Breaking Sub-Saharan Economic Stagnation

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Raushan Gross

|  By Raushan Gross  |

SUB-SAHARAN economic development has been stagnant due to high levels of non-entrepreneurial business practices, and closed trade policies that have been upheld by government. The citizens of this region have long waited for the time when they could engage in open trade, ownership, and relief from poverty by conducting self-owned business practices with limited intervening government regulations, theft, and or the daunting prospects of unemployment. Is the answer to the problem related to the absence of what, Joseph Schumpeter, have termed “creative destruction?” Schumpeter model could be applied to this region to develop new innovative entrepreneurial practices that could open up the entrepreneurial environment. Creative destruction essentially replaces old products, methods, and process with newer innovative processes, and methods of doing business. In order for this economy to pick-up, local small and medium enterprises, SME, owners have to work together with local farming, trading, and manufacturing communities within the social sector. There needs to be destructive forces that break down the corruptive stronghold, and unproductive enterprises, that are currently in place that yield little gain for the general unskilled and the unemployed. To remove the existing established business in the profit sector; social entrepreneurship is the answer. Social entrepreneurship is not the vehicle to fix corruptive business practices and behaviours in its entirety, although, perhaps, it could alleviate the human suffering that does exist within poor and underserved communities. Through the advancement of improving social needs (e.g. skills, education, products, and services) an under developed country is then able to see prosperity-because of increased production, knowledge and development of useful skills.

State of Paradox

You may have asked how Schumpeter “creative destruction” model could be applied to undeveloped economic development. In the case of economic development, the model fits well in the context of the Sub-Saharan state of paradox in their race for development amongst other benchmark countries, and within the African  continent as a whole. For an example, according to the World Bank database, Nigeria’s “strong” future in the year 2014 was discussed; the indices indicated that, “Nigeria’s short term macroeconomic outlook seems to be generally strong, with the likelihood of higher growth, lower inflation, and reserve accumulation.”

The first thought that comes to mind is: who is benefiting from the ‘strong’ economic future of Nigeria? According to the World Bank report on Nigeria, which apparently was also, “Sounding a cautionary note,”  “Nigeria’s economic growth has not automatically translated into better economic and social welfare for Nigerians.” This notion becomes evident and when viewed historically, the years of 2004, 2010, and 2011 reveal that there’s a negative trend of strength in development. According to the National Bureau of Statistics, NBS, Nigeria’s poverty rate in 2004 which was 5 percent  then made an extreme jump to 60 percent in 2010. In year 2011, a total of 100 million Nigerians lived in absolute poverty – these facts  were aligned to economic and entrepreneurial factors.

The governments of these countries in the Sub-Saharan region need to reengineer their policies that foster social entrepreneurship. To be fully effective, governments have to align education with entrepreneurship. Or better yet, allow for education and skills to be learned in operating or working in the social enterprise sector. The broader scope that underpins implementation of social enterprise is to instill a capitalist ideology, increase education, change attitudes on open economic policies, especially in the youth. Establishing and linking entrepreneurship and education together guides the long-term development process of any undeveloped area. Therefore, it remains imperative to creatively destruct the existing informal enterprises, closed policies and government regulations that prohibit entrepreneurial activity.

Creative Destruction

Schumpeter’s model, creative destruction, is the mechanism that breaks down the government stronghold that will open doors for less restrictive entrepreneurial opportunities. Basically, this model directs nations to dissolve the current way of conducting business-internally. Once the internal structure has been destroyed, the capitalist hand, will rebuild in new ways to better create a functional system in which business is conducted for the social good. This model is especially conducive for new and emerging entrepreneurs who otherwise are not able to gain employment in government positions, due to lack of skills. However, the paradox of creative destruction leaves some owners of established business in a worse position than before destruction. In effect, this part of the “cleansing” process is what the Sub-Saharans’ private sector needs so as to open the market for other players. Opening the enterprise markets allows for greater competition that will spur higher level of social cohesive entrepreneurial activity.

Constructing a new social air within the Sub-Saharan industry is the easy task, but destructing and dismantling of the informal labor, corruption, and bribery is the more difficult task. The level of poverty and the lack of ability for one to start a business is a clear indication that the policies and regulations are working against the grain of prosperity. In the destruction process, government’s official control, and informal entrepreneurs’ control will dissolve. The idea is for social enterprises to replace unproductive enterprises and unproductive SMEs through starting up social business that can impact the triple bottom lines (social, environmental, and economic) factors in this region. When this region starts to embrace the capitalist vision, citizens can pursue social benefits, and engage new markets.

New Direction for the Sub-Saharan Region

The Government has been mostly in control of enterprise funding, policies, and general exploitation since colonialism. It is clear that there is a socialist element in the way industry is treated with -little or no incentive to engage in entrepreneurship. On the other hand, we see the level of poverty and business ownership take a steady decline before our very eyes. Thus, engaging in social initiatives will invite global investors who are ready to enter the market with foreign direct investment, FDI. With increased FDI, the knowledge transfer of technology from social business will act as a spring board for business training that is unobtainable otherwise. Poverty, unemployment, and restricted trade will remain unless the framework of social enterprise is institutionalized, if only for a short timeframe. Schumpeter’s model is the best method to get into the capitalistic spirit to make a better future for all who are both unemployed and uneducated, or have little access to open markets. There is emphasis on middle and lower class although citizens have complained that the current policies help the upper class government officials. Destruction replaces enterprises that are unproductive with those that are productive with a social motive of bettering the environment, society, and economic conditions of the region. There’s no doubt that some owners and officials will lose out in the destruction phase, but overall, the society gains and puts those who want to own entrepreneurships and enter the market -they can do so competitively while engaging in business that builds sustainability on the multiple bottom lines of economic, environmental, and social factors of the sub-Saharan region.

 Raushan Gross is a PHd student studying Business and Organizational Leadership at Regent University, US  

— Apr. 21, 2014 @ 01:00 GMT

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