Innovation System Framework and Evolutionary Economics Theory Perspectives on African Economic Devel

1
Innovation System Framework and Evolutionary
Economics Theory Perspectives on African Economic
Development and Integration

• Mammo Muchie
• Coordinator DIIPER Aalborg University
• IKE-Workshop on Innovation,Instuition and
  Development
• May 6,2008

2
Overview

• Inspiration
• Problems of African Economic Development
• Problems with Theories of Development Economics
• The Relevance of Friedrich Lists Theory of
  Productive Power to Africa

3
Overview

• National System of Innovation
• Towards the creation of an integrated African
  economic system
• Future research
• Concluding Remarks

4
The main objective

• The objective is to explore, imagine and wonder
  if indeed what the builders rejected can become
  the cornerstone of the arch!
• To explore whether traditional development
  economic theory has addressed, overlooked or
  ignored the core issues of African development.
• And search for a more robust theoretical
  alternative that is open to reinstating in some
  way the core issues of what should be the
  African quest for structural transformation.

5
Inspiration

• The three principal reactive-reactionary theses,
  which I call the perversity thesis or thesis of
  the perverse effect, the futility thesis, and the
  jeopardy thesis. According to the perversity
  thesis, any purposive action to improve some
  feature of the political, social, or economic
  order only serves to exacerbate the condition one
  wishes to remedy. The futility thesis holds that
  attempts at social transformation will be
  unavailing, that they will simply fail to make a
  dent. Finally, the jeopardy thesis argues that
  the cost of the proposed change or reform is too
  high as it endangers some previous, precious
  accomplishment. ( Hirshman, 1991, p.7)

6
Inspiration

• I should add to Hirshmans three theses, a
  fourth one and that is what people often say
  when I argue for an integrated African national
  economy, they say it is too unrealistic and even
  illusory. Thus I encapsulate their worries as the
  illusory thesis, which says that the pursuit
  of African integration is too pie in the sky
  dream, fantasy, utopian, unrealistic , which
  distracts from taking realistic incremental
  actions and thus by foreclosing such options
  becomes itself dangerous!

7
Inspiration

• So I plan to do the dangerous thing of arguing
  for an integrated African economy by engaging
  with and critquing available theories to develop
  hopefully original new synthesis.
• The only risk to avoid is not to take risk, even
  if that may lead you to land in ridicule!

8
Problem of African development

• After half a century of colonial freedomAfrica
  as a continent still has an economic size less
  than the economic size of France!
• Sub-Saharan Africas economic size is less than
  the economic size of Holland!
• Yet there are 54 states, 54 policies plus the
  unwelcome imposition of often the one size fits
  all policies from outside that most of these
  states do not seem able to avoid or afford, or
  can reject if harmful!

9
map
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Africa

• 30,221,532 km²
• 941,249,130 people (2007 estimate)
• 2nd largest and 2nd most-populous continent
• 6 of the Earth's total surface area
• 20.4 of the total land area
• Total GDP of 3,178,132, 000, 000.00
• 2007 international dollars through estimated
  purchasing power parity (PPP) exchange rates

11
Problems of African Development

• Politically...formal independence without an
  African agency
• Economically... Continued fragmentation means
  dependence will still continue, poverty and
  insecurity too!
• Intellectually knowledge creation and use often
  not geared to bring about structural
  transformation of an integrated African economy
• Integrating research, training, creativities,
  governing, producing and circulating within an
  Africa wide economic system not in existence yet
• Creation of an African national system of
  production and consumption a major challenge
• Linking academy, industry, government and labour
  on an African scale and scope talked about but
  not implemented.

12
Problems of African Development

• The need for African Integration- rich in
  rhetoric, but dismal failure in taking even a few
  actions to do actual integration except for the
  natural cross-border ones!
• The EUs 2005 strategy speaks of a one Africa
  framework for its EPA whilst continuing to
  differentiate its policies to different states
  and regions within Africa!

