A roadmap for inclusive prosperity (3)

Relative to the resources earned over the past six years, with oil prices hovering around $100 per barrel, how much have been devoted to these latter-day programmes in absolute and relative terms, as per each Nigerian? The World Bank states that its mission is “working for a world free of poverty”. It is therefore surprising that it is at an election time that a programme of social safety net, for example, is now being proposed by the economic managers, some of who spent upward of two decades at the institution.

Industrial revolution

Over the next five years to 2020, the main goal of prosperity economics of inclusiveness is to reduce unemployment and inequality and foster shared growth by creating jobs, fostering innovation, and expanding opportunity. Over the next five years and in view of current youth demographic structure, manufacturing, especially labour-intensive industries, should be the prime sector for inclusive and shared prosperity that can lead to higher employment generation, sustainable income generation stream, increasing foreign exchange earnings, fostering economic diversification and deepening value chain prospects. The goal is to more than triple the share of manufacturing value added to GDP from about 7 percent to over 20 percent in line with most of the countries of the BRIC, MINT and SANE, and in line with our own vision document. It will help to slow down the premature de-industrialization, symptomatic of the bulk of excess labour currently in street hawking and other non-tradable activities, informal retail trade and housework services in cities, operating at very low levels of productivity and low-income trap.

The signature economic sector of labour-intensive manufacturing industrial revolution for inclusive prosperity is predicated on public-private partnership within a dynamic market economy that works for all. It is not that other sectors are not important, but given limited resources, prioritization towards an industrial revolution will achieve maximum impacts on unemployment, job creation, and inequality. As documented by Dani Rodrick, a Princeton University Professor of Economics, manufacturing has been the key to rapid economic growth and prosperity in Britain, Germany, the United States, and Japan, in East Asian countries and in China. Nigeria should not be an exception to this manufacturing phenomenon, especially given its large domestic market and its role as a regional economic powerhouse in West Africa. The Vision 2020 specifies the key manufacturing sector requiring immediate attention. Its second pillar aims at optimizing the key sources of economic growth via economic diversification, transformation of production and exports structure from primary commodities to processed and manufactured goods, and enhancing efficiency and productivity in value-adding sectors for global competitiveness. High priority sectors identified include petrochemicals, non-metallic minerals, food and beverages, and textiles. Low priority sectors were electrical and electronics, and motor vehicle and miscellaneous assembly are deferred to after 2020. However, in implementation, priority has been turned upside down. While we hear of establishing motor vehicle and assembly, the more labour-intensive manufacturing industries that will create far greater jobs have suffered low priority.

Many of the new economy business models rely on creating network externalities, requiring speed rather than size that connect firms and people, producers and consumers, capital and labour. As Ricardo Hausmann, a Harvard economics professor, has argued in ‘The Economics of Inclusion’, “The majority of people need access to networks–the grids that distribute electricity, urban transportation, goods, education, health care, security, and finance. Lack of access to any of these networks causes enormous declines in productivity…. A strategy for inclusive growth must empower people by including them in the networks that make them productive.”

The African Competitiveness Report, a joint publication of the World Economic Forum, the World Bank and the African Development Bank, of which I was joint coordinator and which was initiated when I served as director of Development Economics Research at the ADB, identified three key networks that are interlinked and crucial to the development of the manufacturing sector and competitiveness: power, education, and finance. Access to affordable finance, including micro-credit, is an important plank of the critical support for labour-intensive manufacturing that will drive inclusive prosperity. One of the greatest infrastructure networks impeding the growth of manufacturing is the power sector, with current installed capacity generating only 4,500 MW, a far cry from the 20,000 MW target set for 2015 in Vision 2020, and after spending about $28 billion in investment for the sector over the last 16 years. Manufacturers labour under the high business costs added by generating 70 percent of their own electricity requirements. A revitalization of power is needed in powering an industrial revolution in the next five years.

An educated workforce with a training revolution

A well-educated workforce is vital to a revitalized labour-intensive manufacturing sector. It provides opportunity to enhance vocational and technical curriculum, and workforce on- the-job training programmes, which bring together educational providers and business to improve the productive capacity of the workforce. Today, college education in the labour market is almost the same as what high school education was in the 1960s and 1970s. But employers, especially multinational companies, are relying more on graduates trained in colleges from outside Nigeria, thereby further adding to the de-skilling of Nigerian university-trained graduates. As Laura Tyson, former chair of US Presidential Council of Economic Advisers, and Lenny Mendon of McKinsey have noted, a highly trained labour force is a public good that is crucial not only to the prosperity of workers themselves, but also to the productivity of firms and the strength of the entire economy. It requires private-public partnership among governments, employers, trade associations and educational institutions in identifying the skills that employers need, provide the structure to train workers and match them with available jobs. With education budget far below the UNESCO targets and while energy and resources have been expended on the proliferation of federal universities across the 36 states, a more relevant, viable and sustained approach to support regional and industrial clusters would be to upgrade two federal universities in each of the six zones to world-class centres of excellence for research, technological advancement, and industrial innovation. These would be the equivalent of Nigerian Ivy League universities. Universal basic education up to final years of secondary school is essential, with more responsibilities devolved to the states and critical support provided by the Federal Government, especially in setting and ensuring uniform standards, hiring and empowering teachers.

Our prosperity is generated by and benefits everyone

In conclusion, as the PEA report has noted, “Prosperity economics has a distinctive goal: shared prosperity. It also has a distinctive prescription: policies and institutions that broadly distribute opportunities for economic success, create the preconditions for productivity among all workers, and provide the broadest possible space for people to shape their own economic lives through voice in the workplace and through democratic politics. Shared prosperity, in other words, is a means as well as an end. As we all share in the production of prosperity, we all share in its rewards. The central idea of prosperity economics is this: our prosperity is generated by everyone.”

Shared and inclusive prosperity is about socio-economic development that improves the security and welfare of people as enshrined in Section 14 (2) (b) of the 1999 Constitution of the Federal Republic of Nigeria, which states that “the security and welfare of the people shall be the primary purpose of government”, as well as that of business, civil society, and citizens. An effective developmental state combined with a dynamic market economy that works for all, and not a few, is a better route towards an inclusive prosperity.

Temitope Oshikoya