The Failure of State-led Development in Equilateral Guinea
/By Yoon Jin Lee
James Scott, in his book (1998), demonstrates the possible reasons why state-led development is unsustainable and unbeneficial. Two reasons that are most relevant to this blog post are: first, state-led development that exclusively pursues one purpose reduces the human capital of the state’s workforce; second, less diverse and less complex economy, usually resulting from state-led development, is more vulnerable to external shocks. We will now delve into a story of Equilateral Guinea that serves as a great example of the Scott’s argument.
Despite its dramatic economic growth after the discovery of huge oil revenues in 1995, Equilateral Guinea’s state-led development notably failed. The 2005 UNDP Human Development Index, for example, ranked the country 121st out of 177 countries.
Diminishment of the human capital by the Equilateral Guinean government accounts for the aforementioned failure. After the country became independent from Spain in1968, the newly elected president declared himself as “president for life” and suppressed his opponents and educated population. Consequently, one third of the population fled from the country, resulting in a lack of labor force and of educated people. Furthermore, after oil was found, the government started to exclusively invest in the oil sectors, which enticed laborers from agricultural sectors. This “resource-pull effect” diminished the already existing agricultural skills. Thus, the authoritarian government created “narrow, planned environments” in which there was no freedom for the people to take risks and learn how to face new challenges.
A lack of diversity and complexity in the economy also accounts for the failure of state-led development. Aforementioned, after huge oil revenues were found, the government started to depend heavily on the oil sector. Consequently, the country’s oil exports drastically increased, with a further decline in exports of other sectors.
The result was economy that was highly vulnerable to volatile oil prices. For example, at the end of 2008, the oil price fell dramatically and largely harmed the country’s economic growth. This clearly is an unsuitable economy that is not beneficial for the country as a whole.
To sum up, the failure of the Equilateral Guinea’s state-led development exemplifies the Scott’s argument. Clearly, the state-led development highly likely results in the lack of human capital and the lack of diversity in the country’s economy, which in turn account for unsustainable and unbeneficial growth of the country.