Why good leadership at a national level is not enough to make a country successful economically
Let us do a thought experiment. It is often said that the problem of Africa is poor leadership: if our continent had leaders dedicated to serving their people rather than lining their pockets, then our problems of poverty, conflict, misery etc. would end. Even the god of African elites, Barak Obama, made this claim in Addis Ababa when he last visited our continent. This slogan has been repeated so many times that it has acquired the status of divine truth.
Over the last 55 years Africa has seen 278 presidents. Yet most of our problems such as slow growth, corruption, tribalism, poor delivery of public goods and services etc. have demonstrated incredible resilience.
Only Botswana and Mauritius have escaped some of these problems. Africa has had some honest leaders who were genuine servants of their people – Julius Nyerere of Tanzania, Kenneth Kaunda of Zambia, and Leopold Senghor of Senegal. But their developmental record was much lower than that of Omar Bongo in Gabon and not fundamentally different from that of Mobutu Sese Seko in former Zaire, leaders considered the most venal in Africa.
I recently read a book by Sebastian Edwards titled Toxic Aid: the collapse and recovery of Tanzania. It is an insightful story of the economic disaster caused by Nyerere, perhaps the most sincere, public spirited, honest, humane and humble president in postcolonial Africa. But he destroyed Tanzania’s economy and brutally disrupted the social life of its people through his villagisation (Ujamaa) policy in an idealistic pursuit of a utopian dream of an egalitarian society. By the time he resigned in 1985, 45% of his nation’s GDP had disappeared. Tanzania had the second lowest per capita income in the world after Mozambique.
Contrast this with Robert Bates’ book, Beyond the Miracle of the Market: the political economy of agrarian development in Kenya. It is a story of how the state in Kenya under its founding President, Jomo Kenyatta, promoted agriculture policies that sustained impressive rates of growth and brought prosperity to many Kenyans.
Bates’ argument is that this success came, not from altruism, but through the self-interested decisions of the Kenyan agricultural elite (he calls them the “landed gentry”) to increase returns to agriculture. Yet Kenyatta was a tribalist and corrupt president who mostly lined the pockets of his fellow Kikuyu while also personally accumulating a large fortune for himself.
So we come to the development puzzle: why did the nationalist, sincere and honest Nyerere impoverish his fellow citizens while the tribalist and corrupt Kenyatta enriched his? It shows that good intentions are not enough. I am reminded of the statement by Adam Smith: “It is not from the benevolence of the butcher, the brewer or the baker that we get our dinner but from their regard of their own interest.” Smith’s contribution to capitalist ideology was to articulate a view that – holding other factors constant – the pursuit of self-interest in the market produces socially optimal outcomes.
Secondly, the development of a country is not only dependent on the decisions, actions and policies of its leaders and peoples, although the policies of Nyerere (ujamaa) and decisions (like throwing out IMF in 1979) did significantly contribute to the disaster. But development is also dependent of many other none domestic factors including decisions, policies and actions of neighbours. Leaders are facilitated and constrained by these factors.
For example, nations on the Pacific Rim (Hong Kong, Singapore, South Korea, Taiwan, Indonesia, Thailand and Malaysia) enjoyed unprecedented growth in the second half of the 20th Century. It is easy to attribute this to individual leaders- people like Lee Kuan Yew in Singapore. That is only partially correct.
The fundamental explanation may be that their geographical location near rapidly-industrialising post World War Two Japan provided positive spillover effects (like learning, copying and supplying) that facilitated what Albert Hirschman called “a multidimensional conspiracy in favour of development”.
Rwanda best illustrates this argument. In its 2014 World Competitiveness Report, the World Economic Forum produced an index on government efficiency measuring wastefulness of government spending, burden of regulation and transparency of policy making. Rwanda was number seven in the entire world.
All the top ten countries have a per capita income at PPP of $54,000 and above, with the exception New Zeeland (number six at $36,000) and Malaysia (number eight with $28,000). Rwanda with a per capita income of $1,800 at PPP is the only poor country playing in the premier league of governmental efficiency.
It took Singapore 30 years to move from a third world country into a first world one with the third highest per capita income at $85,200. Will Rwanda attain first world status in 2024 (thirty years since the genocide) or in 2030 (thirty years since President Paul Kagame became president)? Based on past and present rate of per capita income growth, this is most unlikely. So why would Rwanda fail to achieve Singapore’s feat? Clearly the problem is not efficiency of government or paucity of leadership. There are domestic factors at play. But neighborhood is fundamental.
Rwanda is saddled with many regional problems. It neighbor to the south, Burundi, is unraveling fast; DRC to the West lives in a state of permanent crisis and may also soon unravel; Tanzania to the east is doing okay for now and Uganda to the north, like Tanzania, passes. Beyond these, Rwanda has Central Africa Republic, Kenya, South Sudan, Somalia and Zambia as distant neighbours. Rwanda’s growth is heavily reliant – not just on its domestic policies – but also on what is happening in these neighbouring countries.
President Paul Kagame can get things working in Rwanda but unless Uganda, Kenya, Tanzania or Congo build efficient rail and road transport and quicken the time of customs clearance in Dar es Salam, Mombasa and Matadi ports, Rwanda’s trade will suffer high time and financial costs in exporting and importing goods from abroad.
Secondly, for a country to improve its trade, it needs to first sell to neighbours, gain experience in market-share acquisition and then aggressively turn this knowledge to overseas markets. But if the economies of neighbours are not growing, Rwandan industry will be constrained in selling its goods in the region.
Its development is not entirely reliant on the decisions and policies of Kigali but also on the decisions and policies of Kampala, Nairobi, Dar Es Salam, Bujumbura and Kinshasa. Remember that while nations can choose their friends, they cannot choose their neighbours.