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The African Bison vs. the American Crocodile

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· Africa

American and African approaches to competition could not be more different. The basis for competition has increasingly shifted to the creation of knowledge, contextualized differentiation of markets and cultural responsiveness of product/service performance. But while America has increasingly come to symbolize the fierceness, authority and power of a crocodile out of itselement, Africa has increasingly come to symbolize the fight for freedom, strength, and self-determination of the bison in its full element. 

The world is no longer America’s fief 

World markets, including African markets, are no longer for America’s taking. America can no longer take for granted that it can control the supply or resources – ideas, people and technology - required to win over markets and consumers. Nor can it force price-reducing “competition” through a whole-of-government effort based on the assertion that competition is good, except when it’s foreign. 

In today’s more diverse international economic ecosystem, what America is calling out as a return to “great power competition” for markets is in reality a departure towards a more dynamically grounded system of entrepreneurial activity. Diversity is galvanizing new ways of doing business, promoting more variegated competition for overlapping markets and consumers and providing new ways of bridging private benefit and public good.  

The Biden Administration, instead of doing everything in its power to keep American business and industry on its toes by making it imperative for them to improve by innovating, rather than innovating to protect, is weakening the nation’s competitive edge. The competitiveness of nations is not built on partisanship, subsidies or on simply “correcting” supposed market failures or weaknesses with attempted “corrections” that reek of one’s own ethnocentric failings. Nor does competition depend on legislation aimed at aggressively countering a perceived threat from another nation’s financial orinnovative strength that puts in evidence one’s own national fragility.  

Economic development and growth results from the dynamic and free interplay between entrepreneurship and competition. The more diverse, resilient and adaptable entrepreneurship is, the more competitive the nation will be and the better it will be able to compete and therefore grow its economy.   

The American crocodile vs. the African bison 

National competitiveness today more than ever depends on a country's capacity for “creative destruction”, a concept coined by renowned Austrian-born political economist Joseph Schumpeter in his book Capitalism, Socialism and Democracy (1942). Industrial mutation or adaptation coupled with the ability to innovate or be “incessantly revolutionized from within by new enterprise” are thepillars for economic growth and the capacity to compete with other countries for ideas, human capital, investments, and other resources.  

While America is constrained by a top-down, path-dependent direction of the nation’s economy under what can be considered controlled “free market” conditions, African economic direction is openly focused on enabling techno-economic-human paradigms that include the creation of new skills and capabilities and spontaneously generate bottom-up, dynamic market forces that can shape existingmarkets and create new ones. 

The landmark African Continental Free Trade Agreement (ACFTA),  signed in March 2018, if successfully implemented, will create a single African market of over a billion consumers with a total GDP of over $3 trillion. The major significance of this is not that it will make Africa the largest free trade area in the world but that it opens a path to diversification and inclusion that will harness the continent’s opportunities and overcome its risks and challenges. In essence, the ACFTA is the biggest game changer for the global economy and its markets because it is stimulating intra-African competition and entrepreneurship and redefining intra-African trade and investment.  

While Africa is building a symbiotic innovation ecosystem, the United States is stuck in a parasitic one. America is trying to “fix” markets, its own and that of others; Africans are creating and shaping them through experimentation, learning and even failure.  

Africans are boldly moving past the myths of innovation and entrepreneurship and reaping the rewards of market upsides while pushing markets into new areas and creating new avenuesfor more inclusive wealth-generation. Meanwhile, the American government is obsessively focused on reducing competition and "de-risking" market downsides with legislation. 

You can’t compete better by biting harder 

The Biden administration’s America Competes Act is an effort to strengthen national competitiveness by “de-risking” its private sector. This involves limiting foreign competition, “crowding-in” the nation’s manufacturing and research capabilities and providing, among other things, $52 billion in subsidies  amidst congressional gridlock over the public budget. 

But you can’t legislate a country into being more entrepreneurial or competitive. As the Porter Diamond Theory of National Advantage  argues, what a country inherently possesses (land, location, natural resources, labor, population size) are not the deciding factors of national comparative economic advantage. What in practice defines advantage are firm strategy, structure and rivalry, related supporting industries, demand conditions, and factor conditions. And you can’t decree them, although you can decry them.  