13
Official African attempt to integrate

• Addis Ababa Declaration of 1973
• introverted, endogenous and self-supporting
  growth
• Kinshasa Declaration of 1976
• free ownership and control of natural resources
  by ensuring permanent sovereignty of African
  countries, the establishment of multinational
  companies, the establishment of the African
  common market, the African Energy Commission, and
  the African Economic Community within a period of
  15 to 20 years
• Monrovia Symposium in 1980
• in favour of national and collective
  self-sufficiency in economic and social
  development, with a view establishing a new
  Economic Order in Africa
• Recovery Programme (South Africa)

14
Official African attempt to integrate

• Lagos Plan of Action and Final Act of Lagos 1990
• principle of individual autonomy and collective
  self-sufficiency
• Abuja Treaty of 1991/4
• establishing the African Economic Community
• Sirte Declaration of1999
• African Union
• NePAD
• merger between the OMEGA Plan (Senegal) and the
  Millennium Partnership for the African Recovery
  Programme (South Africa)

15
African Economic Community

• The creation of free trade areas, customs unions,
  a single market, a central bank, and a common
  currency
• Establishing an economic and monetary union

Institute for Economic Research on Innovation
16
African Economic Community

• AEC founded through the Abuja Treaty, signed in
  1991 and entered into force in 1994 is envisioned
  to be created in six stages
• 1999 - Creation of regional blocs in regions
  where such do not yet exist
• 2007 - Strengthening of intra-REC integration and
  inter-REC harmonisation
• 2017 - Establishing of a free trade area and
  customs union in each regional bloc
• 2019 - Establishing of a continent-wide customs
  union (and thus also a free trade area)
• 2023 - Establishing of a continent-wide African
  Common Market (ACM)
• 2028 - Establishing of a continent-wide economic
  and monetary union (and thus also a currency
  union) and Parliament
• End of all transition periods 2034 at the latest

Institute for Economic Research on Innovation
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Regional Economic Communities

• Community of Sahel-Saharan States (CEN-SAD)
• Economic Community of Central African States
  (ECCAS)
• Common Market for Eastern and Southern Africa
  (COMESA)
• Economic Community of West African States
  (ECOWAS)
• Intergovernmental Authority for Development
  (IGAD)
• Southern African Development Community (SADC)
• Union du Maghreb Arabe (UMA)

18
Problems of African Development

• Over 200 integration schemes, but no recognisable
  and substantive integration yet!
• The central problem of African development is
  linked to whether or not Africa is indeed
  integratable and can be integrated!
• A recognition of Africas experience and history
  implies locating the core of the development in
  the dynamics of integrating Africa
• African integration is one of the few things that
  remains to advance Africas independence, agency
  and post-colonial freedom.

19
Problems of African development

• African integration follows logically from
  Africas specific experience and history(past)
  and the project to transform the economy
  structurally from its fragile state into a self-
  sustaining robust state (future)!
• Any theorising that ignores Africas experience
  and history in its theoretical arsenal is likely
  to be more of a problem than help to bring
  Africas independence and transformation.
• Let us see how development economic theorising
  dealt with this core issue of African development

20
Problems with Development Economics(DE) Its Rise
and Decline

• Albert Hirschman, one of the founders of
  development economics said
• Development economics is a comparatively young
  area of inquiry. It was both born just about a
  generation ago, as a subdiscipline of economics,
  with a number of other social sciences looking on
  both sceptically and jealously from a
  distance.(Albert Hirschman,1981)

21
Development Economics the early Core themes

• Rural underemployment and disguised unemployment
• Late industrialisation
• Utilisation of undermployed manpower
• Accelerate capital accumulation
• Deliberate intensification and guided effort
• New rationality for protection, planning and
  industrialisation

22
The Early Strategies for Economic Development

• Industralization
• Rapid capital accumulation
• Mobilisation of underemployed manpower
• Planning and an economically active state

23
DEs Contribution

• Development economists claimed that neo-classical
  economics did not apply to underdeveloped
  countries
• But this is not a big deal, since neo-classical
  economics cannot be said to apply anywhere!
• Only a few East Asian economies industralised
• Different models Balanced growth, big push, dual
  economy and so on
• Internally the debate raged to write the
  obituary of development economics or find new
  themes to sustain it

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Variation in themes

• The positions polarised from those that
  originated the field( Colin G. Clark(1939), Paul
  N.Rosenstein-Rodan(1943), Kurt Mandelbaum(1947)
  and others such as Bert F.Hoselitz, Ragnar
  Nurske, Jacob Viner and Hla Myint
• To those who advocated development, planning and
  economic growth (Arthur Lewis, Jan Tinbergen,
  Nicholas Kaldor, Joan Robinson, Maurice Dobb,
  Hans Singer, Gunnar Myrdal, Simon Kuznets, Hollis
  B. Chenery and Irma Adelman

25
DE-as Social development?

• And those that stress economic development as
  social development and who inverted and made
  economics a special case of development economics
  (e.g. Dudley Seers), Theodore Shultz(who stressed
  human resources development, skills and
  education) Paul Streeten Mahbub Ul-Haq (human
  development), E.F.Schumacher (Small is
  beautiful))
• And the structuralists(Raul Prebisch, Ceso
  Furtado,) and neo Marxian theory( Paul Baran,
  Paul Sweezy, Andre Gunder Fran, Samir Amin)

