Futility of capital investments to transform economy
Capital investment, per se, does not promote sustainable economic growth and industrialisation (SEGI) or growth that makes positive impact on the economy and people. Nigeria has been achieving high GDP growth rates since 1999 with no positive impact on the economy and the people. Nigeria, therefore, during the past decades confirmed the scientific position that no amount of capital investments including Direct Foreign investments (FDIs), transforms an economy.
The Buhari government should not borrow money to spend on infrastructure because mere erection of roads and bridges does not translate into real growth and development. The government should abandon the thinking that inflow of FDIs into a nation promotes true growth and creates employment. Rather, the Buhari government should focus attention on things that promote true growth and increase a nation’s manufacturing capabilities – education, adequate training, acquisition of relevant competences, and promoting industrialisation.
All Nigerian national plans since 1960 including SAPs, NEEDS, Visions 2010 and 20:2020, have all been based on the assumption that mere capital investments promote SEGI. Second, Nigerians believe that FDIs (technology transfer) are central to Nigeria’s industrialisation. Third, Nigerians believe very strongly that mere foreign investments will enable Nigeria to realise maximum benefits from the Oil and Gas Industry (OGI). Fourth, most Nigerians believe that Nigeria can establish a reliable infrastructural network including a regular electricity supply system through mere capital investments. Fifth, Nigerians believe that the private sector is the engine of growth because it has a lot of capital to invest. These beliefs have no scientific bases. That is why Nigeria has been achieving growth without development and stagnating at the same time.
The World Bank (1998), in its “World Development Report,” stated that technological knowledge means know-how; those countries which possess less of it are caught in the poverty bracket. Poor countries, the bank continued, and indeed poor people are not able to compete in the global system not because they do not have capital, or other material resources, but because they have less knowledge. I agree with the bank that the difference between the agricultural-economies in Africa on the one hand and the technologically advanced economies in Europe, America and Asia on the other hand, is a matter of difference in the level of knowledge. The pertinent questions here therefore are: What did Europeans, Americans and Asians do to possess the knowledge that is the basis of their highly competitive positions?
During the period of almost 2000 (two thousand) years, the productivity of the people in Britain was characterised by primitive tools like hoe, axe and draught oxen (Davies, 1969). The productivity was very low and seemed unchanging for many centuries. Adam Smith (1776), in his book, The Nature and Sources of Wealth of Nations, had described England as a nation of shop-keepers, because virtually everyone sold one thing or the other but no one manufactured anything. Britain, however, achieved the first modern Industrial Revolution (IR) in the period of 1770-1850 (Gregg, 1971). By 1900, England had become industrialised and most people worked for weekly wages.
The research works of Charles Cobb (a mathematician) and Paul Douglas (economist) in 1928, Douglas (1948), Abramowitz (1956) and Solow (1957) showed that capital contributes very little to achieving SEGI. Gerschenkron (1966) examined the Western industrialisation experience and concluded that capital investment was not a prerequisite to it. Our scientific research in Obafemi Awolowo University, using equations and graphs also showed that mere capital investment does not promote SEGI. Nigeria has been achieving growth without development because Nigeria’s planning is premised on the faulty premise that mere capital investments especially FDIs promote growth. President Buhari can and should reverse the downward trend and save Nigeria.
All persons are born as crying babies. The baby soon begins to babble (learns how to talk), acquires the competences to talk and talks (Ogbimi, 1990). The baby who could not babble grows up to be a dumb adult. Talking or speaking is a skill (Hurlock, 1972). The child must also learn how to read and write, otherwise, it grows up to be an illiterate. No one or nation is born with the skills to produce.
Our scientific theory suggests that the five variables that should guide planning for industrialisation or determine the level of industrialisation are: 1) N – the number of people involved in productive work or employment in a nation; 2) M – the level of education/training of those involved in productive activities in the economy and of the people of the nation; 3) L – the linkages among the knowledge, skills, competences and sectors of an economy; 4) r – the learning rates or intensity in the economy and especially among the workforce; and 5) n – the experience of the workforce and the learning history of the society. All the variables are related to the learning-man and learning-woman. Moreover, the higher the values of the variables, the better is the economy. The private sector does not develop the relevant variables that determine the manufacturing strength of a nation – M, N, L, n and r. Hence, the private sector cannot be the engine of growth of an economy.
Let Nigeria initiate a rapid industrialisation process by setting up the framework for training all graduates of educational institutions, especially the scientists and engineers, to acquire complementary practical skills in the economy outside educational campuses. The educated and trained graduates should be challenged to build and maintain the infrastructure Nigeria needs.
• F. E. Ogbimi wrote via e-mail: email@example.com)
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