Feature Article of Sunday, 5 March 2000
Columnist: Maxwell Oteng
Former President Nkrumah once said "seek ye first the political kingdom and all
other things shall be added unto you." In Nkrumaist parlance I would like to say
that seek ye first the economic freedom - through institution building - and all other
things would be added unto thee.
W hat does Ghana and the United States of America have in common?
It looks like the two countries have few things in common: of course they are both sovereign states (in principle) but in Owellian parlance, in the comity of Nations (States' equivalent of the Animal Farm) the US is "more equal than Ghana"; then there is the kente-for-hip-pop cultural exchanges that are shaping the cultural tastes of a significant segment of the cultural constituencies of the two States through increased contacts made possible by modern technology and telecommunications; and finally it so happens that citizens of both countries go to the polls this year to choose a "new" set of leaders (and or re-affirm their support for the old ones) to steer them through national and international affairs for a 4-year period (barring any uninvited interruptions in our case).
Presidential and parliamentary elections are about ten months away but it is time to start yawning. Election year is interesting in its own right not only because of the excitement it can generate (if the game is played with clear and fair rules) but the rancor, divisiveness, the opportunity for dissention among members of same community and neighborhood and sometimes even among family members and the national anxiety all can be a source of comfort or discomfort depending on which side of the political aisle one belongs. Election year is a time for politicians to notch up the self-congratulatory boilerplate and heat up the rhetorical template few more degree Celsius. And oh yeah, it is a time for the rural folk to get something back from their "leaders" in the form of consumer goods (normally offered by politicians to bribe them for their votes).
But while Americans may be concerned about who becomes their next president, they may not be as concerned as Ghanaians. This is because in America, the president has very limited powers and people do not generally look up to the president (and for that matter the federal government) to bring about changes in their lives or in their communities. And that is true in most economically developed countries.
The situation in Ghana, though is the opposite. In Ghana the president is all-powerful, and generally people tend to look up to the presidency to bring about socio-economic transformations in their communities and lives. In fact in Ghana, most people tend to have so much religious and blanket faith in personalities that we continue to look for the Moses that would lead us to the Promise Land. In virtue of this cult believe in personalities, it comes as little surprise that in the "Say it Loud Phorum" of the unofficial Ghana website, some Ghanaians have been romancing the idea of "Kofi Annan for President in Ghana" While it would not hurt Ghana to have the UN Secretary General to be its president (maybe in the near future?), the question is does Ghana really need Kofi Annan to be president before the country could make progress? The obvious answer is no. There are many more Kofi Annans in Ghana and elsewhere who can lead Ghana. The problem in Ghana is not so much about a personality, even though bad political leadership has rubbed a lot of salt in our sores. It is about institution building and attitudinal changes. If we do not do this not even Jesus the Christ, who is generally considered and accepted as flawless, can do anything in Ghana. Let us minimize our religious and blanket faith in personalities and vouch for better institutions. People come and go but good institutions endure.
So while the US can afford to elect a not-so-great person as president without any significant political and economic costs, Ghana cannot afford to do that. Japan for instance, has demonstrated severally that the country could amorphously function without a prime minister without doing much damage to the economic and political life of the people: this is evidenced by the frequency at which Japanese prime ministers are dumped. So the basic question that must be asked is why do personalities matter less in some countries but not in ours? The answer lies in the level and nature of time-honored institutions in those countries compared to ours.
Though institutions do not feature significantly in the training of economists, the importance of institutions in economic development has long been recognized by the profession such that now there is a whole field of Economics known as Institutional Economics solely devoted to the study of the impact of institutions on economic development. In addition most of the economic models designed by economists to help us under economic behaviors implicitly assume away the institutional underpinnings of markets economies.
Institutions are social arrangements. They may, as Dani Rodrik of Harvard rightly observes, include but not limited to a clearly defined system of property rights, a regulatory apparatus that help to curb fraud, anti-competitive behavior and moral hazard, a moderately cohesive society that exhibits trust and social cooperation, social and political institutions that mitigate risks and manage social conflicts, rule of law and clean and transparent government. Thus as Lin and Nugent intimate, institutions should broadly be thought of as "a set of humanly devised behavioral rules that govern and shape the interactions of human beings, in part by helping them to form expectations of what other people will do"
Given the importance of institutions, the question every policy maker must grapple with is no longer "do institutions matter"? but "which institutions matter and how does one acquire them?" The institutions that matter and identified by economists (notably Dani Rodrik of Harvard), include five types of market-supporting institutions namely, property rights; regulatory institutions; institutions of macroeconomic stabilization; institution of social insurance; and institutions of conflict management.
In conclusion, the question that every society, especially a developing one, faces is "how does it acquire "good" institutions?". This is not an easy question to deal with. However, the first step towards dealing with it is the realization that there is no uniquely determined institutional basis for the proper function of a modern market economy. Thus we have to recognize that institutions differ, and they are as diverse as societies are: the American-style freewheeling capitalism is quite different from the Japanese-style capitalism, and they both differ from German style of capitalism. That is there is no one set of institutional arrangements that can fit all societies.
In fact with the triumph of capitalist over communism/socialism, the question confronting developing countries is no longer the choice between capitalism and communism/socialism, but rather what kind of capitalism to choose - Japanese-style, German-style, British-style, American style, etc? Each choice comes with a somewhat different set of institutional arrangements. However, there are some institutions that are universally present in these societies, and which we can adopt and adapt to suit our circumstances.
More importantly, however, institutions need to be developed locally, relying on hands-on experience, local knowledge and experimentation but as a late comer we have the advantage to adopt the best of some of the time-honored institutions in other countries and mend them to suit our own cultural environment and societal needs. Wholesale adoption may not be in our best interest because of the inappropriateness of some of the "foreign" institutional arrangements to our local circumstances.
Instead of being seemingly overwrought with the illusion of the indestructibility of personality cults, let us put our faiths in institutions and direct our energies and resources to build them and make sure of their functional usefulness. That way it would be difficult for one person or group of persons to take our country for a ride no matter how they conceal their ill-intentions.