26
Neo-Classical/Neo-liberal DE

• Anti structuralists and neo-liberal school
  (Alexander Gerschenkron, Walt Rostow, Peter baur,
  Anne Krueger, Ian Little, Harry Johnson, Bela
  Balassa and Deepak Lal)
• Their thesis was simple government intervention
  did not only not improve development, it in fact
  thwarted it.
• The emergence of huge bureaucracies and state
  regulations, they argued, suffocated private
  investment and distorted prices making developing
  economies extraordinarily inefficient.
• In their view, the ills of unbalanced growth,
  dependency, etc. were all ascribed to too much
  government dirigisme, not too little.

27
DE

• Early DE equated development with growth and
  industralisation
• Eveloping countries seen as primitive versions
  of Europe with time to grow into their civilised
  status!
• Qustionining industralisation unsustainable if
  it comes with human cost(e.g.population,
  inequality, agriculture, urban dev.,education,
  health, unemployment).Treat these issues not
  simply as appendages of underlying growrh thesis!
• Populist theories questioned growth(e.g.Schumacher
  )
• Structuralism not primitive versions but with
  distinct structural problems! Country specific
  analyses necessary (Albert Hirschmann(1958)
• Dirigisme more of a problem to development than
  help(neo- classicals)

28
Dispute still sizzles

• What is interesting about development economics
  is that the normative stance of the particular
  theorist clearly informs the choices of issues,
  themes and remedies preferred.
• In recent years, the Neoclassical thesis has
  gained greater adherence, particularly in Latin
  America.
• However, the evidence of why economic growth or
  failure is still ambivalent and disputed.
• Both structuralists and counter-structuralists
  point to fast East Asian development and
  disastrous African experience as proofs of their
  directly opposing theses.

29
The Two Directions to reject or overcome
thematic deficiency?

• In the 80s arguments from the Right stressed the
  neglect of the market and the unacceptable state
  activism in the economy
• Amartya Sen came up with an argument of taking
  the issue beyond the simple state and market
  dichotomy and opening DE to themes to what may
  prolong the life of development economics

30
Sens Attempted Improvement

• Sen admitted that traditional development
  economics may not have been as dismissable as
  various trends suggest.
• Instead he acknowledged what he calls thematic
  deficiency at the core of development economic
  theorising

31
Sens Attempted improvement

• He argued concentration on national product,
  aggregate income, total supply of public goods,
  capital accumulation, the creation of surplus
  may be necessary but not sufficient to get
  development that includes the least advantaged.
• He stressed entitlements of people and
  capabilities these entitlements generate is the
  relevant thematic choice for development
  economics.
• Sen said the process of economic development has
  to be concerned with what people can and cannot
  do or to use his words have reason to value and
  choose to do!

32
Still Development Economics Remains Polarized!

• Development economics has bifurcated into
  neo-liberal versions (Poverty of Development
  Economics, 1981) and its critiques (The Dilemma
  of Development by John Toye,1987) on the one
  hand, and the Amartya Sen thematic extension from
  national product to entitlement and capability
  leading to human development and inclusions of
  social specific themes such as gender,
  deprivation, hunger , basic needs and
  environment.

33
Lists Theory

• Sens capability-building theme seems to resonate
  with Lists theory of productive power!
• However Sens capability is built on the premise
  of the economy of the individual and Lists
  productive power is to improve, progress and
  develop a nation!
• For List economic development is in reality the
  analysis of the economic progress of nations
  in reality that appears to be what economics as a
  whole is designed to be about. Is it?

34
Friedrich Lists Theory

• The theory of productive power by List can
  provide a fresh thematic extension to both Sens
  capability theme and development economics
• The merit of his theory is that it starts by
  affirming experience and history of nations
  rather than beginning with abstractions such as
  industrialisation, planning, capital accumulation
  and utilising the underemployed.
• It contexualises its theory of productive power
  with the idea of the national interest and even
  the national passion

35
Lists Justification of his theory

• His theory of productive power can be built as
  the core theme of the theory of development
  economics
• Individuals, nations and humanity are distinct
• The sum of individual interests is not to be
  equated with the interest of a nation (185674)
• Social interests diverge from private
  interests(ibid.245)

36
Lists Justification

• The economy of the individual is different from
  the economy of the nation, and the economy of the
  global human interest is different from both
  (p.vi)
• Some nations can be concerned more for their
  national welfare than the welfare of humanity!
• So they can choose expanding productive forces
  through protection than expanding global welfare
  through free trade
• They preach free trade, but they practice
  protection!
• Could it be that what was in the interest of
  England is thought to be in the interest of the
  world!

