EM Monthly-The Death of Development

Preamble:
The Effective Manager™ Monthly, a collaborative effort between Daily Independent Newspapers, one of the leading national newspapers in Nigeria, and The STN GROUP is published on the last Monday of every month in Daily Independent Newspapers. The Publication which has as its target base, Top Executives, has in the last two years garnered a credible reputation in Corporate Nigeria, as a great resource on Business Leadership and Management; with cutting-edge features from leading local and international experts.


Professor Pat Utomi is an entrepreneur, politician and management consultant. He seats in the governing council of many universities, including the Pan-African University. Being a political economist, he has served in senior positions in government, Adviser to the President of Nigeria. He is the author of several Management and Public Policy books. including the Award Winning Managing Uncertainty: Competition and Strategy in Emerging Economies. A news report has it that Utomi, “has commenced withdrawal from personal and corporate endeavours, to focus and engage in nation building. Echoes from the Trenches caught up with Professor Utomi and a very enlightening discourse ensued. Find the excerpts of this below.


EM: So forty-eight years down the line, we started with vision 2000, vision 2010, and now it is vision 2020. The government has made plans and assures us that Nigeria will be among the top twenty economies. What's your take on this sir?


Pat Utomi: My heart desires for Nigeria to be even amongst the top ten world's strongest economies by 2020. My head says that there is a journey from where we are to where we desire. And there is a great amount of work that needs to be done to get there. My experience also says that in this business of global competition, the others do not sit back and allow you claim what you desire; they have their own plans going. My experience also tells me these other countries are more disciplined, more focused than Nigeria. So it leaves me wondering if we are likely to attain what is being flagged, specifically because at the heart of all human progress is culture, [and] values determine human progress. The dominant values in Nigeria are not the values around which people make progress. Therefore when my heart desires this my head, my intellect, my study and exposure says to me, the proposition is faulty unless there is revolution in culture. And that revolution I have not seen. If anything, culture is getting worse in Nigeria. Corruption is more pervasive; deferred gratification, which is what really propels builders, is not there. Instead we have a dominant instant gratification culture, a political class that is incompetent and unfocused, who do not have a sense of service i.e. a sacrificial giving of themselves. As long as that is the reality, it will be difficult for me to assume that this vision will be realized, even though I desperately desire it to be.


EM: You have zeroed in on the effects of our warped culture and the need for a culture revolution. Under what circumstances do you think this vision can be actualized?


Pat Utomi: I have spent thirty years of my life obsessed with what makes for rapid economic growth. I began with a study of Latin American countries back in the late seventies and early eighties, and then moved to the South East Asian economies that have grown rapidly. In that period I have come to isolate six critical variables that determine sustained economic growth. Amongst these variables include the choice of economic policies. This brings the question, what kinds of economic policies have we made? Well, in this area we have made some progress, but there is still quite some ground to be covered. We have managed to get policies that are more market driven, policies which, in principle, ought to reduce the barrier to entry. We have moved from the command control economic view points, like the Productivity Prices and Incomes Board which held back ease of decision making in companies back in the 1970s and 80s. All of these are necessary, but hardly sufficient.

The second variable that came out of my study is the strength of institutions. When your institutions are weak you will have great problems. The courts for example are less predictable and by spreading a little money around you can get your preferred judgment. In such an environment, a lot of things are affected; credible business men for example will deem business undertaking too great a risk, thus leading to reduced domestic and foreign investment in the economy, property rights will also be affected with its attendant consequences of the economy. In his book The Mystery of Capital, economist, Hernando DeSoto describes a situation where the poor have assets but due to weak institutional systems cannot convert them into capital, leaving them poor as a result. Whereas in economies where the institutions are well developed and backed up by representational systems such as the land registry --- where you can buy and sell your house, for example, easily or use it as collateral for raising capital --- development is bound to take place faster. So as long as we have these institutional weaknesses, we will only achieve a little progress, even with the right policies. That is why the Nigerian economy has been referred to as a recursive economy; one that takes two steps forward and four steps in the opposite direction. The challenge is that our politicians do not understand the place of institutions. Their behaviors cast aspersions on the integrity of our institutions. They fail to see the long term effect manipulating the judiciary for selfish ends has on the overall credibility of the courts, and how this dissuades the business man who loses confidence in such institutions in the process and stays his investments.

Third critical variable is human capital. In this age of the knowledge worker, the ratio of Nigeria's investment in education, when compared with the countries we are supposed to be competing with, is simply appalling. Healthcare is also important in this regard, because when a man who has the greatest education is about to die of AIDS, then what is the point? Therefore human capital is about investing in education and healthcare, and this we are not adequately. How then do we hope to compete favorably with countries like Malaysia, South Korea, and Singapore who are investing appropriately in educating their population?

