The IMF/World Bank Spring Meetings in Washington DC are now behind us. On the agenda were discussions on inflation, global climate finance, geopolitics.
Judging by conflicts in Ukraine, Africa, and the Middle East, the world is in a tumultuous, dangerous state that has created uncertainty and contributed to the higher rates of inflation.
But we do have some good news – more than sixty-four countries are holding national elections this year, including South Africa. Democracy has improved around the world over the past 100 years and that’s good for humanity.
On the global economy, the United States continues to be the most dominant, biggest economy in the world, and that may hold true till at least year 2063, according to author, global investor and chairman of Rockefeller Foundation, Ruchir Sharma.
China has been slowing but remains a powerful force as world’s second largest economy. China is Africa's biggest trading partner and Africa’s biggest creditor. Even in Southeast Asia as well, China is the biggest trading partner with many nations there.
Africa will see strong growth this year. In fact, it’s the fastest-growing region in the world, though it’s growth of very small economies starting from a very low base and remain poorest in the world.
Good governance is key
The fundamental challenge for developing nations, especially in Africa, is the problem of lack of structural reforms, which suppresses economic productivity.
Forums like Washington’s Spring Meetings should focus more on the core problems of bad governance in developing nations. The problems of governance are more urgent.
The world should understand that what the developing nations need is strong business productivity, fuelled by good governance. However, I believe the responsibility to adopt robust institutional reforms lies with people and their leaders in developing countries, not with Western institutions.
Africa’s problems cannot be resolved by foreign institutions. Reform should come from within, by Africans.
Late Ghanaian economist, George Ayittey, was vocal about this. He wrote great books on how institutions in pre and post-colonial Africa were corrupted and abused by despots. His view was that Africa’s problems in the 21st century, can only be fixed by Africans themselves.
Political and economic institutions are very important and must work for the speedy development of developing nations. Political and economic institutions reform is the foundation of prosperity.
Corruption has been instrumental in suppressing Africa’s potential. According to global investor Sharma, writing in the Financial Times last December, “Fourteen of the 20 most corrupt governments in the world are in Africa, up from 10 in 2010.” Disaster!
Citizens must understand the importance of good working institutions. Wealthier nations have relatively good governance.
Developed nations can help in advising developing nations on good governance. However, that will not be what addresses Africa's socio-economic problems. It’s Africans who will have to do the actual work in reforming their institutions for the better.
Stronger markets desperately needed in developing nations
The developing world has potential to be one of the very strong markets in the world.
Former President of the World Bank David Malpass once said that developing nations should make their private sectors attractive for investments. He was correct – much of the developing world does not have attractive private sectors. In fact, capitalism in many developing countries is suppressed by dysfunctional bureaucracies.
You only have to look at the Fraser Institute's annual Index of Economic Freedom to see where most African countries rank on capitalism. Most are ranked at the bottom. There are no thriving, formal private sectors in many African countries.
Africa’s markets are dysfunctional and underdeveloped. Political leaders in developing countries must embrace markets. They can learn from China on the adoption of markets.
According to an excellent book by Ronald H. Coase and Ning Wang, titled “How China became Capitalist” China’s pro-market reform during the late 70s, and 80s, were focused on “private farming, township and village enterprises, private business in cities, and the Special Economic Zones.” It’s these reforms that propelled China to world’s second biggest economy and helped that country uplift millions out of poverty. Other developing regions can learn a lot from China on market reforms.
The importance of a free press
In his book “The Age of Turbulence”, Alan Greenspan, who was Chairman of the US Federal Reserve from 1987 to 2006, writes about the “Universals of economic growth”.
Amongst the things that are critical for growth and development is a free press, Greenspan writes. According to Greenspan, “democracies with a free press and protection of minority rights are the most effective form of government that safeguards property rights, largely because such democracies rarely allow discontent to rise to a point that leads to explosive changes in economic regimes.”
In Africa, the press is under severe control of the political elite. According to the World Press Freedom Index 2023, Africa remains a high-risk environment for journalists. The journalism situation is classified as “difficult” in 40% of African countries, up from 33% in 2022. The control of information does Africans no justice. A free press can help highlight the socio-economic ills, including corruption, that stifle Africa’s potential.
The “six killer apps”
In his book “Civilization”, famed historian Professor Niall Ferguson, discusses the “six killer apps” – the things that made Western nations rise to global economic dominance. These “six killer apps” are, competition, science, property, medicine, consumption, and work.
Work is a necessity for prosperity. All the hurdles that suppress work should be removed. These hurdles can include government policies and cultural behaviours that are counterproductive for society.
Niall Ferguson’s “six killer” apps – and how to reform and make them robust in developing regions – are what need to be discussed in platforms like the Washington Spring Meetings.
Let’s hope the next Washington DC Spring meetings will focus on the core problems that need to be addressed urgently in developing nations. It all boils down to good governance and pro-market policies.
Phumlani M. Majozi is author of a new book “Lessons from Past Heroes” and a macroeconomist and political analyst. He’s the host of The Phumlani Majozi Show on YouTube. Subscribe to his show here: Phumlani M. Majozi - YouTube.
