It is pertinent to note that a subsistence economy is characterized by low agricultural productivity, poor coverage of public services and infrastructure, and a small amount of exports, all concentrated in a narrow range of primary agricultural commodities (for example, horticulture, raw cotton, and yarns, and so forth). In such an economy, living standards are near subsistence, or even even below.
However any recorded economic growth in a subsistence economy often leads to a transition to a commercial economy in which both rural and urban households are part of the monetary economy. Here, both the rural and urban households save and invest hence prosperity for all. Export earnings rise, and the range of exports also increase beyond a few primary commodities, population growth rates begin to decline as government services in education are expanded and as families seek higher educational attainment. Literacy among the young becomes nearly universal.
With sufficient growth in exports and domestic saving, the commercial economy becomes an emerging-market economy characterized by the nearly complete coverage of basic infrastructure (roads, power, telecoms, ports), basic education (universal literacy and primary education), basic health services, safe drinking water and sanitation. The economy by now is an exporter of both manufactures and services. Manufacturing exports include industrial products (automobile components, semi-conductor products, consumer appliances), information based services (business process operations, software, business consulting), and perhaps construction services as well.
The role of government in achieving these transitions are very clear, for instance, even when technologies are invented by the private sector, their use or use of the new technologies usually depends on public-sector investments as well. For example, cars require roads, electrical machinery requires a reliable power grid, and imported medicines require public-sector hospitals and clinics. If the government is not holding its end of the deal by making the needed public investments, then the private sector will not be able to make profitable private investments in new technologies. Thus, a failed state, or a bankrupt government that cannot pay for public investments, or a wildly corrupt government, will result in a technologically stagnant private sector as well. Sadly, this is presently Nigeria’s lot today hence the need to use the 2010 to craft a new development strategy that reflect this thinking.
Coupled to this is the realization that a final major step to becoming a high-income country is the transition to full-fledged science-based innovative activities. A technology-based economy is characterized by widespread tertiary education (perhaps thirty percent or more of the university-aged population), extensive public financing of scientific studies, extensive private sector-led research and development, a sophisticated information based society (high internet use, large circulation of daily newspapers, nearly universal use of mobile telephony and universal access to computer in schools). The technology continues to import technologies from abroad, but now foreign exchange is also earned by exporting knowledge and technological advances.
But, at all stages of development, the government must also ensure that the basic conditions of a functioning market-based economy are in place. These include a relatively stable monetary unit, a banking system adequately buffered against banking crisis, reasonable physical security for persons and property, a rudimentary legal system to enforce contracts and property rights, and a modest level of official corruption that is kept from getting out of hand.
Primarily, my expectation from the 2010 federal budget is about a sound development strategy that pays attention to three geographical dimensions: the rural (largely agricultural sector), the urban (largely manufacturing and service sector), and the national infrastructure grid (roads, power, and telecoms) that links together all parts of the economy, and connects the economy with neighbors and with world markets. At each stage of transformation from a subsistence economy to a knowledge-based economy, both the public sector and private sector have important and complementary roles to play. Without adequate public-sector investments and leadership, the private sector will be unable to operate effectively.
The current debate at the National Assembly over poor allocation to infrastructural investment and the fight against corruption need to be redressed since development is inherently an interplay between market forces and public policies. Even though we expect the private sector to be the engine of growth, the public sector must provide critical public goods such as infrastructure, which cannot be adequately provided by the private market and without which the private sector cannot thrive.
In the words of Chief Audu Ogbeh, the former Chairman of the Peoples Democratic Party (PDP) “We are spending over a billion dollars importing tiles every year from Switzerland, Spain and Portugal and Italy. There is clay, there is kaolin and water to make tiles here, make paint and make nails. Imagine the boom. But you can’t do it. You can’t raise a bank loan and the opportunities are just closed. You have no electricity”.
Continuing, he said “Greece is a country of nine million people. They have 10 refineries. Abu Dhabi is the capital of United Arab Emirates. There are 1.5 million people there. They have 11,000 megawatts for 1.5 million people. We are trying to get 6,000 megawatts for 130 million. We are now at the manufacturing levels of 1960 in this country. Go to Ogba and Ikeja in Lagos and see factories that are shut down. Go to the Southeast where the Igbo really wanted to manufacture. Go through there and see carcasses of industries”.
What else should we say, other than to challenge the Federal Government to redesign the next decade by strategizing for a better era with the 2010 budget. The benefits in doing this is multiple especially its multiple effects on states.