“Nation-building” or The Expansion of the Rule of Law and the Somali Economic Prosperity Initiative

“Nation-building” was impossible, it was believed, when the failed state of Somalia was in the global headlines in 1992-3.    A decade later,   we know much more about “nation-building” and it is the epicentre of the global political debate.   Among other trends, the debate is informed by the extraordinarily valuable work of Transparency International (www.transparency.org).   There is an increasing consensus about the relationship between rule of law and sustainable prosperity.  TI created a benchmark against which performance can be measured and, indirectly, an incentive system for political regimes.       In the last decade, abstract political debates about economic development have been increasingly replaced   by practical discussions about water purification projects, disarmament of militias, and establishment of entrepreneurship zones.  This is an encouraging set of trends.             Political scientists understandably tend to look at institutions and constitutions.    Investors tend to look at the efficiency of capital markets in directing capital to growth opportunities as well as the resources that are there to be developed (geological, agricultural, intellectual capital).   Practitioners of development assistance tend to look at building the infrastructure capacities (roads, mobile telephony, distribution-networks for vaccines and health-care products).  In approaching the challenge of accelerated economic development,   leadership is required to use all these pieces of software.
            Proponents of democratic activism try to find courageous advocates who can lead a transformation to democracy.   On a planet with the potential for intimate and instant media communications, these democratic leaders can be backed in the manner which most of the international community has rallied behind Aung San Suu Kyi in Burma, and more effectively, Nelson Mandela.     
              After the qualifiedly successful experiences of Liberia, Rwanda, Bosnia and the ongoing experiences of Kosovo, Iraq and Haiti, it is possible to talk in concrete terms about “nation-building” or the expansion of the rule of law.   Debates about globalization and development have tended to take place in echo chambers with institution-building and economic strategies being discussed as if one could happen without the other. 

                It is against this backdrop that a   spotlight can be put on the current complex realities of present day Somalia.   The mix of issues confronting Somali democrats and modernizers creates a perfect challenge for a global community committed to creating the preconditions for sustainable prosperity through advancing the rule of law.  Somalia is, at one level, a society which has already had a profound effect on international politics as a result of the period in the early 1990s.  In that period, Somalia became the political metaphor for a “failed state. It was used by   those who thought nation-building was   an impossible objective as an excuse for non-intervention   in Rwanda and Bosnia.  But Somalia is also in 2005 an historical opportunity, a vibrant society with a tremendously well-educated diaspora.  It has an economic network   sustained by international cooperation within a complex system of cooperative finance.   It has a rich history and a dynamic Islam culture rooted in centuries of distinctive national practices.   Because of this, it is an opportunity for proponents of a rule of law based international system to champion Somali nation-building as an historic opportunity.
            No country should be considered a laboratory for social theories.   Each country is a unique history and culture.  Somalia, however, is timed to be an opportunity for a major moving forward in the self-confidence of the global community that the rule of law can take root in previously “failed” states.    What is required to do this?
            First, there is one obvious but too-often underemphasized precondition for sustainable prosperity and that is the disarmament of private armies.   Whether in Kosovo, Liberia, Sierra Leone, Afghanistan or Iraq, the existence of private militias   impedes and eventually denies the development of the political culture required to create     sustainable prosperity.    Independent militias create a world in which, by definition, capital cannot be channeled to growth opportunities and people live with the fear for arbitrary, unaccountable action that affects their basic security.     So, without the disarmament of private armies or their integration into a rule of law based police function, experience   teaches us that there is sadly no point in discussing economic growth.
            Second, the discussion of how social capital is created is an important part of the new democratic theory of economic prosperity.   Networks of independently minded people create a communications system which makes possible economic decisions that accelerate growth and sustain prosperity.   This is why there can be a competitive advantage for smaller societies, with habits of working together and social market signals about decisions and performance.  This is obviously true in smaller countries like   Slovenia or Estonia,   Finland or   Norway, where compatibilities create a natural efficiency.  The political systems of smaller democracies can focus on mobilizing for economic growth rather than spending scare resources on mediating between groups and negotiating an acceptable framework for operation.    Social capital, described this way can seem to be a synonym for nationalism.    But single-language activities do not necessarily make pan-Italian institutions more efficient.  Nor do multi-language activities    necessarily make Swiss institutions less so.   Social capital or the elusive community value called trust is a prerequisite to democratic stability and needs to be nurtured and developed through shared activities.   It is difficult to create social capital by design, but one thinks of the Nigerian football team or the Slovakian hockey team as examples of shared experiences which can be leveraged – up to a point.   A celebration of Somali national heritage, cultural and philosophical is a form of social capital not always easily replicated.
            Third, a well-connected international diaspora can be assistance in developing sustainable prosperity in a global economy.    The economic development successes of countries like Poland and Ukraine have been accelerated by access to a Ukrainian or Polish speaking community who can invest and provide strategic advice in their economic development.    But having a well-connected diaspora is obviously not a sufficient condition for economic development.   If there are no domestic institutions    which can create a disciplined capital market,   the alchemy of turning investment into sustainable growth will not occur.    
             