37
Lists Justification

• The production based economics (List) vs.
  Exchangeable values and allocations through
  international trade (Adam Smith) have different
  development outcomes!
• Trading in cooked and manufactured vs raw and
  agricultural goods not the same thing!

38
Lists theoretical justification

• Theory of productive power is more than
  commodities, money and factors of production or
  natural advantages
• It is above all a realisation that division of
  labour presupposes national unity, national
  independence, a shared project and cooperation of
  productive forces (p.74)
• List was castigated as a dangerous enemy on
  account of his endeavouring to rescue his country
  completely from the manufacturing monoploy of
  England (ibid.viii- translator of American
  version of Lists tome!)

39
Lists strategies

• Industralisation and manufacturing to be driven
  by a capable nation and state
• Incentives to those who take risks of creating
  new industries
• Building the capital of the mind and training and
  spreading education to cover comprehensively the
  nation as a whole
• Choice of industries for protection on the basis
  of knowledge, experience and linkages with the
  rest of the national economy (p.69)
• Development of agriculture necessary to
  industralise

40
Lists strategies

• Industries of luxury to recieve attention until
  in the last phase(p.392)
• Trade is an instrument of development, progress
  and independence (ibid.)
• Protection is also a means to development,
  independence and liberty for free trade (p.64)
• Improving, developing and preserving the nation
  is the principal purpose of a nation(p.70)
• Supported regional integration of German cities
  and the union of interest of various states such
  as Belgium, Denmark, Holland and Hungary!

41

Relevance for national development

• List is right in his claim that a national
  political economy facing constraints needs to
  find a way to organise transformation!
• Those that trade in raw materials and agriculture
  remain underdeveloped
• Those that build productive power have made it
  (e.g.USA, Germany, Japan, East Asian Tigers)
• The lesson is clear if a nation wants to
  develop, it has to organise its national system
  of political economy with a logic of stimulating
  rapidly and comprehensively productive power.
• Otherwise it can have very rich minerals and
  agriculture and territorial size, but will remain
  underveloped!

42
The Puzzle for Africa

• The national system of innovation concept derived
  from the Listian tradition in the context of
  Africa may be a provocation
• In the context where the national in Africa is
  not well defined!
• In the context where institutionsdo not
  function with a predictable system and
  rationality
• Where learning and capability are not mobilised
  to advance African transformation with
  deliberation and focus!
• Where the misplaced focus on thematic deficiency
  underemphasises framework deficiency that is the
  root of misplaced theorisinf wrt Africa!

43
The Research Challenge

• We are not saying the African NSI exists!
• We are saying the national innovation system has
  to be made in Africa!
• We are not dealing with an already made situation
• We need economic theories that can stimulate
  and assist original research

44
National Innovation approach
45
Linkages for Co-evolution
46
Unifying model of SI

• Technology
• ICT
• Nano-tech
• Bio-tech

• Space
• Nation
• Region
• local

• Sector
• Agriculture
• Manufacturing
• Pharmacy
• electronics

• Political
• Ideology
• Governance
• Institutions
• policies

• Economical
• Market
• Agents
• Incentives

Knowledge Technology Hybrids
System of Innovation

• Innovation
• Product
• Process
• Organisational
• institutional

• Firm
• SME
• MNC
• SOE

47
Unifying model of SI
System of Innovation

• Political
• Ideology
• Governance
• Institutions
• Policies

• Economical
• Market
• Agents
• Incentives

• Knowledge
• Technology
• Hybrids

• Space
• Nation
• Region
• local

• Technology
• ICT
• Nano-tech
• Bio-tech

• Sector
• Agriculture
• Manufacturing
• Pharmacy
• Electronics

• Firm
• SME
• MNC
• SOE

• Innovation
• Product
• Process
• Organisational
• Institutional

48
Evolutionary Economics

• Stimulate and understand inter economic and
  non-economic actor interactions and dynamics,
• Co-evoution of economic and non-economic
  governing institutions, practices and
  understanding (Richard Nelson)
• The interaction of policies, knowledge,
  incentives, instuitions, practices and the
  understanding involved in the process
• System building, to identify significant
  interactions and interfacing of parts,
• Bridge the gap between theory and reality,
• The sources and organisation for stimulating
  innovation, imagination and creativity, learning
  and comptence building
• How routines are formed and novelties emerge

49
Evolutionary Economics

• Integrating Africa or making the Africa nation
  itself is an evolutionary problem of dynamics,
  of creative destruction,requiring evolutionary
  approaches to understanding and creating
  knowledge
• Evolutionary economic theory has such concepts
  that can be useful to stimulate research in
  making an integrated African economy.

