Accelerating the Creation of Enterprise Societies: A New Nigerian Mindset

Richard Joseph
Richard Joseph
Richard Joseph Professor Emeritus - Northwestern University, Former Brookings Expert

October 22, 2008

Editor’s Note: From October 21-24, 2008, the 14th Nigerian Economic Summit convened to address how Nigeria can maximize its potential to become one of the top economies in the world by 2020. During the first plenary session, Richard Joseph reflects on governance and institutional capacity building in Nigeria and how sustained growth can be achieved.

Exactly thirty years ago, I published an article entitled, “Affluence and Underdevelopment: The Nigerian Experience”. That article reflected a turning point in my understanding of the central challenges facing Nigeria and other African countries. Between the inflow of financial revenues from a variety of sources – commodity exports, international aid, family remittances – and the achievement of development outcomes, lay two critical deficits: effective governance and institutional capacity building. Although this understanding is now widespread among scholars and development practitioners, no one really knows how the necessary transformations – in attitudes, behaviors, and performance – will occur. The turmoil in the global economic system is likely to accentuate the slow or insufficient growth in Nigeria and most of Africa during the past three decades and the crushing poverty levels. We can no longer just write or talk about these deficits. The global crisis is a moment of opportunity for profound transformations in all countries wherever they find themselves on the economic ladder. During the next few years, a reformed economic infrastructure will emerge from the current wreckage of the global banking and investment systems. This is an opportunity for Nigeria to step forward and resume its leadership role in the African continent. It has greater human, financial, and other resources than most other African countries. This year’s Economic Summit is a moment to begin charting the needed course.

Governance and capacity building

In 2004, the Head of the U.S. Agency for International Development (USAID), Andrew Natsios, spearheaded the preparation of a report entitled, Foreign Aid in the National Interest. On the issue of governance and capacity building, the report declared:

No amount of resources transferred or infrastructure built can compensate for – or survive – bad governance. Predatory, corrupt, wasteful, abusive, tyrannical, incompetent governance is the bane of development. Where governance is endemically bad, rulers do not use resources effectively to generate public goods and thus improve productivity and wellbeing of their society…Unless we improve governance, we cannot foster development.

One year later, the report of the Commission for Africa, sponsored by then British Prime Minister, Tony Blair, and Chancellor of the Exchequer, Gordon Brown, concurred: “governance is at the core of successful development” and “the central cause” of Africa’s problems is “weakness in governance and capacity.”

In addressing this session’s topic of “changing the Nigerian mindset”, I will focus my attention on governance and institutional capacity building. “Mindset” involves attitudes as well as behaviors. The New York Times columnist, David Brooks, whom I cited in my first presentation, has argued that behaviors are primarily shaped by institutions. Exhortations to change behaviors seldom have a lasting impact. We know that all too well in light of the many “ethical” campaigns that have been launched and then abandoned in Nigeria. From infancy through all the stages of adulthood, behaviors are shaped by the institutions to which we belong: families, community groups, sports teams, religious organizations, schools, universities, trade and business organizations, and others. What the late sociologist Charles Tilly has written about trust networks in his book, Trust and Rule, is very pertinent to Nigeria. Trust networks are essential to producing consequential collective actions ranging from the legal to the criminal. At the very core of all effective institutions are trust networks.

In the prologue for this session the question was posed: “Can the government rebuild and create trust and confidence in the minds of Nigerians?” I will rephrase that critical question: “How can Nigerians, in all their institutions, rebuild the trust and confidence required for consequential – meaning positive – collective actions?” This is not just an abstract issue. As mentioned in my first presentation, a Research Alliance to Combat HIV/AIDS (REACH) has been created that requires a high level of trust and confidence between the three main partners: the University of Ibadan, Northwestern University, and the Bill and Melinda Gates Foundation. In every aspect of our work, trust, confidence and competence are essential. Whenever any of these three features slackens, we take corrective action.

