Why economic philosophy matters: World views and the rise of nations (2)

he world view Nigeria needs to jumpstart its economy must not only be holistic but must encompass diverse aspects of discipline that form interlocking blocks for economic transforamation. In this second part of a series, Prof Kignsley Moghalu, a one-time Deputy Governor of Central Bank (CBN), now an International Business & Public Policy teacher at The Fletcher School of Law and Diplomacy at Tufts University, Massachusetts, United States (U.S.), says Nigeria must upgrade the mental and physical infrastructure as foundation for the nation’s econmic rebirth.

It is a typical afternoon in the beautiful autumn weather in Boston, the “intellectual capital city” (and a major financial district as well) of the United States (U.S.) that is home to many excellent institutions of higher learning. I have just returned to the classroom from a relaxing lunch with my friend Donald Kaberuka, the Rwandan former Minister of Finance who completed a successful decade as President of the African Development Bank (AfDB) and is now a Senior Fellow at Harvard University, and I am now engaged in animated interaction with my class of 30 graduate students at Tufts University’s Fletcher School of Law and Diplomacy. I am teaching the economics and international business course “Emerging Africa in the World Economy”, in which we are studying how macroeconomics, business and public policy interact in African countries to determine Africa’s level of economic development and the continent’s place in the world economy.

The students come from as far afield as the USA, United Kingdom (UK), Canada, France, Japan, United Arab Emirates (UAE), Kazakhstan, Greece, Nigeria, Ghana and Zimbabwe among many other nationalities. It’s a truly global classroom. Many of them have either visited, lived or worked in Africa and are deeply interested in the continent. Brilliant and engaging young men and women, some will, upon graduation with their master’s degrees, join multinationals and private equity firms doing business in Africa. Others will join the U.S. State Department or the equivalents in their home countries, global aid agencies, or their countries’ central banks. In the next 10-15 years, most will be in leadership positions around the world.

The topic of the discussion for today’s session is somewhat unusual, and several students later confess to having been “fascinated” by it. They thought they were broadly familiar with Africa, but they had never heard Africa’s economic prospects discussed in this context. We are discussing “world views” and why this philosophical concept holds the key to whether African countries will prosper and matter as an economically ascendant continent, not just one where foreign investors go to extract natural resources and dominate local markets.

Along the way, I am shattering conventional wisdoms in the way they see Africa, including why stereotypical discussions about foreign aid and assistance as a “path” to Africa’s development make their professor yawn with boredom, how Africa led the world in science and innovation in centuries past but lost their edge, and how (as I explain with statistics and a chart) practically all the African countries with the highest Gross Domestic Product (GDP) growth rates in the past decade, including Nigeria, also rank very low on the United Nations UN Development Programme’s Human Development Index that measures quality of life. (To make matters somewhat more unusual, the required textbook for the class is a book I wrote, I happen to be the professor, and I happen to be not an “Africa expert” from Wisconsin or Manchester or Grenoble, but a real African from Nigeria).

The point: what exactly is economic development? Is it “fast” GDP growth that is not inclusive but has created the “Africa Rising” storyline? Or it is it the quality of schooling, basic healthcare, the availability of clean drinking, and high rates of life expectancy? Is western style democracy a sine qua non for economic transformation? The answers to these questions and controversies are make-or-break, and so how we think about them matters.

So, then, how should Nigerians, in this context, think in order to grow rich? Not just individual wealth, the type where your Mercedes or Bentley ululates gingerly between the potholes of bad roads while you while away the time on your cell phone to manage your frustration at how long what should be a brisk, short ride is taking. I mean the wider wealth of the society in which most, if not everyone, is basically comfortable and the roads are good enough that, like one of my famous professors as a graduate student in the U.S., I can opt to ride my bicycle and not be bothered with owning a car.

The answer lies in four main things: first, a worldview, which means how we interpret and explain the world and apply that view to life, and within that framework, values, strategy, and organisation. The application of these principles to such practical matters as governance, private sector development, science and education, the relationship between church/mosque and the state, and so on, matters greatly for wealth and poverty as alternative outcomes. The term “worldview” comes from the German weltanschauung, which is made up of Welt (world) and Anschauung (view or outlook). It is a key concept in the German philosophical tradition.

This world view, then, is a reflection of the inner world of the mind of an individual or group, which he or they project in their outward actions, and which influences the world around them by creating certain realities. This process, writ large collectively by groups such as a nation or a race, is what creates world orders, economic or military. According to Belgian philosopher Leo Apostel, worldviews have seven core components. First is a model of the world in our minds, which defines in our minds who we are, how the world is structured, and how it functions. Second is the explanation, which answers the question: where have we come from (historically, spiritually as in the Creation or “evolution”?).

