POLITICAL LEADERSHIP AND ECONOMIC DEVELOPMENT IN DEVELOPING COUNTRIES

ABSTRACT

At independence, the economies of Nigeria and India were dominated by primary production, mainly agriculture. However, within some decades, India transformed and overtook Nigeria, emerging as one of the fastest growing economies in the world, while Nigeria’s development lagged behind considerably. This research comparatively assessed the role of leadership in economic development experiences of these two countries from the period of their independence to 2013. The indices of comparison were political leadership characteristics, economic policies, Human Development Index (HDI) and economic development indicators/ranking of these two member-countries of the Common Wealth. Among these indices of comparison assessed to be critical in the development discrepancy of the two historical peers, political leadership remained central. This study adopted descriptive and comparative historical approaches; the data for this study were collected from secondary sources and were qualitatively and quantitatively analysed. It was established that poor governance, mismanagement of resources, corruption, as well as poor execution of economic development policies and plans were all linked to political leadership in Nigeria, in contrast to India. Hence, the research held ineffective political leadership culpable for the slow pace of economic development in Nigeria while effective political leadership has been responsible for the India’s fast economic development success. Given this observation, it was recommended in the study among other things that, Nigeria should learn from the experience of India; and until the enthronement of effective political leadership, development will continue to be a mirage to Nigeria.

 

 

CHAPTER ONE

 

INTRODUCTION

1.1        Background of the Study

The staggered economic development that has characterised Nigeria and in fact most developing countries, especially those in Sub-Saharan Africa is conceived by many as the outcome of leadership failure. Developing countries are undergoing a widening split in terms of development, with some recording spectacular improvements in the standard of living of their peoples; expansion in urban housing, public health, modern transportation, industrialisation, and overall growth of their national economies, while others have unfortunately, not achieved much since independence, despite having similar and even more favourable circumstances, compared to those countries which have made outstanding progress. Nigeria as one of them has become a focal point and case studies in many scholarly researches for obvious reasons. At independence, Nigeria was viewed in the international scene as the giant of Africa with very high expectation to drive the economy and reach the height that the European and Asian countries have reached today.

After the attainment of independence in 1960, Nigeria, like several other newly independence countries, set about to consolidate her political freedom and tackle the challenges of economic development and nation building. But many decades after independence, Nigeria is still struggling to move forward in terms of economic development in spite of its abundant natural and human resources. Hence, these have attracted the concern of the international community and experts (analysts) in international affairs who sought to know the problems and the causes of Nigeria’s economic underdevelopment. Are these problems caused by multi-ethnic configuration of the nation, if yes what about countries like India; Malaysia and Singapore? Are these problems due to large population size? Then, what about China and India? Are the problems induced by long period of colonialism, then, what about other countries like China, India, South Africa, Malaysia, Ghana, Singapore and many others who were subjected to the same form of rule.

Interestingly too, India as at that era (1960) was at par with Nigeria in terms of level of development and potentials to blossom economically. Both countries were commonly described as third World Nations or Economically Less Developed Countries (LDC). Although India had independence in 1947, thirteen (13) years earlier than Nigeria, same could not be said again of India’s socio-economic and industrial development. Some group of countries collectively called the Newly Industrialised Countries (NICs) of South and South East Asia has achieved socio-economic development such that some of them have literally been transformed from “Third World to First World” in one generation, to use the words of Lee Kuan Yew (Lee, 2000). Japan became the first Asian country to modernize, later followed by Taiwan, Hong Kong, Singapore, Thailand, Malaysia, and South Korea after the Second World War. Lately, China and India have followed suit and broken through the barriers of low growth and economic underdevelopment. At the centre of each is quality and competent leadership committed to national development (Ajakaiye, 2007).

In the past, despots in Africa and their intellectual cronies used to counter demands for good governance with the argument that those countries were not all that democratic and yet achieved rapid development. There is no doubt that the regimes in countries such as South Korea and Thailand was not democratic and the leaders were mostly military “strong men”. Evidence of authoritarianism in Singapore and Malaysia cannot be brushed aside. Most of these countries, with the exception of Thailand had one party or leader in office for decades. China still remains socially communist with state control over much of its citizens’ lives. Only India seems to be making it with solid democratic credentials. They have led people in the past to conclude that Africa needs strong men (dictators) to develop. But, if strong-man dictators and despots were the secret for development of the Asian success stories, then Africa should be a haven by now as it had more than its fair share of both dictators and civilian despots.

