Last night I was reading up Japan’s road to industrialization. Specifically, I was learning how it went from a backwards set of earthquake prone islands in 1868 to one of the most powerful economies on the planet.
In 1900, the average Japanese person could expect to live to be about 44 years old, which is almost the same as a Malawian, both in 1900 and in 2013. However, a Japanese person in 2013 can expect to live to be more than 80 years old.
How did it do this? Ignoring the complexities and numerous details, Japan developed because it recognized early on that it had to develop its business sector. Development can’t occur without livelihoods and livelihoods come from cash producing jobs.
For example, following the Meiji restoration, Japan developed a system of land taxation, took the funds and invested them into buying second hand sewing machines from Europe. Rather than aiming for labor saving technologies, Japan aimed for labor intensive, individual sewing machines so that it could leverage as many people as possible. What it lacked in economic resources, it made up for in hands. Japan in the 1920’s then became a major exporter of textiles to Europe.
Japan didn’t stop there. Out of its land taxation system, it also made sure that capital was available for merchants wishing to diversify their businesses and encouraged farmers to convert their crops into products. A soy farmer can process his output into tofu and soy sauce. Similarly, a rice farmer can manufacture sake and sell it.
I am looking at the UN’s Millennium Development Goals:
Eradicating extreme poverty and hunger
Achieving universal primary education
Promoting gender equality and empowering women
Reducing child mortality rates
Improving maternal health
Combating HIV/AIDS, malaria, and other diseases
Ensuring environmental sustainability
Developing a global partnership for development
Out of eight goals, not a single one focuses on private sector development and entrepreneurship, which is arguably, if the cases of Japan and Korea are to be applicable to the African context, the key to consistent economic growth.
Where is the ninth goal? Where is the goal which calls for increased access to capital for small and mid level entrepreneurs? Where is the goal that calls for an elimination of onerous export taxes and corruption which kills the ability for businesses to competitively sell their products to the rest of the world? Why is there no call for proper systems of taxation which allow domestic investment?
The goal of sustainable business development is fundamental to the success of at least each of the other eight goals. I suspect that suspicion and cynicism toward the private sector is the culprit. No doubt, this ambivalence toward business killed the Affordable Medicines Facility – malaria, a supply side subsidy intended to increase access to anti-malarial medications in small private drug shops.
Even in public health, which is supposedly focused on holistic solutions to public health problems, the issue of private sector development and the relationship of economics to human health hardly appears.
People in my field seem to be happy to stick with models of pharmaceutical solutions to health problems, delivered through publicly funded health systems. What they fail to address is how to support those public clinics and hospitals though other means than donations from first world countries.
The evidence that Africans will flourish when given appropriate amounts of capital under reasonable terms (not microfinance as it currently exists) is out there. A strategy to give money to the poor, without strings or promise to repay, conditional on a reasonable business plan found that African households will invest in tools or technology to provide them income in the long term. They find that households which enlarge their business through an influx of capital keep their kids in school longer than households which do not.
I did a small survey of business on Lake Victoria, Kenya and found that businesses’ second most common stumbling block (the first was security) was a lack of access to capital. They need money to expand. Microfinance schemes, with their very high interest rates, are not a viable option to most, though loans at more favorable terms to the right people might make a huge difference.
True development will require a dramatic shift in focus for the development world. We will have to face the reality that business is good for human health, that the negatives of entering the cash economy are small compared with the negatives of trying to fruitlessly maintain a pre-colonial lifestyle in a post-colonial world and that Africans themselves are willing to step up to the plate.