Accelerating the Creation of Enterprise Societies (ACCESS)

Earlier this year, I was appointed a non-resident Senior Fellow of the Brookings Institution in Washington, DC. The Global Economy and Development Program of Brookings has received a major grant to conduct an Africa Growth Initiative. I have proposed creating a project to complement this Initiative entitled, “Accelerating the Creation of Enterprise Societies” or ACCESS. ACCESS will have four component features:

  1. the elaboration of the notion of enterprise societies in Africa by a working group of experts
  2. the distillation and application of lessons learned in improving governance and capacity building
  3. the design of a few country projects that involve collaborative research and training in African partner institutions
  4. the conduct of a global smart aid project based on our just published book, Smart Aid for African Development, and other major studies of aid effectiveness.

ACCESS will promote creative and strategic thinking on how the enterprising components of African societies can be scaled up and help transform deficient systems of governance, institutions, and professional behaviors. This project will identify pitfalls and how they can be avoided, unmet opportunities, domestic resources that remain to be tapped and, most crucially, how enterprise societies can be nurtured within Africa through appropriate incentives, partnerships, knowledge transfer, and training. Pockets of successful enterprise societies have long existed in the continent and much has been learned about the barriers to their dynamic expansion. ACCESS will distill, analyze, and promote the relevant lessons learned and identify concrete and practical innovations. While serving as a forum for the exchange of ideas, it will encourage similar exercises in Africa to instigate new thinking about what is required to foster environments conducive to growth.

ACCESS will focus on a few African countries – one of them Nigeria – that are poised to achieve high sustained growth. In this way, research and policy discussions will be based on concrete cases and opportunities. It will draw on a wide range of learning and, in particular, collaborative exercises already underway at Northwestern University. ACCESS will go beyond simply advocating greater transparency, participation, accountability, probity, and capacity building. Instead, it will examine, in specific country contexts, what concretely can be done to advance these widely accepted goals.

“Every day I become aware,” the co-editor of Smart Aid, Alexandra Gillies, recently wrote me, “of pathways that are opening up through careful policymaking and small shifts in the incentive structure. Nigeria’s bureau of public procurement is one example of an institution that could rapidly improve the efficacy of public spending if it is run well.” Dozens of similar policy and institutional initiatives are being launched in Africa. The point is to ensure that they cohere in a dynamic of increasing complexity and, at the end of the day, real transformations in governance, institutions, economic growth, employment, and poverty reduction can occur. This is the central intellectual and policy challenge that ACCESS will address in conjunction with the Africa Growth Initiative and other pertinent programs. Daniel Kaufmann and his colleagues at the World Bank, for example, have devoted considerable attention in recent years to understanding the connection between governance, capacity building, and development. Their understandings must be incorporated in a truly global partnership to promote growth and transformation in Nigeria and other African nations over the next dozen years.

Enterprise societies and high sustained growth

With your indulgence, I would like to summarize insights from recent studies that are very relevant to this proposed project. The challenges confronting Nigeria and other African countries are many but they are not insuperable. Other countries have overcome them in our era, some starting off from less advantageous contexts than Nigeria. A good understanding has been reached on what is required for the achievement of high sustained growth.[1] I recommend to you the recent report of The Commission for Growth and Development published by the World Bank and entitled The Growth Report: Strategies for Sustained Growth and Inclusive Development. As argued by Harvard economist Dani Rodrik in his book, One Economics, Many Recipes: Globalization, Institutions and Economic Growth, there is no single pathway, “no single recipe” to be followed to achieve high sustained growth and, with it, significant poverty reduction. The most careful studies demonstrate that countries that have moved from mass poverty to prosperity in the past half-century have taken a multiplicity of pathways and generated a variety of models. Although economists can trace these processes retrospectively, they acknowledge the inability to prescribe them for other countries. Growth and development pathways can reflect the resource endowments and other features specific to different countries.

Because these pathways have to be uncovered, there is an imperative need for what I call “enterprise societies”. An enterprise society is defined here as a social collectivity in which the national political leadership, and a wide array of business and social entities, work cooperatively to devise and implement strategies for sustained growth and development. Enterprise societies must have the capacity to foster creative openness, to adjust to shifting conditions and opportunities, to overcome social dislocations and exogenous financial shocks, to harness the human and financial capital of their citizens at home and abroad, and to remain agile in a vibrant, expanding but turbulent global economy.