The third component is the future, otherwise described as rational futurology, which addresses the question, in transitioning from the past into the future, of where we are going, the possible destinations (of, say, Nigeria as a nation, as a society or as an economy) and the options or alternatives to promote or avoid. Fourth, is the value system, which is to say ethics or a system of rules about what we should do or not do. The fifth component of worldviews is a theory of action. A worldview will give us a goal or a destination, but is incomplete if we do not have a system of how to implement plans. In modern management parlance, we call this process strategy and its execution, and we know a country that has had some difficulties with this for many decades. This also is partly because we have not been clear and articulate about where exactly we are going, galvanised ourselves, and deployed the organising principle.

The sixth component is knowledge and knowledge systems. How do we know what is true or false? Is the free market as advocated by Adam Smith the only path to the wealth of nations, and is it the market really “free”? There are several knowledge systems in the world. For example, Western medicine, Chinese acupuncture and African traditional medicine, are all medical knowledge systems. Each is valid, and a society will choose which system or combination of systems to use. Finally, every worldview has building blocks and is based on what already exists in the world of knowledge from different concepts and disciplines.

Nigeria’s fundamental problem is that we have yet to get down to this level of reflection as a nation, and have “managed” our economy for several decades with no particular compass or lodestar other than simply spending “wealth” from natural resources. This has happened because we have not known better to realise that real economic wealth is not what is found in the soil but in what we create, with or without such resources. If we had known better, or know better, we have not acted on our knowledge.

Conflating ad hoc motion with planned and well executed progress, “rising” and “falling”, spending profligately and belt-tightening on the yo-yo roller coaster of commodity booms and busts, we have not become a “breakout nation” as author and Morgan Stanley investment banker Ruchir Sharma coined the phrase. Because we have misunderstood what the wealth of nations actually means. Because we have not philosophically probed the subject. We have left that to those who “blow grammar”. But, it is economic and political philosophers, together with public policy and entrepreneurs, that built the systems that created the wealth of western countries such as the U.S., Germany and Britain. Moreover, the progressive absence of a value system has progressively enthroned corruption, and lack of discipline has prevented us from organising ourselves effectively for economic production. Thus, the very foundation of our economic rebirth must be found in a return to this philosophical question: What is Nigeria’s world view? We must build or upgrade our mental infrastructure as well as the physical ones, for it is really in the former that the rise of nations begins.

This really should not be rocket science. As I often say to my audiences at events where I speak around the world, to frequent laughter, “my world view is like my American Express card; I never leave home without it”. To give an example with one Nigerian institution with which I am quite familiar, I can identify two (but not necessarily the only) governors of the Central Bank of Nigeria (CBN) that had very clear, articulate world views. It is little surprise that both of them recorded strong achievements, which is by no means to say that they were perfect or infallible. But, they had a clear vision of the world and where the CBN should be positioned in it each in his own way, and that vision was the guiding light in most of what they did.

Prof Charles Chukwuma Soludo had a clear vision of a strong banking system rather than the toy boutique banking shops that dotted Nigeria’s landscape before he arrived on the scene. He fundamentally altered the banking landscape, making the banks more relevant to economic growth. Sanusi Lamido Sanusi similarly had a vision of banking reform of sound banks with better corporate governance, risk management, and a new banking model that improved on what he met by creating differential banking sizes for different target segments of the economy rather than a “one-size fits all”. He delivered on his vision. Each met opposition. Neither was deterred by it. But, they succeeded because their visions were each intellectually sound and had internal consistency. Intellect matters. Without ideas there can be no rising.

Another demonstration of the implications of world views for the development of key institutions was the fierce, opposing intellectual and philosophical debates in the late 1700s between then U.S. Secretary of State Thomas Jefferson (who would later become the third U.S. President), and Alexander Hamilton, the Secretary of the Treasury, over the constitutionality of the creation of a central bank in the United States. That Hamilton won this argument, and the then President George Washington approved the creation of what was then known as The First Bank of the U.S. led a century later to the creation of the U.S. Federal Reserve Bank. The evolution of this journey had important consequences for America’s economic and financial history.

Nigeria’s independence era leaders, like most of Africa’s leaders at the time in the fifties and sixties, had clear worldviews. But, their worldviews were mainly political, narrowly focused on decolonisation, and they were spectacularly successful at achieving it, making use of persuasive intellectual arguments and effective political mobilisation of the masses. But, to paraphrase the musician that sang “now that we’ve found love, what are we gonna do?” The question remains: having found freedom, what have we done with it? But, the military interventions in Nigeria led us down a path which, complicated by the civil war, prevented Nigeria from developing a clear economic worl dview.