The fourth variable is entrepreneurship. Unless we have effective Creative Destruction taking place we cannot sustain economic advancement. The Austrian economist Joseph Schumpeter is famous for the concept of Creative Destruction; economic progress does not take place until you can creatively destroy what is the current source of dominant value and supersede it with something that gives greater value. One of the best discussions of the subject is put forward by Ragu Rajan and Luigi Zingales in their 2004 work Saving Capitalism from the Capitalist. We realize that it is capitalism that creates value, and we as a people have not been able to create a healthy environment to make this a reality in our country.

The fifth variable is culture. What are the values, culture and work ethics in this place? What is the integrity quotient in our environment? What is the spirit of deferred gratification, which propels people to save and invest so they can have a better tomorrow? We all crave comfort and pleasure. But builders are reputed for denying themselves of today's pleasures in order to create tomorrow's wealth. Builders are the sort of people who would rather board a Taxi than purchase a four wheel drive, even if they have $5million in the bank. In some ways, we are all guilty of this. This behavior is rooted in our culture of consumption. We are a consuming economy, not a producing economy. And yet we want to be top 20, simply because we produce oil, a gift given by God and harnessed by foreigners. The sixth variable is leadership. The caliber of leaders also determines the extent of development. So what's the impact of that on our GDP?


EM: The current global financial crisis has raised questions about the long-term viability of capitalism. What's your take on this?


Pat Utomi: Let me start by saying that half education is a terrible thing. I hear a lot of people saying, we have seen the end of capitalism. Firstly capitalism is cyclical. There is nothing that has not happened before. Secondly the people that are proclaiming to us the end of capitalism have not shown us a better system. Just like the man who wrote the book The End of History Francis Fukuyama, has had the mud on his face, these people will have the mud on their faces because there is nothing that has ended about capitalism. It is human nature that as capitalist boom brings prosperity to people, human greed will begin to push them to the limits, to the excesses, which is what has happened to the American financial system. In pushing those limits people will begin to create more sophisticated institutional arrangements to advance their greed, then everybody gets burnt, then there is decline. Historically, the last two decades have heralded unprecedented prosperity, with globalization and free trade leading to greater efficiency and facilitating the boom. Then people begin to protect their gains, and what economists call Beggar Thy Neighbor Policies comes into place. This leads to economic shrinking, and finally an economic recession or depression. Invariably, depressions end up in wars because people become feisty. Then at the end of the war the world retraces it steps and repeats the cycle all over again. For example after World War 2, the Bretton Woods institutions i.e. the World Bank and IMF [International Monetary Fund] were created essentially to prevent man from repeating this cycle. And the effect of their success is that for a very long period we have not had that cycle reoccur until now.

EM: Ever since oil was discovered, it seems like the Niger Delta was a time bomb waiting to explode. Now it has become an “exploding dynamite” that is going off every second. In your own opinion what solutions can you prefer to the current crisis?

Pat Utomi: The problem that we have in the Niger Delta is an error of military rule. The founding fathers of Nigeria recognized that regions will have different economic advantages and disadvantages. That is why they chose a federal structure, allowing each region to develop according to their own endowments. However, no region can develop in isolation; it would necessarily spill over benefiting the whole. Malaysia is a good example of this. The current development of the nation actually began from one single region called Panan. From Panan progress came to all of Malaysia. Even the global emergence of China is spreading from those South Eastern regions like Hong Kong, Shanghai and now the whole of China is experiencing prosperity. The fathers of Nigeria recognized that. Then came military rule. The most terrible thing that happened to Nigeria was the convergence of oil and a centralized government under military rule. With oil kicking in, derivation which was 50% began to decline because some powerful Generals used their powers to keep changing the structure of the Nigerian federation. Now we do not have a federation any more. Niger Delta can have all the oil in the world, but if you have proper federalism and intelligent people running Sokoto State [for instance], there will be more prosperity in Sokoto State because the greatest gift that man has is the human mind. The fact that we can share oil revenue have prevented us from making intelligent people run [certain] States, because they are all waiting for allocation from oil revenue. What has happened in Nigeria is not a problem of oil but the failure of leadership.


EM: It is believed that the power sector has not worked, because of those who have a stake in the companies that import and sell power generation plants in Nigeria. Is there some credibility in this conspiracy theory? What is your view on the power sector as a whole?


Pat Utomi: These are just simplistic variables that we bother ourselves with. It is a collapse of culture, the values are so warped that the people are so concentrated on how they can take advantage of circumstances. Professionalism has gone out of the window and so the more money you budget for these things the less likely you are going to achieve your objective. If we were serious about fixing the power problem we would explore the options that are available before us. The other day, a senior Nigerian official said he was on a flight to Abuja one day with a Gambian, when the man discovered he was a senior official in government, he asked him about the power problem saying, “what is the problem you people really say you have? Is that you don't have the money or you don't know where to buy these plants?” He could not give the man a suitable answer. Let's face it; we do know how to manage this problem. We can call General Electric to ensure that there is no power failure in Nigeria. We are going through these problems because we have leaders who can't think beyond their desire to steal.

EM: Well, it has been very enlightening talking with you Sir.

Pat Utomi: Thank you very much.