(Economy) Whom To Emulate; Latin America Or Asian Countries
…lagging horses should emulate leading horses(Yoruba idiom)
First reading encounter with Latin American economies was in 1970s with the news of heavy stagflation in Brazil and Argentina. These economies were saddled with huge foreign debt, hyperinflation and high unemployment hence the term stagflation. Brazil got out of stagflation in the mid 90s but Argentina is back in it now joined by Venezuela.
First impression of Asian countries was the arrival of Japanese goods into Nigeria. On our roads appeared the Toyota models, as well as Nissan, Mitsubishi, Honda etc. Later electronic giants Sony, Panasonic, National and Sharp ventured into Nigerian electronic markets. First impression was that they were of inferior quality hence their low prices compared to European brands like Grundig. Not for long as in twinkle of an eye they replaced European brands on our roads and in our living rooms. They are no longer priced low, the low prices being a function of their delibrate weak currencies amongst other things. Today Japanese goods command premium price tags. Joining Japan from Asia in the 80s was South Korea and later China.
How many hi-tech Latin American products do we find in our markets? There once was the Brazilian luxury bus, Marco Polo on our highways, what else? Brazil also has a reputation for deep off shore oil exploration and exploitation. Both continents were equally exposed to severe Western hegemony and both operate in the US dominated world economic order with a spattering of communist influences and there.
Nigeria is again at a cross road and we have democracy to thank for this else we would be saddled with Buharinomics and it’s twin Emefielism till we end up like Venezuela. Our president elect and his advisors should be preparing to take advantage of the change and have in place a better economic program. Many options would be placed on the table Mr President to be, options from pure central planning to entrepreneurial capitalism. Does he have to reinvent the wheel? No he doesn’t but he can improve on existing developmental wheels.
The question is whose development format should Mr President key into, the Latinos or the Asians? Were there differences in approach to transforming these regional blocs? Yes there are and its these differences I hope to point out, so we can implement what is known as Emulation Economics or Pragmatic Economics. Pragmatism obtained from contrasting Latin American countries approach to transformation with Asian countries approach.
Foremost is the difference in choice of industrialisation policy. National economist knew that concentrating on agriculture, raw materials and mining sectors would not be enough to transform independent countries while industrialisation should. Unfortunately the Latin American countries took in a beggar thy former colony industrial policy offered by Western economists, Import Substitution Industrialisation Policy ISIP. Thus limiting the local manufacturers their country markets and no more. On the other hand the Asian countries implemented Export LED Industrialisation Policy ELIP and went global before globalisation.
In the 1960s lots of Taiwanese raincoats, rubber boots, pencils and kerosene stoves lanterns etc found their way into Nigeria, none from Latin America. Unfortunately Nigeria chose the Latin American path of import substitution industrialisation policy. This we have to change. By the way, what is the most complex good we export from Nigeria? polished sesame seeds, cement, assembled armoured vehicles by Proforce in Ogun State and Innoson vehicles to few African countries.
The question above brings us to the next difference between the two continents. The rate the East Asian countries moved away from exporting kerosene stoves etc to Taiwan’s TSMC and South Korea’s Samsung becoming world’s sole providers of cutting edge microchips. This shows a steep learning curve instilled in them. Brazil, Argentina, Chile are known for their agricultural produce hardly hi-techs. Its been this way for decades meaning a less steep learning curve. In Nigeria our learning curve is flat, agro exports and crude oil exports for past 60 years.
This brings us to human capital development in the regions. Countries in both regions expend a lot on education, it is where emphasis is placed that makes the difference. The Asians place genuine emphasis on the STEMs while the Latinos lay more emphasis on education to offer secondary services to industries. This includes the professions, medicine, accountancy, law and engineering to some degree. With genuine STEM emphasis in Asia, nationals are able to meet industry demand for very high skilled labour while professionals in South America emigrate to wealthier nations, sounds familiar? Something else, Asians knowing importance of grit education, also knew they needed to join the innovation party, so they can research and develop patents and right now China is matching the US with yearly patent output.
What type of national economy existed within these countries? Latin American countries tend to run a planned economy with heavy State presence, while the Asians allow a full blooded market driven economy. The competition in the automotive industry in Japan and less degree South Korea was very intense within the national markets leading to the locals acquiring full benefits of Schumpeterian view of the business world, create, destroy and recreate, which helped in capturing global markets. While Americans were producing gas guzzling cars the Japanese mastered manufacturing of fuel efficient vehicles, this played to advantage of Japan during the oil crisis of the 70s.
Like Nigeria the Latin American countries were assembling vehicles by coupling imported knock down parts. Asians manufacture quality primary vehicle parts, piston rings shock absorbers etc, in country and then assemble. The former has been described as superficial industrialisation with core technology being imported from abroad. The other region has domesticated technology and do not just consume technology but contribute meaningfully to advancing technology in most spheres of manufacturing. Taiwanese TSMC and Samsung are finest examples of Asian conglomerates operating in cutting edge technologies.
MERITOCRACY Vs CRONYISM. A video clip is making the rounds wherein a Singaporean summarised ingredients for Singapore’s rise to First World country in a generation. He summarised with the acronym MPH, M standing for meritocracy. In Latin America nepotism cronyism rules though not as abused as the federal character policy operating in Nigeria. Asia also promoted private Chaebols over State Owned Enterprises birthing the global conglomerates we know today.
Achieving Inclusiveness: Asian countries have a better GINI coefficient than South American countries GINI coefficient being deployed to assess income inequalities within countries. Hard to say if achieving a fairer society was part of the design or a fall out of Asian countries engaging their peoples in high end manufacturing rather than extractive sectors like mining, drilling for oil and raw material export. Simply, the choice Asia made in the 60s have placed them in a higher league of nations than Latin America and Africa.
Is this advising the wholesale adoption of the Asian model? No it isn’t, but it points to a direction to take and the direction to reject. Refine the Asian direction to avoid mistakes that led to Asian financial crisis of 1997. This is because not one recently prosperous nation reinvented means of achieving wealth for their nations, they simply adopted tools of national wealth creation that has been in existence for half a millennium. After penning this article I felt we have not started the journey for inclusive wealth in my country as we quibble on resource control.