Meanwhile, Nigeria with all its natural resources endowment held more prospects for development than India at independence. Paradoxically, India with less natural resources endowment is today one of the Asian tigers. Today, countries like China and India with mega populations are the fastest growing economies while Nigeria is still struggling with underdevelopment; Malaysia and South Korea are developed economies while Ghana, Uganda and Zimbabwe are either recent graduates of highly indebted poor countries or on the brink of economic disaster (Ajakaiye, 2007). This sharp contrast is very relevant as some African countries such as Mauritius and South Africa are on the NIC horizon with the later rapidly overcoming its apartheid history in terms of bridging racial divide. These countries are taking policies and steps that are not too different from the Asian NICs.

India and other newly industrialized countries of the South and South East Asia have successfully made giant strides in socio-economic development and transformation far beyond the Nigeria and majority of Sub-Saharan African Countries, some of which compared favourably with the Asian countries fifty years ago (since 1950s).

However, the linchpin factor in this situation is quality leadership in providing, direction, setting agenda and executing change which distinguished these countries from most of the Sub-Saharan African nations. The prospects of such quality leadership to facilitate Africa’s economic development is already emerging in countries like South Africa, and Mauritius who are already NICs in all intents and purpose, while countries such as Botswana, Ghana, Mozambique, Seychelles and Rwanda, for example, have improved their leadership and are witnessing progress in economic growth and development. Ajakaiye (2007) presents an account of the status of the rapid development in China, India, Malaysia and South Korea since 1990. it is significant that all these countries were characterised by low income, low growth, poverty, illiteracy, etc, and their economies were dominated by agriculture and primary production like Sub-Saharan African countries a few decades ago, but today it is clear that these economies are fast growing, have high and rising per capital Gross Domestic Product (GDP) even though because of their populations, China and India still trail behind the others in terms of per capita indicators, but their macro indicators are under primed by transformation of the structures of their economies. Adoption of technology and innovation is in top gear by them. Their overall Human Development Index levels sum up the progress of the Asian NICs compared to Sub-Saharan Africa.

There is a very wide gap between Nigeria and India today judging from the indices for measuring national development; Purchasing Power Parity (PPP); standard of living (cost of living); inflationary gap; currency exchange rate; level of technological advancement; adoption of technology and innovations, etc. thus, comparing Nigeria with India is like “Polar-Opposite”.

The researcher is therefore compelled to probe the political leadership of Nigeria as a developing countries nation in comparison with India with a view to bringing out where Nigeria is missing out and to recommend a functional leadership model for Nigeria that is capable of rapid economic development if Nigeria must achieve her goals of socio-economic development and transformation by the year 20:20.

Leadership is conceived in this research work as the mechanism which produces policies to drive and direct prudent economic management to achieve socio-economic development and transformation by which individuals and groups work towards the attainment of prolonged social stability or peace, development of management capacity, long term vision and agenda, deliberate change in mindset and work ethic, creation of enabling environment for non-state actors, judicious exploitation of globalization and relentless pursuit of human and natural resources development and socio-economic infrastructure.

Since India and many of the former Third World Countries that are making giant strides in development are not as much endowed as Nigeria in terms of natural resources, many analysts have agreed and concluded that the real problems are those managing the affairs of Nigeria.  Ojah (2005) describes leadership as the major bane of Nigeria’s development, though Nigeria is considered as Africa’s leading country in terms of human and natural resources, but her failure to produce political leaders with vision has kept the country virtually underdeveloped till date when compared to her historical peers that are fast developing countries (Asuquo, 2012).