50
Evolutionary Economics

• It has the concepts that can be appropriated to
  fit with what Africa has to do to survive in a
  difficult world.
• For example the main development problem is to
  integrate Africa to imagine the Africa nation
  and make it!
• Evolutionary economic tools can be useful in the
  process!

51
DangerAppropriation or Mimicry

• We know theoretical and empirical work mainly
  done for developed economies using evolutionary
  economics and the NSI
• Appropriation is legitimate if what is learned is
  how this has been done, and why it has been done
  the way it has rather than copying what is is
  done well!
• The problem is how to use evolutionary economics
  and especially the NSI to do a research
  diagnosis on Africas economics now and its
  likely evoutionary trajectories

52
Danger appropriation or mimicry

• We are not going to use ready made formula but
  explore the evoution of Africas economic system
  as it is in order to find better ways of
  stimulating structural transformation
• No need not thus to engage in controversy on
  whether to apply evolutionary economics or NSI!
• Some suggest important revisions may be needed
• Others say that radical modification not needed.
• For me this is a non-issueto develop, nations
  need to engage in the dynamics of acquring
  Existing knowledge and make New knowledge
  themselves (Richard Nelson)

53
Acquiring and making

• In fact to acquire better and better existing
  knowledge they must build their own R D
  capability also.
• It is not either acquiring the existing or making
  new.. It is making to acquire in order to make
  new and build on a continuous spiral enhancing a
  simulatenous mutuality in the practice and the
  understanding(Ibid.)
• It is both know how as practice and the learning
  and understanding to create novel practices that
  recreate more and better learning that continues
  in time and space!

54
Why the NSI for Africa?

• A national system of innovation to promote a
  national system of production
• To enable a system creation to produce what
  Africa consumes, and to consume what Africa
  produces
• To create Africa...wide producers and users
  interactions (Lundvall85)
• To embed knowledge creation,innovation, learning
  in africas institutions,societies
• To inject a total learning and innovation culture
  in Africa
• To retain African resources to stimulate african
  development

55
The Research Orientation to build on

• The economy of the
• nation
• Systems
• Co-evoutions
• Interactions
• Innovation
• Learning
• Comptence building
• The organisation of productive power

• Africa..nation
• Integration
• Structural transformation
• Relation with the world economy
• Agency and independence
• capability accumulation

56
The Research Orientation to Decline

• Continue to search for solution within the
  existing arbitrary arrangements as they are in
  Africa
• That continues to engage, interrogate and
  critique them
• That tinkers with fragmented Africa
• That does not question dependence,
• Continues to taken the fragmentated status of
  Africa asnormal
• Fashions ideas and policies without questioning
  such fragmentations
• Blames Africans when conceptual and policy
  results show more poverty creation than wealth
  creation

57
Concluding Remark

• Not all the states in Africa can catch up as they
  are now!
• Not sure even if they can catch up even if
  regrouped as regions
• Important to emerge united to deal with a world
  economy and respond to its many challenges.
• No alternative to learning and the social
  innovation of uniting, if Africans and Africa are
  to attain full dignity and humanity.

58
Concluding Remark

• A theory of African economic development that
  confronts the key challenges of integration of
  economy, society, knowledge, forging Pan-African
  unity, stimulating the African Renaissance,
  stregthening the AU/NEPAD, imagining and making
  the Africa-nation and creating a vibrant African
  public sphere of free citizens!
• This theory of African development is likely to
  emerge with a controversy and debate with the
  available theories.
• What Africa suffers is not thus from a thematic
  deficiency in diagnosing its development
  problematic.. It is the irrelevance of the
  framework that ignores its specific experience,
  history , project and dream to be free at the
  core of the problem!

59
Concluding Remark

• Can evolutionary economics help address this
  framework deficiency.. That is the question.
• The central task of evolutionary economics is to
  provide three things
• Understanding the myopia and evolutionary
  dynamics of development
• Providing an adequate explanatory structure of
  the nature and dynamics of the development
  process
• Taking on board specific context, experience,
  history, passion and asymmtric power distribution
  within the world economy

60
Thank You