THE LONG-TERM GROWTH MODEL (LTGM): FUNDAMENTALS, EXTENSIONS AND APPLICATIONS.

In March 2023, World Bank released a policy titled: THE LONG-TERM GROWTH MODEL (LTGM): FUNDAMENTALS, EXTENSIONS AND APPLICATIONS. Ostensibly, the policy thrust is that - “Economic growth is the foundation on which social and economic development rests: Creating jobs, generate income opportunities, and reduce poverty, and promote political and social stability. It posited that LTGM is a simple, transparent, and easy-to-use suite of tools to help policy makers assess what growth paths are feasible in their country and how growth can be accelerated and sustained. This is not fundamentally different from Structural Adjustment Program (SAP), Millennium Development Goals (MDA), SDG 2030 etc.

First, it discussed how to model the determinants of Total Factor Productivity (TFP). Second, presented insights on the effect of higher public investment on growth. Third, addressed the evolution of growth in resource-rich economies.

Here are some takeaways, because as we approach 2030, new framework is in the making. The best way to measure any policy is to conduct impact assessment. Should African countries not embark on conducting impact assessment after 40 years of implementing various World Bank and IMF policies.

1.      Total Factor Productivity (TFP): The concept of productivity at its fundamental core lies the human element. The other factors by themselves cannot produce without human intervention. About 400 years ago, slave-trade thrived in Africa for many reasons. The people then resisted slave-trade. But today, highly skilled citizens sell prized properties to secure second citizenship and relocate from their motherland. It began with Structural Adjustment Program (SAP) of 1980s thanks to World Bank and IMF. The first impacts were massive devaluation of currency(s), closure of factories across Nigeria and first wave of brain-drain. Here are the effects of these policy.

a) Devalue the currency within 30 years the active population will find their    countries unproductive and insecure – net result japa.

b) African countries used her hard resources to train skilled personnel, but other countries benefit.

c) Increase taxes in African countries, remove subsidies and growth assured    according to World Bank and IMF. But in the UK, government provide free    healthcare thanks to NHS, free council houses, and during Covid19, people received government benefits. The same story in the US and more profound in Scandinavian countries.

2.      Higher Public Investment on Growth: OA Lawal in O Level Economics for West Africa taught us that savings form capital. But saving comes from skilled and unskilled working population. Many Nigerian skilled workers have left the country, thanks to ineffective and inefficient government occasioned by SAP. How will government invest in public asset without capital formation to provide long-term infrastructure finance.

3.      Evolution of Growth In Resource-Rich Economies: There are empirical evidence to suggest that African contributed significantly to the growth of rich economies - through slave trade, resource explorations, imposition of illegitimate government, etc. Which is why the Late MKO Abiola, pioneered the concept of reparation, and Bob Marley preached African unity, because there is strength in unity.

With the combination of these three factors, it is almost impossible to fund largescale infrastructure projects without recourse to rich economics for support in form of loans. It is yet to be seen the effects of these loans on African soil. Regrettably, without largescale infrastructures, economic activities remain latent potentials and development illusive. 

This author contends that Africans should look deeper to understand the root cause of sub-optimal development in the continent. Till we do that, she shall continue to be treated as a third-world continent and third-class citizens of the World. But if she harnesses her resources, delivers workable infrastructure projects, set a 25-50 years developmental program. Successful governments think in long-terms and sustainability (government business is a serious business), when we do this, chances are the next generation may inherent a better country.

It is possible...