It is this world view failure in the economic and domestic political sphere that still haunts us. The worldview we need to lift up our economy must be holistic, not just narrowly and technically economic, and encompass several aspects and disciplines that form interlocking blocks for economic transformation. Ethiopia, Rwanda, Botswana and Mauritius are African nations that have recorded great strides in this type of clear thinking and its application to public policy. Their economic progress is catching the world’s attention, because worldviews create and energise cohesive societies that deliver results for themselves. Have you ever wondered why Nigeria, a country that is with so many brilliant economists, has nevertheless performed so poorly economically?

To demonstrate how worldviews have built economic world orders, let us look at the western world and rising Asia. Prior to the past 300 years, before the Industrial Revolution, most of the world, including the western world, was poor. Individual wealth was the exception and not the norm, and was warehoused mainly in the hands of the landed nobility and gentry. But the rise of a worldview of scientific rationality that increasingly separated church from state, led to the rise and encouragement of scientific innovation. Wealth and a higher standard of living became democratised. The discovery of electricity by Michael Faraday, the light bulb by Thomas Edison, and earlier, the steam engine by James Watt, changed poverty to the wealth of nations. As inventions were commoditised by mass production, the quality of life of the citizens improved in leaps and bounds.

At the same time, political and economic philosophy as espoused by Enlightenment philosophers such as Diderot (Encyclopedia), political economist Adam Smith (The Wealth of Nations), Jean-Jacques Rousseau (The Social Contract) and Baron de Montesqieu (Spirit of the Laws), led to the rise of human rights, democratic governance, and strong institutions in the western world. Their ideas influenced not only the political and economic evolution of Europe, but as well the U.S. Declaration of Independence and the U.S. Constitution, the foundation on which the greatest power in the world today stands.

As James Robinson and Daron Acemoglu have observed in their seminal book “Why Nations Fail”, institutions matter greatly, and the effectiveness of political institutions determines whether similarly effective economic institutions can exist in a country. Thus the rise of strong institutions in the Western world, combined with scientific rationality, created a progressively amplified world view that built the prosperity and global dominance of western economies that has implications to this day, as we saw in yesterday’s essay on globalisation as part of this series.

Now, world views do not have to be based on objective facts. They may in fact be subjective, and indeed frequently are. But, if consistently applied, they create facts on the ground. The trans atlantic slave trade and colonialism were based on world views of racial superiority, empire building, and economic might. The world view, aided by military and technological prowess, established “facts” (subjugation of the black race, followed by its economic system of exploitation) to support it, albeit for a while. But contending world views such as the human rights ideas of the Enlightenment adopted by the anti-slavery and anti-colonial movements, ultimately supplanted this order, which of course has adapted to other, more acceptable ways of achieving the very same purpose ever since.

Thus there are contending world views which can give rise to multiple or contending realities. And there is no better contemporary example than the rise of China as a global economic power. The Chinese world view is based on three elements, which are, first, the idea that all things are cyclically connected through time and space (this is why the Chinese think in hundred- year time spans, whereas Nigerians think only short term); second, stability is an end in itself and must be maintained; and third, following from the second element, the society is more important than the individual. China’s sense of itself is driven by a sense of the superiority of its own 5,000-year history as well as an acute remembrance of historical humiliations it suffered at the hands of the West (UK, specifically) during the Opium Wars in the 19th century when, in military defeat, it had to cede Hong Kong to Britain for 99 years.

This worldview, and a realization that its communist and socialist economic system was not delivering prosperity for such a populous nation, drove the Chinese leader Deng Xiaoping to authorise a shift in economic philosophy to “state capitalism” or “capitalism with Chinese characteristics” beginning in the late 1970s. Said he, a communist: “to be rich is glorious”, and “it doesn’t matter whether the cat is black or white, as long as it catches mice”. A shift, based on a world view, from ideology to realism. We know the rest of the story. Today, China is a global economic giant second only to the U.S. That is no accident or fluke. It is the result of conscious mobilisation of its citizens in one direction as part of the consistent application of a clear philosophical view of the world and China’s place in it.

Nigeria needs to adopt a clear national economic and social philosophy, perhaps through the instrumentality of some variation of a national conference. The worldview declaration should be drafted initially by a committee of 12 or 13 wise men and women, at least three of whom should be economists from different ideological spectrums (left, right, and in between), at least one professional philosopher, one or two lawyers, a representative each from the trade unions and the private sector, one scholar of international relations, one sociologist, one political scientist, one physical scientist, one engineer, and one medical doctor. One or two youth representatives under 30 years of age should be included. The declaration should state clearly the goals of the Nigerian state with an emphasis on economic wellbeing and how to achieve it, and affirm our nationhood, unity and collective determination, based our history, our demography, our diversity, our capabilities in terms of skilled human capital at home and abroad, and our culture. The declaration must then become compulsory to be taught in secondary schools as something every student must learn, imbibe, and take and pass a test on.

QED (Quod erat demonstrandum).

It is with this worldview approach, this mental infrastructure, that we should now approach the subject of globalisation.

-THE NATION