Indeed, countries like India, China, Malaysia, Singapore, South Korea, Indonesia etc, currently referred to as fast developing countries nations or economies attained these positions by effectively utilising available resources to develop and improve their conditions. Leadership is a process of influencing the activities of an organizational group in a task of goal setting and goal achievement (Stogdill, 2003). Mac Ogonor and Steve (2000) sees it as the process of motivating, mobilizing resources and directing people to passionately, diligently and strategically pursue a vision that the people of a state or nation jointly embrace by performing tasks. From the above, a leader must possess the following characteristics; knowledge, moral discipline, charisma, clearer understanding of reality and vision, and is a team player.

Emphatically, Joseph (1995) in Asuquo (2012) noted that in Nigeria, all the abundant ingredients for building a great nation are present: Land, water, mineral resources and human. The only element standing between Nigeria and greatness is political leadership. The selflessness that leaders like Mahatma Gandhi, Manmohan Singh and many other Indian national leaders provided which makes the country to be a fast developing countries and industrialized nation is what is lacking in Nigeria.  India like China deserves special attention because of its size and recent robust growth. From 1996 to 2008, India’s average annual growth rate exceeded 7 percent (Goldstein and Pevehouse, 2012). India’s success could be, in the coming years a repetition of China’s rise out of poverty. India’s economy was for decades based loosely on socialism and state control of large industries but private capitalism in agriculture and consumer goods. The state subsidized basic goods and gives special treatment to farmers. Unlike China, India like Nigeria has a democratic government, but a factional one, with various autonomy movements and ethnic conflicts. Indian government has suffered from corruption, although this has improved in recent years.

Obviously, South Korea, with only iron and coal resources, developed competitive steel and automobile industries that export globally, creating a trade surplus; Taiwan also used a strong state industrial policy, specialising in the electronics and computer industries and in other light manufacturing; Hong Kong controlled by China since 1997 also has world-competitive electronic and other light industries with greatest strength in banking and trade; Singapore is a trading city located at the top of the Malaysian Peninsula – convenient to the South China sea, the Indian Ocean and Australia.

Nigerian leaders for the last four decades have been described as being dictatorial especially during the military era. Okoye (2012) averred that development is put in abeyance in a country with leadership problem and anarchic situation. Any country whose leaders are corrupt or harbour corruption cannot develop. There are so many cases of corruption by Nigeria leadership; this situation has eaten deep as a cankerworm into the fabric and all facets of the Nigerian economy and the nation at large which has rendered the Nigeria political leadership incapacitated of facilitating any meaningful economic development. Nigeria promises a great deal, but usually fails to deliver. It could be the powerhouse of Africa, but has so failed to use its oil wealth effectively or to build an economic system that spreads opportunity. Indian political leadership is known to have provided a major boost and source of the country’s development strides. Barnabas and Clifford (2012) noted that an important method of leadership development is by vicarious learning, which is based on learning from role models.

 

1.2       Statement of the Research Problem

In recent times, political and socio-economic development has been viewed as products of effective political leadership. Based on this thinking, we find it necedeveloping countriesry to undertake a comparative study of the role of leadership in political and economic development in developing countries nations with emphasis on Nigeria and India, both former British colonies. Poor countries are not only poor because of their geographies or cultures, but because their leaders do not know which policies will enrich their citizens. In Nigeria, all the abundant resources for building a great nation are present. They include land, water, minerals and human resources. The major problem facing Nigeria today is that of political leadership.  Although Nigeria is confronted with various problems, but political leadership remains the greatest obstacle to its economic development.

This study examined the impacts of political leadership on economic that are responsible for the sharp difference in level of economic development level Nigeria and India.  A comparative analysis of the link between political leadership and national economic development in Nigeria and India will offer the needed explanation for the contrasting experiences of economic development in Nigeria and some developing countries. Nigeria and India gained Independence from Britain in October 1, 1960 and August 15, 1947 respectively. They both have similar political and legal institutions as well as economic and educational systems, and their societies are multi-ethnic, multi-lingual, multi-religious and populous.   Today, these two countries no longer have things in common as they have moved and transformed through various stages of their political, social and economic development. If these countries had things in common at independence, why has India today developed faster than Nigeria?