Sub-Saharan Africa has long been ripe for the creation of enterprise societies. Indeed, while they must be nurtured on wider national canvases, they have always existed in many countries, dynamic albeit constrained. Many pertinent insights can be found in the writings of the Canadian student of Africa, Bruce J. Berman, such as “Capitalism Incomplete: State, Culture, and the Politics of Industrialization”, in W.J. Tettey, K. P. Puplampu, and B. J. Berman, Critical Perspectives on Politics and Economic Development in Ghana (2003). Anyone who has lived in the continent or associated closely with its citizens would know that Africans are inveterate entrepreneurs. What they have generally lacked, however, are leaders with the capacity and determination to channel their immense potentialities and work with them and external partners to promote sustainable growth and development.[2] Time and again, such leaders seem to emerge but then they falter, succumbing to lavish rent-seeking opportunities and the politics of predation, repression, and exclusion.[3] As Joel Barkan writes in Smart Aid, despite substantial financial transfers to support economic reforms in Africa since the 1980s, “little growth occurred because there was little commitment on the part of African leaders to undertake genuine reforms”. Most donors, he argues, also “did not enforce their own conditions for aid but simply rolled over the loans.”[4] The creation of enterprise societies will require “buy-in” from a wide range of actors, domestic and international, involved in policy-making in Africa.

The creation of enterprise societies cannot just depend on inspired leaders. They are highly necessary but not sufficient. Equally important is the assumption by African peoples themselves of the responsibility to create and maintain such societies. An important component of enterprise societies is what I call “citizens’ republics”. Citizens’ republics can be defined as political collectivities in which the welfare of the people is consistently and effectively acknowledged to be the main purpose and objective of their collective power. In such republics, citizens enjoy and actively exercise the rights, freedoms, and means to influence and shape public policy. How this definition differs from the typical conception of democracy will be elaborated in subsequent essays.[5] At its heart are mechanisms to ensure that public power is used to advance the greater welfare of the people; that constraints to the creation of enterprise societies are removed; and citizens enjoy the freedom to determine if these objectives are being honestly and effectively pursued, and possess abundant opportunities to participate in their elaboration. I have for long believed that Nigeria can and must take the lead in the creation of citizens’ republics in Africa. Indeed, I’ll go further and say that Nigeria has an unparalleled opportunity to take such a lead, and not just in Africa but globally. This is a moment for Nigerians to step forward with a model of participatory democracy that can accomplish high sustained growth and serve the interests of all citizens. Through the work of ACCESS, I and many colleagues can share in this vital undertaking.

From growth spurts to sustained growth

High sustained growth in Nigeria, and in sub-Saharan Africa generally, has been artificially held back for decades. Yet components of enterprise societies have long existed. This can be demonstrated in the case of the rapid expansion in productivity and incomes in commercial agriculture commensurate with the 1950 to 1965 upswing in world commodity prices. This process reduced poverty and brought prosperity to countries and communities able to take advantage of the opportunities. Less than a decade later, however, one African economy after another became stifled by corrupt governing systems and, in some cases, also by ill-advised state-led socialist experiments. Escaping from this labyrinth has not been easy, especially as entrenched rulers and elites cling to systems and practices that benefit them greatly but harm the greater public. In the United States, despite our advanced democracy, we have seen how unaccountable and unregulated financial power was badly used by the titans of our economy. They profited enormously from such activities while greatly damaging the livelihoods many Americans. During the rest of this decade, we will witness the re-empowerment of American citizens via governmental and other institutions. Nigeria, similarly, has long been ripe for such transformations.

To return to the key issue, Dani Rodrik demonstrates how the achievement of high sustained growth follows no blueprint. He contends that the Washington Consensus on stabilization and structural adjustment reforms, even in its revised form, should be regarded as more of a toolkit than a road map. Japan, Korea, Taiwan, Malaysia, and Mauritius arrived through experimentation at different combinations of state action and private market initiatives, domestic and export strategies, to capture increasing shares of global production and trade. China, India, and Brazil are now part of that upward movement along with several post-Soviet states. In that regard, they are joining others, such as Portugal, Spain, Ireland, and Poland, which were already catapulted from stagnation to high sustained growth through membership in the European Union.

