupted by the civil war), Second National Development Plan, 1970-1974, Third National Development Plan, 1975-1979, Fourth National Development Plan, 1980-1984. The development plans were subsequently replaced by policy plans, which General Babangida’s regime which initiated the Structural Adjustment Policy (1986-88). The post-colonial state continued with the policy of development plans until finally abandoned in the 1980s.
The Ten Year Plan of Development and Welfare was based on a projected expenditure of 55 million pounds for its duration. Of this amount 23 million pounds was to be provided under the CD&WA, 17 million to be raised by loan floatations while the remainder would come from Nigerian sources. As should be expected, sectoral allocation of funds roughly reflected the identified areas of priority. Rural and urban water supplies received 7,909,000 pounds or 14.3 percent of total capital outlay. Education received 7,162,793 pounds or 13.02 percent. Basic health and medical services were allocated 6,628,217 pounds or 12 percent. Altogether social programmes received a total allocation of of 23,131,860 pounds or 42 percent of the projected expenditure.
Although social development was the main thrust of the Plan, officials in Lagos and in London correctly saw as most crucial on the long run economic projects which were imperative to a sustained process of capital accumulation and development. The Plan was unequivocal on this point:
In the long run the most important thing is the provision, extension or development of those services which will lead to economic betterment, without which any other form of development and welfare may ultimately become nothing more than a liability with consequent national bankruptcy.3 (SP 24, 1945, Ten-Year Plan of Development and welfare, p 4).
If one were to judge the importance of any programme by its level of funding, one may conclude that the allocation to economic projects did not match the expectations of CD&WA. Agriculture, including fisheries, forestry, veterinary services and training, which the formulators of the plan saw as the pivot of the economy, received a total allocation of 3,487,181 pounds or 6.3 percent of the Plan’s capital outlay.
The Nigerian Plan, like the Act on which it was based, had little to say about industrial development. There would clearly be no marked, let alone radical, departure from the export-oriented agrarian economy favoured by the colonial government. The Plan asserted that Nigeria’s main natural asset was its land. “Therefore for the time being future economic development must rely upon raw materials which are the outcome of agriculture, livestock and fishing.” (SP 24, 1945, p.5). The development of subsidiary industries, mainly export processing, were entrusted to a newy created Department of Commerce and Industries (SP 24, p 5).
he Ten-Year Plan envisaged a revision after five years. But it was discovered at the time that nothing short of a complete revision was necessary as it quickly became obsolete. This was not surprising. Totally lacking in any experience of development planning and requisite personnel, the administration had great difficulty putting the plan together and equal difficulty convincing the Colonial Office to approve what was fundamentally a defective plan. The administration’s difficulties were most evident in the area of implementation.
One important feature of the revised plan was the professed shift from social services to “ developments which produced the material resources to maintain the social services.” The state was able to learn the basic truth that social programmes can only be sustained by commensurate economic strength. Another striking feature of the revised plan is the fact that although the central government still had control over the funds, their actual disbursement was now being done by the regional governments which increasingly became the focus of authority with the proseeive devolution of political power. The balance of funds was accordingly divided roughly among the three regions in the following proportions: 50, 25, 25 per cent respectively for the North, East and Western Regions
As it turned out, the dearth of a viable entrepreneurial class which could pioneer capitalist development made the state, not private enterprise, the key play in the development process. At the lower levels the focus was to be on cooperatives and “communal” development agencies. Thus in addition to the traditional functions of the state, the Nigerian colonial state now embarked upon a process of transforming itself into into the largest investor in the national economy, undertaking infrastructural development, and direct programmes of agricultural and industrial production. The concept of a dominant interventionist state not only capable of dictating the tune of political, economic and social development, but also playing the leading role of producer and accumulator, was now being worked into a practical reality.
The weakness of indigenous entrepreneurship notwithstanding, the state did not abandon capitalist development, which was a long term objective. There were clear limitations on what the state alone could achieve in respect of economic development. Efforts were therefore made to promote local entrepreneurship. Deveopment institutions were set up to make possible access to capital resources by entrepreneurs. But such access was so limited that the realist chances of a powerful capitalist class never materialised during the period under consideration.
A number of what could be called “institutions of accumulation” were set up in pursuance of the state’s economic objectives. One authority calls this period “a time of active institution formation.” In addition to the Department of Commerce and Industries, the Ten- Year Plan included the Nigerian Local development Board in the 1947-48 financial year. The department of Commerce and Industries was given the broad mandate “to assist, to advise, and, where necessary, to participate in such economic improvements as may be decided upon.”4 The department established and managed schemes of agricultural and secondary industrial production and assisted the local public agencies and co-operatives through advice, subsidies and loans.
So far we have seen how the effort to generate development, create prosperity led the colonial and immediate post-colonial government to play a commanding role in the national economy and adopted a mixed economy, a role normally played by market forces in a market economy. The two central issues that continued to challenge the adopted development initiatives were the weakness of the indigenous entrepreneurial class and shortage of capital. Schartz and other analysts of “Nigerian capitalism” identified this weakness as a major obstacle to economic development in the country.5 To strengthen the emerging entrepreneurial class and ensure that Nigerians took control of their national economy, the indigenization process was adopted by the government. But Nigerians remained front for foreign capital.
Parasitic indigenous businessmen and a rent-seeking economy
So far it was mainly foreign capital, mostly European, Lebanese and Indian that dominated the private sector of the Nigerian economy. To strengthen Nigerian entrepreneurs and ensure indigenous control, the military government of General Yakubu Gowon enacted the Indigenization Decree in 1972, reviewed by another decree in 1977. A key feature of the indigenous entrepreneurial class which was to be crucial to the character of the Nigerian economy had become evident at this time. This was the dependent and rent-seeking nature of the Nigerian entrepreneurs. They were mainly concentrated in trading with little investment in commercial agriculture and industry. When the indigenization decree came these business transformed as fronts for foreign businesses as they were given token position on the boards of these foreign companies just to give a semblance of Nigerian participation or ownership.6 The innovations that are so crucial to capitalist development have been lacking. Government policy failures and the weak and unproductive character of
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