How and why is nationalization central to the politics of resource-rich countries? This chapter opens with a review of current theories on natural resource wealth and nationalization in political science, economics, and public policy, and then describes why existing theories are unable to answer the questions this book seeks to answer. With these questions in mind, this chapter presents the book’s central theory of why leaders nationalize and how leader survival shapes and is shaped by the choice of nationalization. After describing empirical implications of the argument, the chapter offers initial evidence to support these claims in the form of exploratory case studies of Iran and Iraq. In Iran, the shocking collapse of the Shah in 1979 defied the West’s notion of the “island of stability” in the tumultuous Middle East. In Iraq, the fall of the Hashemite monarchy in 1958 ushered in a decade of instability until the unexpected Ba’athist consolidation in 1968, when Hassan al-Bakr established a 35-year single-party dictatorship. These are precisely the types of outcomes in which the book’s theory predicts nationalization should affect the rise and fall of dictatorships.

The final chapter of the book compares the findings from the four issue areas and links them with the theoretical framework presented in Chapter 2. The chapter then asks: Given the EU’s interventions, what have been the impacts on the functioning of private governance and the larger policy field? The chapter argues that the regulatory impacts are twofold: The interventions have both restructured the field of private governance and largely retained private actors’ governing authority and private governance space. The interventions impose baselines that cannot be undercut and that arguably have resulted in some sustainability improvements. At the same time, the interventions are relatively limited since the standards and procedural regulations are minimum baselines with several evident gaps. This situation allows for policy exports and spillovers from private to public governance, both within the EU and beyond, which can potentially strengthen public policy. The chapter then discusses the generalizability of the theory by discussing examples of public interventions at both the international and the domestic level beyond the EU. The book concludes with avenues for further research.

The chapter explains why the EU has so far failed to intervene in private fisheries governance. The chapter starts with comparing private governance schemes since the 1990s. It then analyses EU policy discussions until late 2017, showing that until very recently all involved stakeholders agreed that the fragmentation of the private governance market needed to be addressed. Differences of opinion on the desirability of publicly supporting product differentiation, however, have continued to exist. While most stakeholders consider the costs such differentiation would impose on European producers too high and therefore support procedural regulation, the European Parliament has consistently favored both standards and procedural regulations in the form of an EU-level certification and eco-labeling scheme. Attempts to create a policy failed in 2008–2009 when a legislative proposal for procedural regulation was abandoned, and in 2013 when the discussion was integrated in the reform of the Common Fisheries Policy. A 2016 report on feasible policy options, moreover, questioned the fragmentation of the private governance market, casting further doubt on the likelihood of public intervention.

I have always been intrigued by the underlying reasons behind the stark differences between the rich and poor countries as well as that between rich and poor households, communities, towns and cities. I have been curious to understand why developed nations got wealthy and why poor nations lagged. As a young graduate I was very much involved with my country's industrialization efforts, especially the development of Nigeria's iron and steel and other industrial plants. The failure of these initiatives further heightened my curiosity and eventually led me to seek answers when I went off to pursue my doctorate degree at the Science and Technology Policy Studies Unit (SPRU), University of Sussex, in the United Kingdom. I wrote my thesis applying development economics framework on “Technological Capability Acquisition: The Steel Industry in Nigeria.” While my focus in the early days was on the technological dimension of industrial capability acquisition, I was always fascinated by the writings of Simon Kuznets and Arthur Lewis on structural change.

Several years later, working as a consultant for the United Nations Economic Commission for Africa (UNECA), I expressed my thoughts in a report as follows: “The industrial development process in the Twentieth Century is one in which backward countries and regions have employed extant technologies to overcome the wide gaps between them and the industrial forerunners. The key to the successful industrialization of countries that are now referred to ‘late- comers’ had been not only been willingness to imitate but also more importantly the will to learn” (UNECA 1997). In other words, technology transfer demands explicit investment on the part of the learner in order to acquire both formal and tacit knowledge. While the former is fairly easily acquired in the short term, the latter is the product of long- term learning- bydoing, expensive process of heuristics and the establishment of institutions of some sort that is a repository of institutional memory.

