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Leadership matters.
A bad leader can run even a wealthy, flourishing economy into the ground. A good leader can lift a poor, struggling economy to the soaring heights of prosperity. Consider Zimbabwe and Singapore. At their independence, both Zimbabwe and Singapore had charismatic and durable leaderships in Robert Mugabe and Lee Kwan Yew. With little or no mineral or natural resources, Singapore is a small, insular island, whereas Zimbabwe is a country of spectacular waterfalls, exquisite natural beauty and abundant natural resources including platinum, gold and diamond. As is obvious, Singapore began with a much narrower-almost an impossible- path to development, compared to Zimbabwe. Lee devised a development strategy that emphasised good governance, rule of law, meritocracy, fiscal prudence and economic openness. The idea of economic openness was contrary to the contemporary development thinking which emphasised import-substitution and severe restrictions on foreign investments. Defying conventional wisdom, Lee turned Singapore into a virtual free-trade zone and a giant industrial park for multinationals.
In contrast, the policies that Mugabe adopted were in many ways antithetical to Lee: Mugabe gave short shrift to good governance and the rule of law, and flouted meritocracy in favour of pervasive nepotism, favouritism and partisanship. Equally catastrophic was Mugabe's economic management which included a disastrous land reform policy that effectively turned Zimbabwe from a bread basket to a basket case; pervasive state controls which fuelled inflation and wreaked havoc on the industrial sector; and rampant fiscal profligacy. A crass display of the latter included Mugabe's umpteen trips abroad every year, zig-zagging across continents, with large entourages - something that became the stuff of international news. The economy was wrapped up in a surfeit of regulations, making it a giant ball of red tape.
Different policies and practices lead to different economic and social outcomes. Starting from an income of less than $500 in 1960, Singapore has now reached a per capita income of almost $60,000, which places it in the ranks of the advanced countries in the world. On the other hand, Zimbabwe also started with an income of less than $500 in 1960, not too far from Singapore's, but remained deeply mired in poverty - and it is yet to cross even the low-income threshold of the World Bank (see Figure).
Singapore also outperforms Zimbabwe in other indicators of economic success. For example, in export earnings, Singapore exceeds not only Zimbabwe (by whopping 150 times) but also the whole of Sub-Saharan Africa (by almost two times).
Singapore and Zimbabwe provide a study in contrasts for the role of leadership in economic development. As the above two examples illustrate, much of the prosperity of a nation depends on the quality of its political and economic leadership - and not necessarily on its durability. The durability of a regime is a double-edged sword. Longevity of good leadership with good policies helps to accelerate the process of growth and development. The durability of bad leadership leads to stagnation - even to downright economic decline. In the case of Zimbabwe, notwithstanding its enormous resources, continuous government profligacy and plunder of prime economic assets by political elite led to a condition of yawning fiscal imbalances, soaring indebtedness and chronic liquidity crises.
Many great authors had extolled the salience of leadership, including Scottish philosopher Thomas Carlyle who opined that all major events of history were the outcome of a few individuals, and German sociologist Max Weber who argued that leaders could play a pivotal role in economic transformation when institutions were weak. Nevertheless, modern economics has, until recent times, paid scant attention to the issue of leadership. Much of this has to do with the way economics as a discipline has evolved, with its excessive obsession with rigorous empiricism. Non-availability of appropriate (quasi-experimental) data as well as of suitable empirical methods handicapped much of the past efforts in economics to tease out a robust empirical relationship.
However, important economic insights need not always be wrapped up in the glittering veneer of econometrics. A few years ago, the World Bank created a high-level commission on growth and development comprising leading practitioners from government, business and the policy-making arena to provide a deeper understanding of growth, development and poverty reduction. This study, drawing extensively on the experiences of practitioner and policymakers, concluded that leadership had indeed an important bearing on post-War economic development.
According to the World Bank Growth Report, leadership can contribute toward economic development by conceptualising an appropriate model of development; by creating and sustaining suitable policies and institutions in support of the model; and finally, by managing the politics to address the various issues that the growth model may generate ---such as inequality, shifting comparative advantage or regional imbalance.
A defining characteristic of a successful leader is the intellectual ability to formulate a long-term vision of development or a successful model, and then build a consensus around it. A successful model should be informed by history and needs to consider resource constraints, the socio-economic context as well as the global economic environment.
As the World Bank report noted, even otherwise great leaders like Mao or Nehru chose economic models that did not work. In the 1960s, Mao Zedong adopted a strategy of "four modernisations" which entailed the introduction of high accumulation, low-consumption policies, gave priority to the development of heavy industry, adopted capital-intensive guidelines, and set highly protective import substitution policies. This strategy, which did not take into consideration the country's resource endowments and defied comparative advantage, largely failed. A distinguished Chinese economist Justin Lin has persuasively argued that a model of development that is not compliant with the principle of comparative advantage -- or, in other words, defies comparative advantage -- flounders.
In today's globalised economic environment, leaders need to be smarter than ever before: a leader must have a sophisticated understanding of the economy as well as the global economy, a capacity to articulate an appropriate model of development, and possess problem-solving skills in the face of unexpected turns in the economy. Finally, leaders must possess superior political skills to build consensus and foster coalitions to sustain the articulated model and bring its economic dividend to the people. As is obvious, being a good leader is hard -a fact that explains why there are so few of them.
Bangladesh will soon go for its eleventh parliamentary elections. At the next phase of development, economic challenges will be much more daunting, requiring leaders who are not only politically savvy but also developmentally transformative. Time will tell what is in store for the country: whether there will be a new era of good governance, the rule of law, meritocracy and innovative economic thinking, or will it be a continuation of the politics as usual.
Dr. M G Quibria, a former Senior Adviser, Asian Development Bank Institute, is a Distinguished Fellow at the Policy Research Institute of Bangladesh (PRI) and Professor of Economics at Morgan State University, USA.