For instance, India today is the fourth fastest growing economy of the world and a member of a group popularly known as the BRICS (Brazil, Russia, India, China and South Korea). They are sometimes referred to as Newly Industrialised Countries (NICS), while Nigeria is still regarded as an underdeveloped nation and grouped among the poorest countries of the world as the 94th poorest country.  Nigeria is still struggling to develop socially and economically. If these two countries had things in common at Independence, then, the major questions today are “what” and why” the difference. The answer lies in the way the political leadership of these two countries have evolve strategies and policies that are capable of economic transformation and development by way of rightfully combining both its abundance human and material resources to achieve its economic goals and success. Thus, this research seeks to explore what Nigeria’s political leadership has failed to do over the years in contrast to India in confronting development. It is observed generally that failure of Nigeria’s political leadership to address some vital issues like the nationality question, religion, ethnicity, intra and inter-ethnic violence, terrorism, corruption, physical insecurity, social injustice, has contributed a great deal to the fundamental problem of the survival and sustenance of democracy as an instrument of political leadership for the achievement of economic development. However, the main contention of this study is that, a pervasive sense of alienation, marginalization, exploitation, internal colonization, corruption and terrorism has adversely combined to challenge the capability of the political leadership of Nigeria to achieve economic development for the country. These factors mentioned above and the prolonged period of military rule created the environment that hampered the capability of political leadership in Nigeria.

The above scenario prompts the following research questions;

1. What are the sources of these fundamental factors identified above that militated against the emergence of good political leadership in Nigeria and how can they be re-addressed?
2. Can Nigeria evolve an effective political leadership without sustainable democracy?

iii.        Can Nigeria achieve meaningful economic development without corresponding political leadership?

 

1.1                                                   RESEARCH QUESTIONS

The research questions that this study addresses include the following:

 

1. How does political leadership affect economic growth in the selected developing countries?
2. How do economic, political and cultural institutions affect economic growth in the selected developing countries?

• How does the interaction effect of political leadership and institutions affect economic growth in the selected developing countries? and

1. What role does the quality of institutions play in influencing economic growth in the sub-regions of developing countries?

 

1.2      OBJECTIVES OF THE STUDY

The main aim of this study is to investigate the impact of political leadership and institutions on economic growth in selected sub-Saharan African countries. However, the specific objectives of the study include the following:

1. To examine the impact of political leadership on economic growth in selected developing countries;
2. To assess the impact of economic, political and cultural institutions on economic growth in selected developing countries;

• To evaluate the interaction effect of political leadership and institutions on economic growth in selected developing countries; and

1. To investigate the role of the quality of institutions in influencing economic growth in the sub-regions of developing countries.

1.3      HYPOTHESES OF THE STUDY

The essence of formulating these hypotheses is to either validate or refute the findings of this study. However, based on the objectives of this study, the following hypotheses (stated in the null forms) are formulated:

 

1. H₀: There is no significant relationship between political leadership and economic growth in the selected developing countries.
2. H₀: There is no significant relationship between economic, political and cultural institutions and economic growth in the selected developing countries.
3. H₀: There is no significant relationship between the interaction effect of political leadership and institutions on economic growth in the selected developing countries.
4. H₀: There is no significant influence of the quality of institutions on economic growth in the sub-regions of developing countries.

 

1.4         SCOPE OF THE STUDY

This study employed the use of secondary data. It examines the impact of political leadership and institutions on economic growth in selected developing countries. There are various types of institutions but this study focused on three which are on economic, political and cultural institutions. The thirty (30) selected developing countries are: Angola, Benin Republic, Botswana, Burundi, Cameroon, Cape Verde, Chad, Congo, Cote d’Ivoire, Djibouti, Equatorial Guinea, Ethiopia, Gabon, Gambia, Ghana, Kenya, Lesotho, Madagascar, Malawi, Mozambique, Niger, Nigeria, Rwanda, Senegal, South Africa, Sudan, Swaziland, Tanzania, Uganda and Zambia. These thirty (30) countries were selected based on the World Bank’s (2007) classification of countries into ‘moderately outward-oriented’, ‘moderately inward-oriented’ and ‘strongly inward-oriented countries’. In addition, they are all developing countries and belong to sub-Saharan Africa and the African continent. These countries had also embarked on political leadership policies from the 1980s till date. The time frame for the data covers 1985 to 2012. The choice of the time frame is informed by the fact that this era witnessed the introduction of trade policy regimes and economic reforms such as the introduction of Structural Adjustment Programmes (SAP) in most developing countries (Ajakaiye and Oyejide, 2005; Akinkugbe, 2008). See the classification of the countries in Appendix A1.3.