For the most part, African countries have neither redeemed their developmental promise nor fulfilled the great potential that natural resources and large deposit of minerals, petroleum and agricultural resources conferred. A number of African countries are endowed with a large population, a potential supply of skilled manpower and ready domestic market. Yet, despite the excitement over their economic potential at independence, most remain stuck in the low- income category.

This book makes very important contributions to the discourse of an important theoretical concept: the notion of structural transformation. It uses a rich data set and sound theoretical framing to explain the variety of ways in which structural transformation relates to employment, industrialization, productivity growth, urbanization and poverty reduction. It enriches the debate on how societies are transformed from agrarian economic structures to modern industrial structures, and more significantly the attainment of sustainable social and economic development.

Another important set of analytical findings coming out of this book is the establishment of an explicit relationship between the manufacturing capacities of nations and the eventual transition to high- value services. While the emergent Fourth Industrial Revolution seems to be blurring the boundaries of the three key sectors, namely, agriculture, industry and services, the author demonstrates the inevitable acquisition of manufacturing capacity as a necessary condition for sustainable structural transformation. Clearly, the rate of growth of manufacturing and value added does not just undergird economic growth; it is a strong prerequisite for mastering industrial agriculture and services sectors.

The book shows that while both agriculture and manufacturing value added (MVA) and exports are important drivers of real economic growth, Africa's participation in the global market of manufactures is negligible when compared to other developing countries. Its contribution to continental gross domestic product (GDP), which stands at 11 percent, represents lower ratios than those of other developing regions such as East Asia and Pacific (23 percent of GDP) or South Asia (16 percent of GDP) (African Economic Outlook, 2017).

Not surprisingly, the impact of MVA on real economic growth has been weaker than that of services in Africa. In other words, not only has industrialization not taken a firm root in the region, but sub- Saharan Africa has also been skipping the manufacturing phase of development. The central message of this book is that Africa is unlikely to witness shared and inclusive economic growth and development without industrialization.

Fortunately, over the last decade, industrialization has been back on Africa’s economic policy agenda. The leadership of the region understands the imperative of industrialization, with at least half of African countries having put industrialization policies in place. What these countries seem to understand is that for as long as they lack industrial capabilities, there will be no breaking away from the dependency on commodities.

Introduction

The previous chapters articulate in detail the principles of ST and the implications for urbanization, industrialization and quality of life. This chapter sets out to describe the pathways to employment and the relationships between structural economic transformation and employment. Equally, the chapter demonstrates how this crucial relationship impacts development and growth for African economies. Employment is understood technically as a contractual relationship between two parties where one party works while the other pays for this work, resulting in opportunities for people to earn a living. In the grand scheme of things, employment results in economic development as it allocates the work force into sectors with the highest growth potential and productivity. Other than this, employment also creates the environment for social welfare to flourish; it enables a rise in the living standards and minimum wage employments, among others. Studying this relationship between ST and employments enables better understanding of the true long- and short- term causes of rural and urban unemployment.

Global unemployment has continued to rise particularly since the financial crisis, but the situation in Africa is of particular concern given its large percentage of youth. From AfDB (2016) data, one- third of the African youth are unemployed and discouraged, another third are vulnerably employed and only one in six are in wage employment. Africa has the fastest growing and most youthful population— with nearly 420 million people in Africa between 15 and 35 years of age; the youth face roughly double the unemployment rate of adults, with significant variation by country. This proportion of the region's population constitutes a significant asset if properly managed but a ticking socioeconomic time bomb if left undeveloped and unemployed in productive work.

Currently, unemployment constitutes a major socioeconomic challenge to the region. For instance, unemployment rate in South Africa rose to 27.6 percent in the first quarter of 2019 from 27.1 percent in the previous period. Nigeria also experienced an increasing rate of unemployment from 22.70 percent in the second quarter of 2018 to 23.10 percent by the end of the third quarter (Trading Economics, 2019b).

