Are “Soft Issues” the growth path

Should the “Soft Issues” be the key focus for economic growth in Africa, Caribbean and Central America? It has long been the practice of most developing countries especially in Africa, Caribbean and Central America (ACCA) economic zone to focus on “Hard Issues”, to assess economic performance. Hard Issues are indicators such as Gross Domestic Product (GDP), Foreign Direct Investment (FDI) and Median Income to mention a few. Improved performance on these Hard Issues (Indicators) appear to give a guide of economic progress. These indicators fluctuate over time. Rightly, these indicators are important, but do they tell us the true story, and do they give us an accurate indication of future growth? To a large extent the answer is no, but rather they should stimulate further investigation on how to achieve sustainable economic growth. What are the underlying factors necessary for stable and continuous economic growth? At the moment, less time and emphasis are directed at this issue.

Understandably, Hard Issues/indicators are useful for financiers and investors to determine investment decisions, assess investment risks and benefits. These decisions are made with the intention of achieving returns within a short period based on the complexity of the project. Unfortunately, they do not give an accurate picture of underlying growth drivers that are important for sustained economic growth. They are great for their simplicity, tangibility and ease of measurement. They amplify short-term performance which in some cases might be deceiving and ignore the long-term fundamentals. In short, they mask true developmental drivers. Economic growth is only relevant if it enhances the well-being of people.

The key underlying issues necessary for sustained economic growth are the “Soft Issues” or intangibles. These are Culture, Leadership and Civility. Greater emphasis must be spent on understanding and identifying the Soft Issues. They enable achievement of the Hard issues and their impact on people’s lives. Economic growth becomes relevant when it improves a nation’s Human capital.

There have been talks that growth of countries in Southeast Asia lend itself to the belief and practice of Confucian teaching. In Confucius Lives Next Door – 1999 by T. R. Reid, he alluded after speaking to Asian experts that Asian spirit of discipline, loyalty, hard work rather than inheritance as key entitlement among other qualities were fundamental to Asian economic success. This teaching they explained, influence family, marriage, education, crime, esteem for the family, concern for the collective harmony of the group and control over one’s desires. These Soft Issues they added, have shown empirical evidence towards massive economic transformation of countries in South East Asia. Though other factors such as political influence assisted in directing focus and energy. Countries in Africa, Caribbean and Central America need to dig deep into their “guts” to identify the Soft Issues that will support sustainable economic growth. Over emphasis on Hard Issues to justify economic growth mainly pamper to simplistic short-term approach. They satisfy western financiers at the expense of long term holistic economic progress. This in some cases, to the detriment of ACCA economies.

As countries in the ACCA economic zone embark on new growth strategy buoyed by massive economic changes in Southeast Asia, part of Latin America, growth and influence of China as a new global investment partner, these countries must pay more emphasis on Soft Issues. They are the underlying fundamentals necessary for economic prosperity.

What are the soft Issues?

Culture – It involves a nation’s belief, attitude, practices and values. Meaning the “gut” of a nation. Religious, traditional tribal/group rites, work attitudes, identification and recognition of achievements, family and community practices are all aspects of a nations culture. Culture is ingrained in society, nurtured over years. David Landes in Culture Matters described it as the inner values and attitudes that guide a population. ACCA countries must embark on a cultural audit and identify aspect of their culture supportive of modern economic growth. It must contain issues that can be supported by all and must resonate with everyone’s daily life. Some aspect of current culture may need to be modified, rejected and where possible, transformed towards long term economic prosperity. It must encompass all, absent of ethnic and regional differences. The nation’s gut must contain the right enzymes applied during the right time. Daniel Patrick Moynihan alluded that it is culture not politics that determines the success of society.

Countries in Southeast Asia have enabled their culture whether in the teaching of Confucian or Buddhism, to facilitate economic growth. Their current economic performance is a true indication. There are numerous examples of tried and tested practices from around the world supportive of economic growth. They need to be copied and applied with modification. Some cultures may contain similarities, but it must be adapted to the country’s situation.

