Resources on Growth and Development Economics

Of the many aspects of Nigeria's political leadership that have always struck me as strong indicators of their lack of fitness for the task of development, one of the most glaring has been their virtually universal ignorance of, and disinterest in, the economic history of other notions. "Surely", one would think, "in drawing up development plans, it would be helpful to know what examples there are to emulate, and how exactly these success cases managed the feat", but this seemingly obvious notion appears utterly foreign to Nigerian rulers and the political class as a whole, whose primary concern seems to be about fighting for a bigger slice of a fixed "national cake" amounting to the revenues of pumping 2 million barrels of crude oil per day, never mind that these revenues are meant for the "development" of a nation of 180 million, and whose population is growing so rapidly as to be set to double over the next 25 years ... To the extent that Nigeria's political elite pays even minimal lip service to thinking about economic development, it is always a matter of talking up more natural resources to serve as potential sources of new rents, or to mouth vacuous inanities about "agriculture", as if the future lay in turning the country's 100+ million young people into subsistence farmers.

As a corrective to this myopic view of economic development, the next reference item I'd like to suggest is a work of economic history, namely WJ MacPherson's book titled "The Economic Development of Japan: 1868-1941". I might have suggested in this work's place several other worthwhile titles, e.g. "The Cambridge Economic History of Modern Britain" (both volumes), but as a case study for economic growth, I think Japan is particularly worth studying for several reasons:

1. Unlike an economic leader such as Britain, Japan was a latecomer to modernization, which had to scramble to make up for lost ground.
   
2. Of all countries with non-white, non-European-descended majority populations, only Japan managed to learn the ropes so well that within a short time-span it could even beat the Europeans at their own game, defeating Russia in 1905, and even daring to attack America's Pearl Harbor base in 1941, before subsequently demolishing British imperial defenses in Hong Kong, Malaya and Singapore (those who talk up Japan's postwar economic "miracle" fail to consider that the country must already have been pretty developed pre-war in order to have been able to go to war with the USA).
   
3. Japan's rapid economic growth occurred despite the constraints of few natural resources, and in an extremely threatening environment in which neighboring China had already been dismembered by Western powers; in fact, Japan too had to put up with humiliating "unequal treaties" which took more than 3 decades to abolish, starting in 1899. The Nigerian obsession with resources as the basis of "wealth" is utterly wrong-headed, and it was already misguided 150 years ago, well before the dawn of the information age, biotechnology, robotics, etc.
   

As the points above indicate, Japan's history suggests that rapid economic development is achievable even under apparently unfavorable circumstances, provided decisive leadership is in place with the necessary intellect and selflessness to make good decisions and then stick with them, even in the face of potential unpopularity. The developing countries of our day also happen to have one major advantage the Japanese lacked: when Japan's leaders set about pulling their country into the modern world, they didn't have any easy examples to copy, whereas we now have as templates not only Japan itself, but also the East Asian Tigers (Hong Kong, Singapore, South Korea, Taiwan) and, most recently, China.

Getting into the content of MacPherson's work, I'll begin by saying that the book is both quite short (only 107 pages in total) and easily accessible, requiring little in the way of an economics background to digest. Despite the brevity of the book, it is also packed with interesting statistics on various aspects of Japan's economic development, from population growth rates, to sectoral production inputs, to export growth, consumer consumption as a percentage of national income, etc. Among the more interesting insights the book has to offer is how crucial access to large amounts of capital was to Japanese growth, and how heavily relied the country on foreign capital at the very start, before income per capita had grown enough to allow domestic savings to satisfy most of the country's capital requirements; this is noteworthy because Japan's huge and ever-growing export surpluses since the late 1970s fosters the misleading impression that the country was always either a net exporter of capital, or has at least always been so self-reliant as to never have needed foreign investment.

Speaking to modern-day Nigerian politics, Japan's example - which is often wrongly cited by champions of capital controls - shows how futile it is to expect rapid growth under the toxic mixture of import restrictions and artificial currency pegs which Buhari and Emefiele have combined to impose on the Nigerian economy; these two incompetents are directly to blame for the recession which Nigeria is only just starting to show signs of recovering from, and with slightly better policy-making, the recession could easily have been avoided altogether. Only countries with very high domestic savings rates can afford to shut themselves off from foreign sources of capital, and Nigeria's low per-capita GDP, high and erratic inflation rate, and incomplete financial markets (most Nigerians don't even have bank accounts) all work against this rosy "we can rely on our own savings" scenario.

I've gone into only one of the many insights to be gleaned from the book, but there are certainly many more awaiting the interested reader. Above all, I would say that the most important thing to take away from the work is that solid, reliable institutions that encourage rational economic incentives are what make the difference in the long run, not direct government intervention in every area of economic activity. What really counts are mundane things such as reasonably low and steady inflation, an honest and reasonably efficient public sector, a sensible and predictable system for settling legal disputes, and a general environment of law and order which allows entrepreneurs to invest without worry. Nigeria has suffered from decades of economic failure because Nigeria's leaders have always pursued the wrong priorities - prestige projects that are nothing but white elephants (e.g. Ajaokuta), neglect of crucial but unglamorous infrastructure (e.g. the railway system), illogical and tribalism-driven economic planning (e.g. placing a refinery in Kaduna, when the oil is in the Niger Delta), pouring of money into projects without any thought for their standalone economic viability over the longer term (e.g. Federal roads without tolls to pay for upkeep), pandering to mass opinion at the expense of items with longer-term returns (e.g. fuel subsidies, electricity price caps, bloated public payrolls) - the list of points of failure in Nigerian economic thinking is almost endless, and it really is no mystery why Nigerians are poor.

Indeed I do! I've been several times to Japan, and every time I've gone there I've been incredibly impressed by so many aspects of their culture - their work ethic, their punctuality, their reliability, their emphasis on cleanliness, their politeness ... I could go on and on. The best thing of all is that once the Japanese began modernizing, they embraced change thoroughly while still managing to hold on to so much of their own cultural traditions - unlike certain people who think themselves more "innovative" than others merely because shame at their pre-colonial state drives them to uncritically adopt western names and imaginary Jewish ancestors ...