The role of the government is to act as a catalyst to improve the nation’s position in a globally competitive economic environment. This demands providing support for economic actors by addressing the economic fundamentals of competition: the capacity of business and industry to innovate and upgrade in a way that actually enables them to compete better and more.  

Subsidies do not strengthen the nation’s competitive edge, no matter how strong their bite. They actually weaken that edge by corrupting the influence of special-interests, penalizing businesses that do not receive subsidies by putting them at a competitive disadvantage, distorting investment and other economic activity, and undermining market-based entrepreneurship, which is the main factor for long-term economic growth.  

By trying to pick winners and losers through subsidies and the financialization of entrepreneurship, the Biden administration risks picking the wrong horse at the expense of taxpayers and the broader economy. And the risk is great, because no government can outsmart the marketplace. 

Meanwhile, African governments are trying to develop what Mariana Mazzucato, in her 2015 book entitled The Entrepreneurial State, defines as a more mutualistic or symbiotic public-private competitive system. This involves developing an innovation system that enables free competition.This means allowing multiple individuals and businesses, both domestic and foreign, to use resources more efficiently and welcoming risk-takers. The latter are entrepreneurs who are neither delusional in their business strategy nor lack the courage to see beyond the myth of “African darkness” in order to value the opportunities Africa presents for creating and shaping new markets.  

Indeed, African governments and the private sector dare to think the impossible against all odds and are putting “new” industrial and start-up policies on their growth agendas. Meanwhile, the American government and private sector are stuck in the assumption that correcting what they see as market failures, at home and abroad, will facilitate American innovation and make American entrepreneurship more dynamic.  

The difference could not be starker. Africans seek to rebalance their economies away from finance and towards “real” economy sectors in a way that can foster inclusion and the redistribution of wealth. Americans prefer to overlook the fact that subsidized innovation and inequality go hand in hand. Ignoring the urgent need to realign competition with entrepreneurship within the framework of strategic, long-term economic growth will just reinforce the socialization of risks and the privatization of rewards, which together work against national competitveness.

Markets may be blind but they can kick your teeth out 

Competitive advantage over the world’s best established and rising competitors is gained through challenge, not subsidies, trade restrictions or market shielding. As Benjamin Friedman argues in his book entitled The Moral Consequences of Economic Growth (Random House, 2005), economic growth and competitiveness depend on openness of opportunity, tolerance, economic and social mobility,fairness and a practical democratic spirit.  

Markets may be blind, so to speak, but they’re not partisan or selective or discriminating.They are an open arena for the transaction of goods, services, ideas and knowledge. The problem is that you can’t expect to be a truly competitive economy if you consider only your own competition, versus competition from abroad, as good.

Competitiveness and entrepreneurship go hand in hand in developing, building up and nourishing a nation’s domestic and international economic strength. America would do well to look at what Africa is doing to compete openly and responsibly. African governments are demonstrating what true competitiveness is in practice: an ability to design, produce and commercialize a wide range of products and services that fully, uniquely and continuously fulfil the needs of their targeted market segments, while connecting with and drawing resources from the business environment and achieving a sustainable return on the resources employed through the creation or extraction of value in a way that matters for their national and regional competitiveness. 

Competition and entrepreneurship must work together to make a nation competitive, innovative and dynamic. It’s like the difference between weightlifting and powerlifting. Powerlifting is focused on lifting as heavy as possible in a single plane of motion; weightlifting involves two movements in different planes of motion and they are executed faster. National competitiveness is the art of wrapping the strength of the country’s entrepreneurial innovation around the global market, not an effort to force the global market into a confrontation that will end up wrapping the barbell, so to speak, around America. 

America may have still have the most muscle and the strongest bite of any nation in the world, but Africans are proving they have more supple movement and the best and most tuned sense of hearing and smell for entrepreneurial competition. In today’s global markets, gregariousness beats solitariness.    

Astrid Ruiz Thierry, Principal, Upboost LLC

 

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