In some countries tribal differences have been a major obstacle to economic growth, however this cultural diversity can be used positively as each group comes with their own strength. Instead of emphasizing the negatives in some cases to gain superiority, countries and communities must identify cultural strengths and use for the benefit of all. A country’s economic performance must be measured on how its cultural practices enable growth in human capital – performance of its gut!

Leadership – Leading in every facet of society. This role does not only apply to the formal governmental structure as it exists in many nations. Qualities such as integrity, accountability, consensus, tolerance, meritocracy, transparency, determination, courage, hard work and selflessness are needed in all aspect of community life. These qualities become more important at a higher formal governmental level as it influences a nation’s political and economic progress.

Leadership must apply to every aspect of community life from small groups and communities to the top – workgroups, sport groups, social organizing groups, etc. An effective leadership practice at a lower level of the community mostly translates to better performance at a higher level. A progressive cultural practice should aim to identify leaders based on merit and avoid traditional practices of tribal succession without leadership qualities as exists in some countries.

The skills needed to become an effective leader are most times cultivated in small informal groups. These groups prepare individuals to undertake complex institutional issues. Countries should create a culture that encourages individuals to embark on leadership roles within their community. Effective leadership at all levels is essential to enable the process of cultural adjustment. One should not expect effective leadership performance of high governmental officials if the supporting culture does not breed positive leadership qualities.

Investors are more inclined to invest in countries where there is clear demonstration of effective leadership in all aspect of business interaction. Effective leadership creates institutional fluidity and convenience which attracts many foreign investors.

Civility – Adherence to laws, rules and regulations. Civil performance must be observed and practiced in every aspect of community life. There must be clear understanding about compliance and consistency of punishment for non-compliance. Basic issues such as forming lines at public places regardless of acquaintance, respecting rules & regulations at business and public settings, respect for public and private properties, and respect for lives are fundamental Soft Issues. They lead to positive outcome of Hard Issues.

Practices of informal groups are important. They provide information to formal groups including government entities on handling discourse and forming laws. Civil performance thrives when there is a transparent, participative process of making laws, rules and regulations, and provision for fair enforcement.

International investors pay attention to this process as an incentive for FDI to flow into ACCA countries. ACCA countries must ensure that their practice of civility is transparent, simple, consistent with rules and regulations. A fair process of enforcement demonstrated at all levels of its social structure.

Countries around the world where its people have better healthcare, access to education, high level of literacy, human well-being, economic prosperity, longer life span and continued economic growth did not achieve them by focusing on the Hard Issues. Greater part of their focus was spent on Soft Issues. The Ibrahim Index annual reports highlight these Soft Issues. Organizations such as World Corruption Perception annual index provides guidance on issues of civility.

The way Forward

The issue of cultural adjustment must now be undertaken within and among ACCA counties. Economic growth within this zone is falling behind countries in Southeast Asia and even further from Western countries. The discussion should now begin possibly with a start of selecting a slogan that embodies those underlying Soft Issues that promote economic growth in that country. With all its paradox, the USA uses the “American Dream” as a rallying call; China in the past had the “Red Revolution”. Other countries have adopted a rallying call. For countries in the ACCA zone, failure to address the underlying Soft Issues will lead to unachieved economic opportunities, a continuous economic dependency on developed nations and missed opportunity to utilize its human and physical resources.

A Soft Issues index should be developed. It must encompass the areas discussed with other relevant areas that can assist in assessing underlying developmental progress. Over time, countries would be able to measure and identify areas were resources and focus are required. It would be appropriate for governmental agencies to undertake this project with assistance from private agencies giving it broader participation.

As an investor once put it, “people don’t eat GDP”. People resonate more with Soft Issues as it impacts their daily existence rather than Hard Issues. It is the Soft Issues that grow a nation and bring in the investors. It is the Hard Issues that tell the story.

ACCA countries must examine their gut! Are you really prepared for tomorrow’s growth?

Desmond Thorpe Chief Strategy Officer, Stafford Global Group.

Kzelle.com
@kzelle4

Are “Soft Issues” the growth path