 

1.5         SIGNIFICANCE OF THE STUDY

Taking into consideration the fact that institutions create the choice pattern that affects not only transactions and production costs but also the likelihood of engaging in economic activities which lead to economic growth (Ike, 1977, 1984; Williamson, 2000; Rodrik, 2008b), they can reduce or increase transaction costs because they determine the nature of exchange. The discourse from literature is that the impact of political leadership and institutions on economic growth does not have a defined pattern; the effect is either positive or negative. This study examines the impact of institutions on economic growth in selected developing countries; this is because efficient institutions guarantee a transparent policy- making process that promotes economic growth. Coupled with this is the fact that conducive economic environments such as secured property rights, price stability, government effectiveness, the effectiveness of monetary and fiscal policies that are in agreement with the efficient utilization of resources have been found to exert some level of impact on economic growth. In this regards, trade policies and institutional quality in a country can determine such country’s growth (Temple, 1999). This means that when a country has weak institutions, it can lead to the occurrence of sub-optimal economic outcomes. Therefore, institutions matter in the growth process of any country. Hence, this study would help highlight the vital significance of institutions.

Moreover, this study also examined the impact of political leadership on economic growth in selected developing countries. This helped us to assess the benefits of international trade, to see if there has been noticeable growth in the selected developing countries, or that international trade have driven some firms out of existence because they cannot compete with the foreign products in the local market thereby reducing domestic output and hence growth, on the one hand or have helped to increase aggregate output on the other hand. This is clear from the high rate of imported goods in developing countries. This is based on the assumption that a country can only gain from international trade when she is economically stable. It is pertinent to note that no country would want to trade with another country that will not be able to pay for the goods and services imported from other countries, and this will have an adverse effect on the country in question. Thus, this study would serve as an eye opener to governments of these selected developing countries in particular to embark on and implement policies that will boost growth so as to boost political leadership. Aside this, taking into account the fact that culture plays a very important role in any economy in that it helps in dictating the ways of life of the citizens of the country and determines their interactive abilities; this study examined the impact of cultural institutions on economic growth.

In addition, this study also examined the political leadership – institutions – economic growth nexus on sub-regional classification. The selected thirty developing countries were classified into Central, East/Southern and West Africa sub-regions. This enabled the author to examine the impact of political leadership and institutions on economic growth on sub-regional basis in order to know which of the sub-region fared better than the others. Due to these classifications, this study is different from other previous studies on political leadership and institutions.

Furthermore, this study made use of a different technique (the LSDV and GMM techniques), a methodological departure from other similar studies to examine the role of political leadership and institutions on economic growth in selected developing countries. Therefore, this study unfolded the relevance of growth in a country. This is because when a country experiences economic growth, aggregate investment and savings increase, output level increases and poverty reduces. The study would also contribute to existing views on the political leadership – institutions – economic growth nexus. It would give persons both inside and outside an insight into the importance and significance of political leadership and institutions in affecting the economy’s growth. Thus, it would help to enhance the interest of persons on the academic platform seeking to carry out further study on similar topics.

Also, the recommendations from this study would be useful to policy makers in the appropriate government parastatals on how to improve on their institutions. The study would equally serve as a medium through which awareness is created to the government and society to know the measures to be taken in order to improve the economic activities that will boost economic growth which in turn will lead to the overall development of the economy. It would be useful to the government in the sense that it would enhance processes involved in taking decisions and making conclusions on how to encourage and promote the industrial sector so as to reduce importation of goods and services. Finally, it would serve as a platform for further research in related areas like the impact of trade and institutions on output and employment growths.