                        What can be developed from this is the beginning of a state-building exercise, applicable perhaps elsewhere, but a starting point in Somalia:
                       
                        First, disarm the forces of violence and coercion.  Without protection and the enforcement of the rule of law, there can be no framework for the development of sustainable prosperity.   While obvious, this point is frequently missing from discussions of nation-building.  The trajectories of Haiti and Liberia point to the indispensability of international action in providing security infrastructure. 
           
            Second, develop social capital.  In Somalia, the network of sophisticated financial lending through hawala is significant.   Because this is a system of collaborative finance, social capital literally comes about as a result of a culturally specific and potentially socially unifying financial activity.    The strength of the Somali tradition and its sustaining power as a strongly defined cultural heritage is an important source of social capital.    Celebration of Somali artists and the promotion of Somali culture internationally are not frivolous because appropriately done, it contributes to the growth of social capital.

           Third, develop a market allocation to permit entrepreneurially-led commercialization of the resources in Somalia. The idea of a web-connected pool of capital to back entrepreneurs in emerging markets has been germinating for a while.     Such a web-syndicated investment vehicle could provide small amounts of capital for the management of investments in Somali entrepreneurs.   The framework is a somaliventures.com approach, which would enable a Somali entrepreneur access to capital and management expertise.    The corporate governance of somaliventures.com will need to ensure that capital is invested in entrepreneurial projects, that strategic advice and management assistance to new ventures will be available through the web and that these activities will be provided with their own web-sites for both monitoring and strategic assistance.   The efficient allocation of relatively small amounts of capital to entrepreneurs is a cornerstone of development and can be done on a much larger scale given the capacity of the global internet to link investment opportunity with source of finance.

           Fourth, develop the kinds of capital markets necessary to manage globalization from a position of strength.  This means mobilizing all the networks of which Somalia is a nucleus: the diaspora, the relationships with Gulf States and other sources of institutional capital. A Somali Bank for Reconstruction and Development (SBRD) could be created on an investment banking model similar to that of the European Bank for Reconstruction and Development which channeled international capital into market-sensitive investments.      An SBRD-style institution could facilitate the creation of a dynamic, internationally-networked capital market which enabled Somalis to invest in their future and to translate the returns that come from resources (tourist, natural resources) in a manner which ensures long-term growth.  The capital would come from debt-conversion, international sources and would lead to dividends or pensions being paid to Somali citizens.  It speaks to the challenge of making Somalia the fastest-rising country in the Transparency International rankings and to make Somalia analogous to Malaysia, South Korea or Turkey as a society with the capacity to translate its present tense resources into future-oriented investment strategies.     Without this kind of growth-oriented capital market structure, sustainable prosperity is a mirage.

            Fifth, determine through a democratic framework what form of relationship is desirable in creating regional partnerships.       When democratic processes and issues of political integration create cross-border challenges (see The Organizational DNA of Democracy below), the prime directive is to ensure the democratic integrity of the process.   All states need a larger economic market and the Northeast Africa zone provides Somalia with a geographical opportunity to create a cross-border investment and trading with Ethiopia, Kenya, Eritrea, and Djibouti.   Nation-building cannot take place in a vacuum.

             
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The Somali Economic Prosperity Initiative will involve a group of political activists and policy analysts operating out of Toronto who will try to assist in advising the new Somali government on these and other related steps of nation-building.  A conference to discuss rule of law in Somalia and the role of hawala in creating efficient capital markets for longterm growth will be held in late October and will be synopsized on this web-site.  For those interested in Somali politics, the following websites are cited:

A useful map to facilitate understanding Somalia:  http://en.wikipedia.org/wiki/Regions_of_Somalia  

Some websites with an interest in Somalia or hawala
http://www.somalivoices.com/press.htm#Mach
http://www.allgedo.com/news/04apr804.htm
http://www.cbuae.gov.ae/Hawala/presentationsList.htm
http://www.somalifamily.org/news_hawala.htm
http://www.somalia-rebirth.org/frame-team.htm
http://www.menafn.com/qn_news_story_s.asp?StoryId=55102
http://www.dahabshiil.com/article.jsp?id=1
http://www.csmonitor.com/2001/1128/p6s1-woaf.html
www.hamarey.com