Opinion
Will Africa leave the World Bank behind?
The main case for the World Bank against industrial policy is that a strong developmental state quickly dissolves into crony capitalism, with picking winners turned into picking friends.
“Its a razor’s edge you are playing with here! If you have an enlightened bureaucracy with perhaps a military government or at least a government able to bring along the powerful industrial groups in the direction of greater economic growth and stay on top, then maybe,” says Shanta Devarajan, formerly Africa chief economist for the Bank, now chief economist for the Middle East and North Africa. The challenge is in designing the mechanisms through which subsidies go to the intended beneficiary.
Unsurprisingly, the successful East Asian governments were the ones that managed to corral the private sector into productive sectors of the economy without getting captured. Big-time entrepreneurs who are not effectively disciplined by a developing country government become the oligarchs of Southeast Asia – or Russia, or Latin America.”
Lamido Sanusi has caught public attention in Nigeria for his own embrace of industrial planning. His dismissal of eight bank chief executives in 2009 following a huge stock market bubble did much to reduce the levels of moral hazard in the sector.
He believes in encouraging entrepreneurs to invest productively – for example, showing the diesel cartel in Nigeria, which had been sabotaging the power sector for its own short-term gains, that much greater riches are around the corner if Nigeria can keep the lights on.
“You create a lot more money by investing in a refinery, so stop being a marketeer! So you transform them from primitive accumulation into capitalists.
The United States had its robber barons, all the J. P. Morgans, etc.”
Ultimately, this is where the argument over industrial policy will live or die.
Will METEC resemble POSCO or Ajaokuta? A general launched POSCO in South Korea, and Ethiopian army officers run METEC. They may have the discipline to see the project through, though, as Nigeria’s experience shows, a military background is no guarantee.