1.6         Organization OF CHAPTERS

This study is made up of five chapters. The introductory part of the study is contained in chapter one. The chapter discussed the background of study, the statement of research problem, objectives, significance, research questions, research hypotheses, scope and methodology of the study. It also contains the data sources as well as the outline of chapters. Chapter Two is the literature review. In this chapter, a critique of previous works, research and other materials related to the subject of study were carried out. The method used in the research is discussed in chapter three. In this chapter, the Chapter four dealt with the data analyses and interpretations. In this chapter, the data collected from secondary sources were analyzed and the results interpreted. Chapter six is the concluding part of the study. It contained the summary of major findings, policy implications of findings, recommendations and conclusion of the study as well as the limitations of the study and suggestions for further studies.

 

1.7         DEFINITION OF TERMS

Contract: A contract is a legally enforceable agreement. It involves a formal, legal obligation to which each party gives express approval and to which a particular body of law applies, (Acemoglu and Robinson, 2008).

 

Cultural Institutions: These are the rules, beliefs and norms that a given society will usually hold, that shape collective actions of the constituting human agents, (North, 1991).

 

de facto and de jure: de facto is a Latin word that means ‘by the fact’. In law, it means ‘in practice but not necedeveloping countriesrily ordained by law’. De jure, on the other hand, means ‘concerning the law’ especially when referring to legal matters, standards and governance. Specifically, in legal parlance, de facto defines action of what happens in practice while de jure describes what the law states in letters. In this study, both would be included in the conceptual framework, (North, 1991).

 

Economic Institutions: These are economic arrangements that a country is involved in, which can be domestic and international. They are essential for economic growth in a country due to their influence in shaping incentives for various economic actors in a society, (North, 1991).

Exports: These are goods or services that are sold to other countries by a domestic country, (Todaro and Smith, 2011).

 

Imports: These are goods or services that are bought by a domestic country from other countries, (Todaro and Smith, 2011).

 

Institutions: Institutions are the humanly devised constraints that structure political, economic and social interaction. They consist of both informal constraints (sanctions, taboos, customs, traditions and codes of conduct) and formal rules (constitutions, laws, property rights), (North, 1991).

 

New Institutional Economics (NIE): This incorporates a theory of institutions into economics by building on and extending neo-classical theory. NIE has developed as a movement within the social sciences, especially economic and political science, which brings theoretical and empirical research to examine the role of institutions in economic growth, (North, 1991) .

 

Non-Tariff Barriers (NTBs): These are trade barriers that restrict imports but are not in the usual form of tariffs. They also mean a number of agreements that deal with various bureaucratic or legal issues that could involve hindrances to trade such as health and safety requirements or technical barriers, (IMF, 2005).

 

Political Institutions: These are defined by the nature of political leadership structure or governance structure that is persistent in the country. Examples of political institutions include the form of government in a country (democracy or dictatorship), civil liberties and the extent of constraint of political rights, (North, 1991).

Property Rights: They are divided into economic and legal property rights. The economic property rights of an individual over a commodity/an asset are the individual’s ability to consume the good or the services of the asset directly or to consume it indirectly through exchange. Examples of economic property rights are: the right to earn income from an asset, the right to use an asset and contract over the terms with other individuals, while the legal property rights are the property rights that are recognized and enforced by the government, (North, 1991).

 

Tariff: This is a kind of tax imposed on goods when they are moved across a national political boundary. It is also a schedule of duties imposed by a government on imported or in some countries exported goods, (Todaro and Smith, 2005).

 

Tradable and Non-Tradable: A tradable good is a good or service that can be sold in another location distant from where it was produced. The opposite is the Non-Tradable. Different goods have differing levels of Tradability, usually the higher the cost of transportation and the shorter the shelf life, the less tradable a good is (IMF, 2005).

 

Trade: This is the exchange of goods and services within a country (domestic or home trade) or between countries (international or foreign trade).

Political leadership: This is defined as a move towards freer trade through the reduction of tariff and other barriers and is generally perceived as the major driving force behind globalization.

 

Transaction Costs: These are costs used for the creation, maintenance, use and change of institutions and organizations. They include the costs of information, negotiation and enforcement, costs of defining and measuring claims, costs of using and enforcing the rights specified, (Acemoglu and Robinson, 2008).

strongly against imports.

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