A Vexing Problem II: A Follow Up

A gathering of 50 leaders (Presidents and Prime ministers) from the African Continent took place in Washington D. C. USA per invitation from President Obama. The meeting described as the US-Africa leaders Summit (not quite a G-50 Summit), took place on August 3-6, where experts from the US and Africa tackled many issues least of which the form of aid to the African Nations.

Such an unprecedented gathering, by all accounts would result in a myriad of sessions, panels of experts, public policy advisers, as well as invited guests all addressing one or another aspects of development, trade and foreign assistance.
President Obama, the host of the conference, placed emphasis on two issues: that, “investing” in the next generation is at the core of a government responsibility; that a trajectory of African growth requires a shift from a donor mentality to a model of “business networking”. During the following two days, the conferees had the opportunity to discuss ways of:
• Stimulating growth,
• Unlocking opportunities and,
• Creating enabling environment for the next generation.

A tall order to be sure. Nonetheless, planning for the future is what governments do, or ought to do.

Economists, for long have recognized that the individual’s decision regarding consumption, saving and investment is carried out in an inter-temporal setting. That is, the individual in making a choice of what goods to buy, whether to save or invest as well as allocation of time between work and leisure, does so with an eye to the future. The objective is to allocate lifetime income to get maximum satisfaction (utility) over one’s lifetime.

“Good” governments could not afford to do less. The returns to individuals living in a society, depends on a societal allocation of its resources that maximizes returns to its members over their lifetimes.

Achieving such an optimal inter-temporal allocation both at the individual level, and in societal context is “vexing” at best. That does not mean that it should not be sought. Attendees and presenters at the President- Leadership summit made a valiant effort in identifying those pillars on which a society should construct its future. The multitude of sessions that have taking place during the Summit, put forth ideas and recommendations as well as made pledges for funding support for various projects initiated by governments and US business.

The task of stimulating growth, and, creating enabling environment for growth in the 50 African nations, as the saying goes, may be easier said than done. The 50 African countries differ significantly in terms of their natural and human resources, levels of literacy and educational attainments, levels of corruption and legitimacy of their governments- elected or dictatorial. That being said, one needs to add that, one ought not throw one’s hands and give in to a future that perpetuates the status quo. Addressing future needs of society have to go hands in hand with current needs.

One of the specific recommendations/ pledges that came out of the Summit is that the USA pledges, in partnership with business, to continue their efforts for the “Power Africa” initiative. The President announced on August 5th that private companies and government institutions are providing additional $12 billion in aid to the administration’s electrification program in Africa. The federal government would add $30 million to supplement this effort. Conferees at the Summit applauded the effort. Since the US government funding requires Congressional approval, that did not deter the US business community from pledging support to the effort to invest in power, and power infrastructure in sub-Saharan Africa (for details on this announcement see Juliet Eliperin, Obama to announce expansion of electrification in Africa, The Washington Post, August 5th ).

This brings me once more to the comment I have made in my August 2nd blog, prior to the US-African leaders Summit. There, I have suggested in response to an announcement by the GDN/Gates foundation asking for proposals that would recommend a way or ways to “reinvent foreign assistance”. My suggestion to whoever cared to listen is that the highest returns an investment would reap are through investing in education. No society in my view can prosper, let alone, compete in tomorrow’s world without a literate population. Once again, I endorse in the recommendation that “education” unlocks the door to prosperity.

My endorsement for education as the “right” approach to the so called “reinventing foreign aid”, elicited a response from one of my formal Doctoral students, currently a professor of economics with a great deal of expertise in development policies. I would like to share with you a brief exert from his note as it is quit enlightening:
“…the biggest bang for the foreign aid/ development assistance dollar may not be education expenditures, whose worthwhile returns are derived from other functional conditions being in place, but an investment in the necessary initial conditions that makes an economy organically and sustainably develop and progress. These include, inter alia, the establishment, enforcement, and education about the culture, of property rights, which includes the opportunity for people getting a competitive return on investing in their own education and human capital development”.

As I stated in my previous blog, I am not a development economist. Yet, I cannot help but wonder how a society in the African continent, with more than one third of its population are illiterate (the definition of literacy is that a person aged 15 and over is able to read and write), can possibly achieve those conditions that make an “economy organically and sustainably develop and progress”. A sustainable development would only prevail in a society whose members are literate.

Hopefully, an expansion of the “power Africa” project would bring the light of literacy to all citizen of the African continent.