There is a clear connection between employment and economic growth although the growth- employment nexus varies considerably with economic structures and levels of development. For instance, while informal employment is strikingly extensive and widespread in many Asian and African cities, formal employment is more prevalent in advanced industrial economies.

Introduction

Poverty reduction continues to be the central goal of the international development Agenda because poverty and inequality are not just manifestations of economic and industrial backwardness; they are sources of social tension and powerful sources of societal conflict and widespread mistrust between different groups. According to Adam Smith (2007), “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labor as to be themselves tolerably well fed, clothed, and lodged.” Therefore, poverty elimination was prioritized at the Millennium Summit debate as a key social development goal, it is also the capstone objective of the SDGs. Despite a significant reduction in the general poverty levels worldwide, about one billion of the world population lives under extreme poverty. The international target originally widely adopted in 2000 was to reduce by half the proportion of people living in extreme poverty by 2015. Despite concerted efforts at the highest level, the goal was met in some countries but remained a difficult challenge for many other countries. A new 2030 date has now been set arising from the post- 2015 Agenda debate (United Nations, 2013).

A study for the United Nations University World Institute for Development Economics Research (UNU- WIDER) (2006) concluded that “high levels of inequality (above a Gini coefficient of 0.40) negatively impacts growth, due to “incentive traps, erosion of social cohesion, social conflicts, (and) uncertain property rights.” Poverty has wide- ranging negative effects in all societies especially developing countries because, by their very nature of being less industrialized, African countries are characterized by laterally unintegrated production structures and fragmented markets that are weak relative to advanced industrial nations. Equally, governments in these countries are less effective in compensating through public policy for these weaknesses because the state itself lacks financial capacity. In other words, regardless of the level of development, poverty has a large destructive component associated with unequal opportunities, and this destructive inequality contributes to lower growth (Birdsall, 2006).

Introduction

Urbanization is closely linked with the process of ST and industrialization. ST refers to the reallocation of economic activities across the three broad sectors (agriculture, manufacturing and services) that are associated with productivity increase and economic growth. As countries urbanize, their economies modernize toward highly productive sectors such as industries and manufacturing. The analysis of ST and productivity changes are key to understanding the mechanisms behind urbanization. Reversely, analyzing urbanization is essential to understand the causes of SC.

In traditional growth patterns, ST and urbanization are deeply interrelated. Both phenomena are characterized by the same movement of labor from the rural and agricultural sectors to the manufacturing and urban sectors. This process normally translates into higher productivity levels and overall economic growth. However, the observed lessons from developed countries does not seem to apply to all developing countries, where urbanization is often not accompanied by industrialization. The example of African countries is particularly striking. Africa's transformation trajectory is very dissimilar to the conventional pattern of growth whereby sustainable urbanization proceeds with transformation from agriculture to productive manufacturing. Contrarily, African cities are crowded with migrants from rural areas with little skill sets and mostly engaged in low- value services rather than high- value manufacturing.

Recent empirical evidence indicates that ST could occur without change in labor productivity, especially in the case of African economies. Most importantly, this situation is common in natural resource exporters (Jedwab et al., 2013). Many African countries tend to specialize in the export of natural resource, which constrain conventional transitions experienced in industrialized settings. Natural resource– exporting countries tend to urbanize without significantly increasing their GDP share of manufacturing output. It is worth noting that the most urbanized countries export natural resources: oil (Angola, Gabon and Nigeria), diamonds and/ or gold (Botswana, Liberia and South Africa). In these countries, urbanization takes place without significant change in the economic structure. A recent analysis looked at ST and productivity growth in eleven sub- Saharan countries during the past 50 years (McMillan et al., 2014). It suggests that the early postindependence period had brought an augmentation of manufacturing activities due to the reallocation of resources, resulting in economic growth. However, in the following period from the mid- 1970s to the 1980s, the process of SC attenuated.