Why East Africans must beat the resource curse

Today they say globalization has made the planet more equal or has made the world a global village. As communication gets cheaper and transport gets faster, African countries intend to close the gap with their rich global counterparts. However, inequality still impacts and erodes even deeper in some of the ‘third’ world countries especially in Africa. Many factors explain why nations differ in wealth.We all know, from our personal experience, that there is not one simple answer to the question why each of us becomes richer or poorer: it depends on inheritance, education, ambition, talent, health, personal connections and opportunities, among other factors. Hence we shouldn’t be surprised that the question of why a country becomes richer or poorer also cannot be given one simple answer. Usually, economists say that no basic theory predicts that inequality falls when developing countries enter global markets. The theory of comparative advantage is found in every introductory economics textbook. It says that poor countries produce goods requiring large amounts of unskilled labour while rich countries focus on things requiring skilled workers. As global trade increases, the theory says, unskilled workers in poor countries are high in demand; skilled workers in those same countries are less coveted. With more employers clamoring for their services, unskilled workers in developing countries get wage boosts, whereas their skilled counterparts do not. Differences in productivity between rich and poor countries are systematically larger in sectors that require skilled labour and extensive research and development. The perception is that more economically developed countries are richer. This means that the countries make more money and the people in the countries have more money to spend on health, education, food and luxuries. People in these countries earn enough money so that they can borrow even more and buy their own assets. They do jobs in the service industries.A poor economy on the other hand is said to be characterized by lack of appropriate education, adequate social security systems, missing infrastructure, dependence on agriculture, foreign aid and a poor developed export economy. Conversely, this difference between poor and rich countries seems not to reside in the available natural resources which should be an added advantage. Japan has a limited territory, 80% mountainous; inadequate for agriculture and cattle breeding, but it is one of the top world economies. The country is like an immense floating factory, importing raw materials from the whole world and exporting manufactured products. Another example is Switzerland, which does not grow cocoa but boasts of having the best chocolates and dairy products in the world. Switzerland is a small country that has consistently demonstrated an image of safety and security as well as order. Africa is presumed to be one of the poorest continents despite being the richest in mineral deposits among other precious natural resources. Many countries here fall among the meager economies in the world which has always formed the basis of the developed countries’ constant donor support to alleviate poverty. Unfortunately, aid disbursements from rich countries to poor countries are often dwarfed by wealth flows that run in the other direction, to the point where poor African countries are effectively developing rich countries. Perhaps most critically, aid is not actually designed to reduce poverty, but operates as a tool that the elites of rich countries leverage to extract wealth, resources, and political compliance. By continuously ranking the continents’ poor economies, the aid paradigm prevents development practitioners – and the public – from understanding the real causes of poverty, and therefore precludes meaningful solutions. Donors and international agencies attempt to “engineer prosperity” either by foreign aid or by urging poor African countries to adopt good economic policies. But there is widespread disappointment with the results of these well-intentioned efforts, decades rolling with such donor support. The solution to the African countries transforming their economies solemnly lies with the continent. A change of attitude, embracing good governance and cultivating a culture of independence and hard work could be one way of reversing the poverty trap. As the 7th East African Petroleum Conference and Exhibitions 2015 come to an end today, discussions have circumnavigated around oil, gas and mineral deposits discoveries. These are potential resources and opportunities that can now be used to turn around the fortunes of the economies of our East African region. For instance, the deliberations benchmarked on improving the skills of the region’s workforce, reduction of aid-dependence, use of locally available resources, opportunities and human capital, are critical to socio-economic transformation of our region. East Africa has an opportunity to avoid the resource curse if we continue to emphasize the good governance and its associated practices of transparency and accountability. East Africa should and in fact must translate our new frontier of opportunity in oil and gas into sustainable and inclusive growth. oscar_kim2000@yahoo.co.uk

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Why East Africans must beat the resource curse