Nobel Laureate Advocates for Adequate Training and Education as Keys to Addressing Imbalance in Global Markets

Nobel Laureate Advocates for Adequate Training and Education as Keys to Addressing Imbalance in Global Markets

Nobel Laureate Advocates for Adequate Training and Education as Keys to Addressing Imbalance in Global Markets

Nobel Laureate and Keynote Address Speaker at the Day 2 of the conference Professor Eric Maskindelivering the keynote address at the conference

The current imbalance in the global market, as it affects emerging economies in Africa, can be reduced by raising the skill levels of the low-skilled workers of the budding economies through adequate education, so as to have international matching opportunities.

This was the conclusion of Professor Eric Maskin at the 1st Covenant University International Conference on African Development Issues (CU-ICADI 2014), with the theme ‘Rising Opportunity for Investors in Africa and the Prospect of an Economic Miracle.’

Speaking on the subject “Why Haven’t Global Markets Reduced Inequality,” Professor Maskin said the challenges currently besieging emerging economies have simply highlighted the failure of the theory of comparative advantage when put side by side with the globalization campaign for trade opportunities.

He noted that before globalization low level-skilled workers were matched with high level-skilled workers which enhanced their productivity and development of competency, but the reverse has been the case after globalization which has left homogenously matched low level-skilled workers to suffer a sharp fall in wages; by contrast high level skilled worker wages rise, thereby making inequality in emerging countries worse.

The 2007 Nobel Prize Winner in Economic Sciences said, globalization in theory should have delivered prosperity and reduced the gulf between developed and emerging economies of the world, and the ‘haves and have not’ since the turn of the century, but the expectations of the emerging economies from globalization have not delivered totally; rather in the face of global free trade policy of the World Trade Organization, inequality has increased.

Professor Maskin noted that the comparative advantage theory was not enough to address the issue of inequality that currently pervades developing economies of the world.

The Professor of Economics opined that this situation will remain because of the higher skill workmanship developed economies have at their disposal, while developing and emerging economies will continue to be disadvantaged with regard to trade and employment imbalance due to their lower skill level workmanship.

This he said is due to output, which most times, will depend on the skill level of the people occupying various positions. The comparison here, he noted, has to do with the ratio of high skill to low skill workers, which is higher in the wealthier economies. This in itself confers on the wealthy countries a comparative advantage in producing goods requiring a high proportion of high skill workers, while emerging economies have acomparative advantage in producing goods where skill does not really matter.

Professor Maskin noted that globalization has affected the skill level of developing countries in the sense that the little know-how used in producing technical equipment, though in the inefficient state, has been whittled down. That is, low skill workers in emerging economies are hurt by the activities of developed economies, which slows down the growth of emerging economies in their quest for technological advancement.

In addition, he said the challenge of reducing inequality is one that has been put forward as a means of promoting egalitarianism, eradicating poverty, and engendering political stability in developing and emerging economies.

Professor Maskin blamed the internationalization of production for the significant part it has contributed to the inequality problem facing emerging countries. This he said has made transference of knowhow from developed to developing economies cumbersome, but making the absorption of the averagely skilled workmanship from developing countries into their economies easy, creating more gaps in the emerging economies.

He suggested that to remedy the current imbalance, skill levels and capacity of the different categories of workers must be improved upon through adequate investment by third parties like domestic governments, international agencies, foreign aids and private foundation for the workers education.

Moreover, he posited that it is important to allow low-skilled workers share in the benefits of seeking improved opportunities, through investing in their training as well, knowing full well that education raises workers productivity which would in turn attract higher wages.

At a panel discussion to dissect the various issues raised in the presentation, Professor Kenneth Adeyemi of Covenant University advocated the establishment of subsidiary companies from parent organizations in emerging economies as it would enable transference of skill level from the highly skilled to the lowly skilled.

Professor Adeyemi stated that such acts would breed relationships and understanding, and this would go a long way in cross-fertilization of skills in highly important professions and at the same time reducing the inequality issues currently pervading the emerging economies.

A one-time minister of finance in Nigeria, Dr. Kalu Idika Kalu, said the bane of inequality in Africa is traceable to her consumption habits. According to him, Africa’s inability to engage skillfully in the production of things that change from time to time while it chooses to consume a lot of those things that she cannot produce would continue to foist an undue advantage on developed economies.

Dr. Kalu posited that Africa is not a mono-culture economy as many would want to make it look, the failure of Africa’s leadership to develop other elements that would have helped expand her export basket is what has brought it to a position of standstill.

The former minister, who also superintended ministries of National Planning and Transport as minister, pointed the fiscal policies of many African nations as having impacted their economies negatively. According to him, “If policies are well packaged, it could help cushion the effects of deferential flows arising from different skill levels and income by reason of globalization.”

Furthermore, he noted that the theory of comparative advantage is not wrong in itself, but strong development of vested interest by governments of developed economies, has not allowed the equalizing effect of globalization to take place, due to their usage of domestic policies through congress and parliament to make sure measures are in place to negate some of the benefits that should accrue to nations involved in normal flow of deferential trade and prices.

On his part, a Nigerian economist based in the United States, Professor John Ifediora blamed the heavy protectionist policies of developed nations for the inequality that currently exist. He asserted that some developed economies have put in place legislation that would inhibit the movement of skill level workmanship from their domain to another and thereby sustain one of those means by which inequality continues to be entrenched.

He mentioned countries like Britain, United States of America, China, Japan, and Korea as some of those who through subtle legislation have imposed stringent protectionist policies, when they attained the position of industrialized nations. He said these legislations have helped the developed economies remain dominant over the emerging economies, and urged Africa and others in her position to open up to free trade.

Even with the classification of African countries as agrarian economies, Dr. Ifediora, who lectures at the University of Wisconsin-Platteville, USA, was of the view that with a country like United States of America making heavy subsidy available to farmers, yet canvassing the opposite, it would be difficult for the African farmer to be able to compete with his western counterpart in the global market setting.

He added that there is no free trade anywhere in the world in as much as the developed economies would not create enabling and level playing field for emerging economies to gain access to their own markets.

President, Nigerian Economic Society, Professor Olu Ajakaiye decried the consistent failures of policy formulators in the continent to take into account the various components of their individual societies by doing what is necessary to ensure that the welfare of the private and public sectors in that economy is enhanced.

Professor Ajakaiye challenged states not to be limited by any theoretical construct in doing what would enhance the welfare of the various components of the society. He solicited for agents of the state to start serving the people instead of serving the interest of external forces that keep pulling back the growth-prospect of African economies.

He averred that the likes of Nigeria, Malawi and others who seem to be generating economic growth as against development, are occupying the primary producers’ cadre in the production sequence, and as such are leaving the intermediate and secondary production activities to the developed economies.

The renowned economist charged African economies to seek partnership, not aid, with developed economies, if they must correct the current imbalance in global economy. He suggested a shared growth model that would determine what aspect investors could invest in their different economies.

Professor Ajakaiye said by this model, Africa would have also tacitly reversed and equalized certain aspects of the current economic imbalance in play by reason of globalization and free trade the developed economies are canvassing.

The Covenant University’s International Conference on African Development Issues, which held between May 5–6, 2014, was aimed at addressing key development issues in Africa and how Africa can catch up with advanced economies.

The conference featured two renowned Nobel Laureates in Economics as well as other experts in Economics and Development around the world, as resource persons. It drew participants from within and outside of the country.