Recession as Opportunity for Reversing Resource Curse (II)
I did promise a double view today. Its the last day in September and one day before Nigeria's Independence anniversary.
Here I present my favourite 2 replies to Waziri Adio's article.
Number 1: James Edwards. Rather than the Resource Curse he argues that what has affected Nigeria, Saudi Arabia, Iran and other resource rich countries is one word CULTURE. He believes that it is the prevalent culture that has caused economic drop due to oil drop. Do you agree? First read what he says.
Number 2: FrNinja. He posits that it is not the culture but the POLITICAL STRUCTURE of the country. Do you agree?
James Edwards says: This article is just one of the many that fail to describe what truly happens with Nigeria's economy. Submissions here have all been explained by development economist for decades. See for example the book, "The Paradox of Plenty" by Terry Lynn Karl. But what this writer and other fail to acknowledge and report is that the US economy was built on natural resource development: oil. The US for many decades and even till today is the biggest producer of hydrocarbons. Russia is the biggest producer of gas in the world but is also industrialised. At least they build all their weapons, including nuclear weapons locally and also send people to space. Russia is the only country that currently sends people to the ISS including the Americans. But is a natural resource rich country.
This writer and others blame the lack of savings during high oil prices for recession and economic difficulties in times of low oil prices. But the question they have not answered is, what happens after you used up the savings during low oil prices? Savings cannot be the solution to resource curse. Depending on the size of the economy and the level of import, a country can blow $100 billion within a year of low oil prices. Ask the Russians and the Saudis. There is no amount of savings (especially in the case of Nigeria) that can protect an economy from low oil prices if that economy does not have strong industrial base or local industry that can immediately produce goods to replace imported ones to save foreign reserves and reduce demand for foreign exchange. This idea that lack of savings alone is responsible for recession or economic crisis in resource rich countries is shallow thinking.
Also the idea that natural resources cause people/leaders of such countries to be corrupt, have rent seeking mentality, etc etc does not explain anything. These can be true of some countries of the South but not countries of the North. That is why the US, Canada, Norway etc cannot be said to have suffered or suffering from resource curse. The issue boils down to culture. People are explaining the consequences of culture as the consequences of natural resources.
What people should be concerned with should be how inflow during boom period can be used to diversify the economy through industrialisation. This may have been what informed the establishment of heavy industries in Nigeria in the 70s and 80s such as the steel mills, the ALSCON, news print manufacturing company and other companies. The steel mill was necessary because it the basis of industrialisation. But what happened to these heavy industries cannot be attributed to resource curse but the culture of the people. Prior to colonialism our way of life in Nigeria/Africa was purely artisanal. Our environment did not condition us to think of how to surmount anything. We didn't have snow and tough climatic conditions that taxes the mind to think of solutions to everyday problems. Heat was not an issue for us that's why we did not invent the air-conditioner even when Africa was and remains the hottest place on earth. Air-condition was even invented in a country where cold kills people. Same for refrigerator which was also invented in an environment where cold could preserve foods. Our way of life from antiquity has always been one of subsistence: how to live from day to day. Industrialisation and national planning was never part of our culture for centuries. These are concepts we inherited from the colonisers and have done a bad job of it. It is therefore our culture that breeds the mindset which produces the outcomes that development economist now attribute to natural resource abundance. This is wrong.
I noted elsewhere that leadership plays a role in natural resource curse. This is true because strong and transparent leadership directs and shapes the attitude and culture of society to some extent. But again, such strong and transparent leadership has its foundation in culture. In the case of Nigeria, the dominant cultures are not ones that conduces to enthronement of accountability, transparency and development. In some of the dominant cultures, one individual wields both spiritual and political authority thus making it difficult for citizens to hold such individuals to account. Colonialism did not eradicate such cultures but instead reinforced them. They were carried into governance after independence and transferred into national life. The outcome of these cultures which breeds corruption, rent seeking, political patronage, short term mentality (as can be seen in the proposal to sell assets for immediate gain) lack of creativity, etc in Nigeria is what analyst now attribute to consequences of resource curse. The dominant cultures of the different peoples of Nigeria (shaped by the environment that did not tax the mind of the people to solve problems posed by their immediate environment) is the reason why Nigeria's natural resources appear to be a curse to development economist. It is not the natural resources. It is the peoples' culture.
Here I present my favourite 2 replies to Waziri Adio's article.
Number 1: James Edwards. Rather than the Resource Curse he argues that what has affected Nigeria, Saudi Arabia, Iran and other resource rich countries is one word CULTURE. He believes that it is the prevalent culture that has caused economic drop due to oil drop. Do you agree? First read what he says.
Number 2: FrNinja. He posits that it is not the culture but the POLITICAL STRUCTURE of the country. Do you agree?
James Edwards says: This article is just one of the many that fail to describe what truly happens with Nigeria's economy. Submissions here have all been explained by development economist for decades. See for example the book, "The Paradox of Plenty" by Terry Lynn Karl. But what this writer and other fail to acknowledge and report is that the US economy was built on natural resource development: oil. The US for many decades and even till today is the biggest producer of hydrocarbons. Russia is the biggest producer of gas in the world but is also industrialised. At least they build all their weapons, including nuclear weapons locally and also send people to space. Russia is the only country that currently sends people to the ISS including the Americans. But is a natural resource rich country.