Sub-Saharan Africa is ripe for applying the perspectives of Rodrik and Michael Spence,[6] the Stanford economist who chaired the Commission on Growth and Development, on how countries can move beyond their growth spurts. According to Rodrik, such spurts are relatively easy to bring about but they can occur and then fizzle. High sustained growth over a decade or more requires capable governments, appropriate macro-economic and micro-economic policies, substantial investments in infrastructure, education and health, the nurturing of clusters of high, medium and small private enterprises, and the emergence and strengthening of many public and private institutions. In that list of challenges you can hear echoes of what have long been components of Nigeria’s development agenda. Bringing these elements together over time and space requires a growth and development strategy that is understood and promoted by a broad leadership in government, business, and a variety of private and social institutions. Since 1950, according to the Growth and Development Commission, 13 economies have managed this feat over an unprecedented 25 years. Others are on course. While Botswana and Mauritius are already launched, perhaps a dozen other African countries including Nigeria have the potential to achieve consistent growth of at least seven percent annually for a decade or more and thus realize the prospect of lifting their people out of poverty.[7]

An important lesson from these success cases is that development and growth are processes which require the willingness as well as the capacity to implement long-term socio-economic strategies. Here the issue of the “Nigerian mindset” is crucial. Short-term efforts to get rich quickly or score political victories often dominate decision-making. New leaders arriving in government at federal and state levels dismantle the progress made by their predecessors, and public office is ruthlessly exploited for personal gain while revenues are dissipated on non-productive investments. The incentive environment in Nigeria fosters narrow perspectives and short horizons among economic and political actors. Overcoming the daunting challenges to sustainable growth in Nigeria will require a larger vision, more carefully honed strategies and incentive structures, appropriate institutions, and an unprecedented commitment to fostering effective governance practices. Can such an agenda move from Nigerian conference halls to government, business, and other offices throughout the land? That really is the 2020 question.

Governance, institutions, and sustained growth

Dani Rodrik, in addition to his argument that developing economies must discover their own path, emphasizes the role played by institutions in enabling countries to move from growth spurts to high sustained growth. He also writes interestingly of democracy as a “meta-institution” which can facilitate the discovery of appropriate institutions for setting macro-policies, for providing the necessary infrastructures in education, health, electric power, transport, and security, and foster entrepreneurial actions of increasing numbers of citizens. I believe that the conceptual and operational framework is close at hand for collaborative work to help Nigeria and other African countries find pathways to high sustained growth.

If enterprise societies are to come to fruition, they will depend on an overt and sustained commitment to enthroning policy agendas, and institutions, that privilege the citizenry. It is only in such contexts, according to Rodrik, that certain crucial processes will occur: the search for broad and long-term growth; the encouragement of entrepreneurship in both new and established sectors; the provision of social insurance for those who suffer from economic dislocations; and systemic openness so that course corrections can be made as the growth cycle moves through different stages. Here again, the Commission for Growth and Development reinforces Rodrik’s perception when it states that African policymakers have “won the fight for macroeconomic stability. They can now afford to think about long-term growth.”[8]

In the introduction to Smart Aid, unbeknownst to the co-editors, they had intimated what would become its successor project: “If aid is to foster sustainable development, it must facilitate the emergence of enterprising private and public sectors as well as strong systems of accountability to protect them.” We had, in effect, perceived that programs such as ACCESS would follow logically from our collaborative study. Repeatedly in the book’s chapters, the authors emphasize the need for profound transformations in “how governments do business with their citizens” (Barkan), and how aid and other agencies must empower the real champions of progressive change. In the conclusion to Smart Aid we wrote: “the donor community, and actors within Africa, have neither significantly improved governing systems nor created the kind of agile and predictable environments required for progress in a globalized economy.”

Larry Diamond, who wrote the book’s Foreword, argues the importance of moving beyond conventional reformist language and acknowledging the need for major transformations in governance. Profound changes, he states, must be made “in the way a political and social system has worked for decades. That can only be done with a sustained, comprehensive approach – and with very powerful incentives.” A new five-year program of research and policy engagement, Power and Politics in Africa, funded by the UK Department for International Development and Irish Aid at the Overseas Development Institute (ODI) in London, has a similar perspective: It will explore “the kinds of political, economic and social arrangements that, if adopted, would enable countries of sub-Saharan Africa to make faster progress” in development and poverty reduction. As with ACCESS, the organizers “recognize the substantial, if often underrated, resources for collective problem-solving that are to be found in African societies.”

