Underpinnings of an Enabling Environment for a Market Economy

Underpinnings of an Enabling

Environment for a Market Economy

Costantinos Berhutesfa Costantinos, PhD

Published by Fortune, 2006

The end of the Cold War and the advent of a wave of democratic experiments in Africa marked the dismantling of state power oligarchies and titans who presided on humankind's most appalling era of distress and despair. As we entered the decade of the Nineties, ordinary Africans witnessed a unique era emerging testifying to the systematic disintegration of totalitarianism that tend to relegate earlier `great 'events in history to the backstage. Advances in human thought and action towards global justice and universalisation of guarantees for human rights, were gathering added momentum with the reasoned vigour contributed by pro-democracy activists and plaintiffs in civil society. The ability of states to strip-off people of their rights, behind the thin veneer 'non interference in each other's internal affairs' was highly contested in post-Cold War world set-up policed by only one super power.

Alas! These high hopes were to be shattered as the new states consolidated increasing state interference, tantamount to outright monopoly in many sectors, in the aftermath of aborted political contestation. The coordinates of state ceased to function, with the legislative assemblies in many nations dominated by single parties or a coalition of them which softened the boundaries of rule making, justice and rule enforcement. In addition, failed liberalisation and privatisation brought little resources that could have been released for strategic development. The reticences of many states to join the band wagon of the free market notwithstanding; there are few beacons of hope that are successfully transiting to the club of developed nations.

How have they done this? In the following, I will catalogue some of the economic governance best practices and recommendations that have emerged in the past decade with rapid globalization - in which economic development transpires through increased integration of world economy - international trade, capital flows and production processes.

The most successful states have been those where the constitutional and legal provision for private ownership of property and investment has been guaranteed through acts of parliament. These are conductive to the private ownership of property, and removing obstacles that make it difficult and/or only possible in certain circumstances. Investment and private ownership of property in all sectors of the economy (infrastructure, manufacturing and services) with highly facilitative regulations and administrative procedures, which were followed ardently, made significant difference in the pursuit of meeting the MDG goals of reducing poverty and enhancing livelihoods.

Closely linked to this is the question of access to credit. Some key impact indicators are (1) the amount of money available for credit controlled by the governments, (2)  restrictions exist on credit eligibility such that only a small percentage of the population qualifies; (3) credit is generally available, to all citizens through a variety of mechanisms, and (4) there are governmental restrictions on what credit can be provided for?

Of primary significance, in this connection, is the banking system's ability to support private investment. Key impact indicators in this arena are whether (1) such ability of the banks is curtailed by governmental regulations (2) if there is a functioning banking system that is not subject to arbitrary political manipulation; (3) if there governmental restrictions on lending for private sector investment and (4) if regulations on interest rates or tax on private deposits exist, and do they negatively affect private sector activity. Implementation of regulations and licensing procedures at the speed the investor requires has been another best practice lesson that we learn from a host of nations in the continent with a facility for "one stop" procurement of required documents and with officials generally familiar with regulations and able to expedite the process. Recorded instances of bribes or other payment being required to obtain government services, licenses or other documents, although regulatory procedures have all been followed have impeded a market society that can, to a level ethically acceptable can promote accountability and transparency. Although the institutions of the anti-corruption have made it possible to obtain documents within a relatively short time frame; the fear factor of unnecessary harassment by the same has also impeded market development.

One way to get out of this fear is to have regulations governing investment, and import and export procedures that are unambiguous. Administrative regulations governing investment, import and export procedures that are publicly available and that are supportive of, and conducive to, private sector activity, or designed to exercise control over it also contribute to the enabling condition for the free play of interests. In many instances those successful nations have evolved regulations that are consistent, inferring that they are not contradicted or overruled by another set of regulations. At the same time these regulations are uniformly enforced, without any known or recorded instances of their being waived in particular instances.

In those relatively developed democracies, the existence of powerful legislative assemblies which have clear and direct oversight over governmental policy has been instrumental in creating, sustaining and managing an enabling environment. This means that the executive branch cannot implement decisions without legislative approval of broad policy and strategic measures. Nonetheless, this implies that the members of the legislature have sufficient access to information and technical resources to enable them to make informed decisions, through a research service and technical support staff. Developing the capacity of the legislature to be responsible for drafting legislation means that it is not limited to a role of rubber stamping of legislation drafted solely by the executive branch; but can evolve and develop the rules. Media coverage of the legislature has also enforced some level of accountability on the law makers and as a system of disseminating legislative information beyond the capital city to the rural areas on radio and print media.

The custodianship of the market reform process, which was unavoidably preceded by turbulent and chaotic regime changes and reckless structural adjustment programmes are marked by uniquely ascetic issues. Even under encouraging global economic governance conditions, policy and process, organisational and systems characteristics internal and external to the market reform agenda still exist to make that shift a costly exercise. As a way of contributing to the overcoming or lessening of these difficulties, we may theorise that free market development as the dynamic interaction of systems, strategy and process. It is the playing out of objective and critical standards, rules and concepts of political conduct in the activities of all participants - those public officials who formulate and actualise the market rules as well as those of ordinary citizens who are affected by them.

The concern here is not simply one of "application" of the rules to particular market and business related activities, it is rather the production or articulation of process elements and forms within and through which the premeditated and tactical (and non- premeditated and non-tactical) activities of those participants manifest in an inclusive manner. These are measures that will transform the eternally aid-addicted African nations to join the club of China and India, hitherto bastions of ‘Socialism’, and to stem the tide of poverty and hunger. Given the fact that SSA nations will not be able to meet the MDG Goals in over a hundred years to come, the corners to cut may ultimately lie in a functioning market.