This writer and others blame the lack of savings during high oil prices for recession and economic difficulties in times of low oil prices. But the question they have not answered is, what happens after you used up the savings during low oil prices? Savings cannot be the solution to resource curse. Depending on the size of the economy and the level of import, a country can blow $100 billion within a year of low oil prices. Ask the Russians and the Saudis. There is no amount of savings (especially in the case of Nigeria) that can protect an economy from low oil prices if that economy does not have strong industrial base or local industry that can immediately produce goods to replace imported ones to save foreign reserves and reduce demand for foreign exchange. This idea that lack of savings alone is responsible for recession or economic crisis in resource rich countries is shallow thinking.
Also the idea that natural resources cause people/leaders of such countries to be corrupt, have rent seeking mentality, etc etc does not explain anything. These can be true of some countries of the South but not countries of the North. That is why the US, Canada, Norway etc cannot be said to have suffered or suffering from resource curse. The issue boils down to culture. People are explaining the consequences of culture as the consequences of natural resources.
What people should be concerned with should be how inflow during boom period can be used to diversify the economy through industrialisation. This may have been what informed the establishment of heavy industries in Nigeria in the 70s and 80s such as the steel mills, the ALSCON, news print manufacturing company and other companies. The steel mill was necessary because it the basis of industrialisation. But what happened to these heavy industries cannot be attributed to resource curse but the culture of the people. Prior to colonialism our way of life in Nigeria/Africa was purely artisanal. Our environment did not condition us to think of how to surmount anything. We didn't have snow and tough climatic conditions that taxes the mind to think of solutions to everyday problems. Heat was not an issue for us that's why we did not invent the air-conditioner even when Africa was and remains the hottest place on earth. Air-condition was even invented in a country where cold kills people. Same for refrigerator which was also invented in an environment where cold could preserve foods. Our way of life from antiquity has always been one of subsistence: how to live from day to day. Industrialisation and national planning was never part of our culture for centuries. These are concepts we inherited from the colonisers and have done a bad job of it. It is therefore our culture that breeds the mindset which produces the outcomes that development economist now attribute to natural resource abundance. This is wrong.
I noted elsewhere that leadership plays a role in natural resource curse. This is true because strong and transparent leadership directs and shapes the attitude and culture of society to some extent. But again, such strong and transparent leadership has its foundation in culture. In the case of Nigeria, the dominant cultures are not ones that conduces to enthronement of accountability, transparency and development. In some of the dominant cultures, one individual wields both spiritual and political authority thus making it difficult for citizens to hold such individuals to account. Colonialism did not eradicate such cultures but instead reinforced them. They were carried into governance after independence and transferred into national life. The outcome of these cultures which breeds corruption, rent seeking, political patronage, short term mentality (as can be seen in the proposal to sell assets for immediate gain) lack of creativity, etc in Nigeria is what analyst now attribute to consequences of resource curse. The dominant cultures of the different peoples of Nigeria (shaped by the environment that did not tax the mind of the people to solve problems posed by their immediate environment) is the reason why Nigeria's natural resources appear to be a curse to development economist. It is not the natural resources. It is the peoples' culture.
FrNinja says: The culture of patronage, rent-seeking is prevalent in Chinese and
Korean culture but it did not stop the likes of one party states like
Singapore, Taiwan, Korea from developing which says that the primary
difference with the likes of Nigeria was something called patriotic
leadership. Those cultures may have been corrupt but they reinvested in
their countries and did not seek to destroy it like Nigerian leaders.
They built infrastructure, invested heavily in education while Nigerians
were looting government coffers, watching roads, power collapse and
shipping it to the UK and the US. It says that Nigerian leaders never
believed in their country. That Nigerian leaders continue in their
destructive behavior patterns in 2016 says that the country will not
change until the structure becomes more legitimate to the leaders and
the people.
For Nigeria it means implementing true federalism along the lines of the six geopolitical zonal structure conceptualized years ago. It means dominant ethnic zones where toxic national competition between the Yoruba, Igbo and Hausa can be channeled into regional economic development while their domineering tendencies at the federal level can be counterbalanced politically by three zones of minority groupings.
The only resource curse is the governance one and Nigeria is definitely cursed to have failed to have learnt lessons from the first oil boom and bust. For those prescribing diversification the question that should be shouted to them is WITH WHAT? Is it with expressways built in the 1980s half of which have collapsed? Is it with less power generation capacity than small neighbouring Ghana ? Is it with a banking system that has proven to be as corrupt as government itself and has had to be bailed out? Most importantly is it with the Nigerian government which has absolutely no plans to change the status quo. $50 oil is here to stay for quite a while. Nigerian government will be the first casualty of an extended depression in oil prices.
For Nigeria it means implementing true federalism along the lines of the six geopolitical zonal structure conceptualized years ago. It means dominant ethnic zones where toxic national competition between the Yoruba, Igbo and Hausa can be channeled into regional economic development while their domineering tendencies at the federal level can be counterbalanced politically by three zones of minority groupings.
The only resource curse is the governance one and Nigeria is definitely cursed to have failed to have learnt lessons from the first oil boom and bust. For those prescribing diversification the question that should be shouted to them is WITH WHAT? Is it with expressways built in the 1980s half of which have collapsed? Is it with less power generation capacity than small neighbouring Ghana ? Is it with a banking system that has proven to be as corrupt as government itself and has had to be bailed out? Most importantly is it with the Nigerian government which has absolutely no plans to change the status quo. $50 oil is here to stay for quite a while. Nigerian government will be the first casualty of an extended depression in oil prices.
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