Pursuit of shared solutions

Paul Krugman, the 2008 Nobel laureate in Economics, wrote on October 10, 2008 regarding the global financial crisis:

Why do we need international cooperation? Because we have a globalized financial system in which a crisis that began with a bubble in Florida condos and California McMansions has caused monetary catastrophe in Iceland. We’re all in this together and need a shared solution.

This is a moment in which the chickens of exuberant globalization have come home to roost, and we are all covered by their droppings. There is no single-nation solution to the greatest economic calamity of our times. Africans, in such distress for so long, can now look out at a world in which citizens expect from their governments unprecedented action to protect them from prolonged hardship. Before the crash, Kenyan John Githongo, and South African, William Gumede, wrote in the Financial Times:

Across the continent people are demanding more from very limited democracies. They want jobs, economic opportunities, access to justice and equity. Yet most governments have failed to deliver these things and have been indifferent to the expectations of their citizens. The real danger is that Africans will lose confidence in the limited democratic institutions available to them…Citizens will increasingly find refuge in tribalism, violence or religious fundamentalism. Many, too, will give up and migrate.[9]

“Unless we act now,” Githongo and Gumede plead, “Africa may never catch up with the fast-growing economies of east and west. This is perhaps our best chance since independence to reorganize, consolidate and move to the next level.” I fully agree with Githongo and Gumede and others that the opportunity does exist for a number of countries, especially Nigeria, “to move to the next level”, that is, to grow their economies in a sustained way and lift millions from poverty and despair. But this window of opportunity narrows with each outbreak of violent conflict and the transmission worldwide of harrowing pictures. Moreover, the current global economic turmoil has narrowed that window even further. Decades of potential economic growth and poverty reduction have been lost in Nigeria principally because of the failure to generate an institution-building culture. Faced with immense challenges today, both at home and in the global system, either profound transformations in the individual and collective “mindset” will occur, or this great nation will succumb to interminable and destructive conflicts that have decimated other countries in the continent.

[1] Much of this information is synthesized and presented in The Commission for Growth and Development, The Growth Report: Strategies for Sustained Growth and Inclusive Development (The World Bank, 2008).

[2] Ellen Hillbom writes pertinently of how the citizens of Botswana have benefited from “the blessing of leaders who have been relatively modest in their rent seeking.” “Diamonds or Development,” Journal of Modern African Studies, 46, 2 (June 2008), p. 211. In November 2006, Amy Poteete gave an insightful talk at Northwestern on how Botswana could have gone down another path were it not for the inspired leadership of Sir Seretse Khama and critical decisions made regarding the exploitation of the country’s diamonds and use of the revenues.

[3] An example would be Abdoulaye Wade, the current president of Senegal, who talked passionately about what we call an enterprise society during his years of principled opposition. Since his election in 2000, however, he appears to be taking his country in a quite different direction. See Lydia Polgreen, “Shadows Grow Across One of Africa’s Bright Lights,” New York Times, June 12, 2008.

[4] “Rethinking Budget Support for Africa: A Political Economy Perspective.”

[5] The formulation of citizens’ republics will draw, for example, on the writing of Richard Sklar who argued many years ago that all that is good in governance is not captured by “democracy”. Sklar also calls attention to unique aspects of African modes of government , including chieftaincy systems, which he termed “dual majesty”. My Northwestern colleague, Muhammad Sani Umar, startled me recently when he raised a question about “good neo-patrimonialism”, suggesting the need for renewed theoretical work on accepted paradigms of African governance.

[6] Michael Spence chaired the Commission on Growth and Development whose key findings and recommendations coincide with those summarized here.

[7] Even in a well-performing country such as Ghana, however, 40% of its population is still enmeshed in poverty. Despite the economic gains made over twenty years, Ghana has a steep road left to climb.

[8] The Growth Report, p. 80

[9] “Let the African Union set democratic standards,” Financial Times, July 1, 2008.