A treatise on developing the wealth of nations

By Olufemi Adedamola Oyedele

Olufemi Adedamola Oyedele, MPhil. Construction Management, managing director/CEO, Fame Oyster & Co. Nigeria, is an expert in real estate investment, a registered estate surveyor and valuer, and an experienced construction project manager. He can be reached on +2348137564200 (text only) or femoyede@gmail.com.

All nations will prosper if they are able to develop their wealth. All nations have comparative advantages over one another because there is no nation without natural resources like land and people located in a unique environment. National prosperity is created and not inherited. It does not only grow out of a country’s natural endowments, its labour pool, its interest rates, or its currency’s value, as classical economics insists. National wealth is created from the efficiency of the residents living in a country. Prosperous nations are not those with a large population or small population; they are not those endowed with natural resources, but those which can use their population, either large or small, and natural resources to increase the efficiency of the people, and exploit research and development (R&D) to maintain a lead.

There are two types of economy; knowledge economy and agrarian economy. Knowledge economy or advanced economy describes the commodification and economic value derived from research and development. Agrarian economy is an economy which is highly dominated by primary industries like farming, fishing, lumbering etc and subsistence means of production. Wealth of a nation depends on which economy is used most.

There are four factors that aid production of goods and products on which production of services hinges. These factors are: entrepreneur, land, capital and machinery. There is no nation without land that can be used for production of foods and products. What makes the difference between wealthy and poor nations is how they are able to organise their factors of production to generate wealth, that is, how they are able to develop their land, entrepreneurs, capital and machineries to create wealth. A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade. It also depends on what its industries are producing. Wealthy nations are those whose industries are not only producing consumer goods but big machinery, aircraft, ammunition, automobiles, ships and rockets.

Companies gain advantage against the world’s best competitors because of pressure and challenges. They benefit from having strong domestic rivals, aggressive home-based suppliers, government support and demanding local customers. Local customers are able to demand for goods, products and services when they have strong ‘purchasing power’. Wealth is created by the number of bankable customers with ‘good debts’ and the number that have access to ‘live loans’.

Abraham Maslow’s theory of human motivation in “Maslow’s Hierarchy of Needs”, which states that human needs are insatiable but predictable should be exploited by all nations’ beneficially. Maslow postulated that human needs are in five levels from bottom of the ‘needs’ pyramid’ upwards. Human beings basically need food, water, shelter and clothing (psychological needs); security and safety of lives and properties, job security and environmental peace and order (safety needs); friendship, recognition, being loved and loving somebody (love and belonging needs); confidence (self esteem needs) and fulfilment (self actualisation needs). The basis of Maslow’s theory is that we are motivated by our needs as human beings. The most important thing about this theory is that if our basic needs are unmet, we would be unable to meet our other needs. Governments’ constitutional role is to ensure everybody’s psychological and safety needs are met. This theory may be used to explain why Africans are mostly not innovative and inventive, and why they remain poor!

In a world of increasingly global competition, nations have become more important. As the basis of competition has shifted more and more to the creation and assimilation of knowledge, the role of the nations has grown. Competitive advantage is created and sustained through a highly localised process. Differences in national values, geographical location and culture in the world are now being exploited to develop the wealth of nations. No nation with over 40 percent youth unemployment rate, as in most African countries, can prosper.

Government is defined as the group of people elected, selected or appointed to provide security and ensure welfare of the people of a nation. No nation with insecurity of lives and properties can attract investments and no nation in Africa without an efficient taxation system can prosper. Government should add to the value chain of the nation by organising the people to be able to fend for themselves. This is done through exploiting the nation’s comparative advantages. In Africa, most nations have comparative advantages in agriculture, petroleum resources, tourism and solid minerals. Government should look into these areas of comparative advantages as means of employment generation and wealth creation.

According to the history of human settlement, human beings historically settled in areas where they could engage in at least a means of livelihood like farming, lumbering, fishing and hunting (primary industry). Specialisation of trades made some people to concentrate on farming and depend on others for their other needs. Trade-by-barter was initially practised before the discovery of ‘money-equivalence’ and money. Production was at subsistence level and sustainable. As times went on, local farmers, with the help of the government, concentrated on the manufacture of exportable produce like ‘cash crops’. The aim of the government to make sure everybody is employed led to the creation of industries for the manufacture of goods and provision of services. Corruption was abhorred by many and not a national plague as we have now. Everybody was ethical and industrious as good names were better than gold and silver! Lack of dedicated leaders and institutionalised corruption, and not colonisation led to underdevelopment in Africa. And unless we learn to create wealth by ourselves based on our land resources, Africans may not emerge.

There are different types of land uses that a community can be mapped into. There are agricultural-, residential-, office-, industrial-, medical-, transportation-, education-, services- (water plant, sewerage, waste dump), defence-, recreation-, religious-, tourism-, land uses, etc. To be able to channel the efforts of the citizens into efficiency and creation of wealth, there must be rule of law and the corruption level in Africa must be reduced to the barest minimum. There must be discipline and merit must be the watchword and not national character or nepotism.

The three basic needs of man are food, shelter and clothing. These needs in the modern era have been increased to include transport, education, medical services and security of lives and properties. Governments should be able to capitalise on these basic and modern needs of man to create wealth. Wealth is an abundance of valuable possessions or money. Wealth of a nation is the abundance or at least, adequate provision, of basic infrastructure like food, housing, roads, hospitals, schools, potable water, industries, recreation grounds and sports field. It also includes the credit balance sheet of nations.

Adam Smith, On March 9, 1776, published, “An Inquiry into the Nature and Causes of the Wealth of Nations”, usually referred to as “The Wealth of Nations”, which discussed the mercantilist system. Mercantilism held that wealth was fixed and finite, and that the only way to prosper was to hoard gold and tariff products from abroad. This theory stated that nations should sell their goods to other countries while buying nothing in return to have a monopoly of trade. This is an exaggerated scenario! No nation is an island on its own.

In the real sense, nations that want to create wealth and prosper must have a surplus ‘balance of trade’ compared with other nations. Nations must be able to identify their areas of comparative advantages and jealously develop these comparative-advantage activities to their own benefits. A nation with arable land should develop its agriculture and food adequacy, while a nation that has spiritual and religious history should develop its tourism potentials. No nation can prosper by allowing its markets to be turned into a dumping ground. Without healthy competition with other developed nations, no nation can prosper.

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