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Opinions of Tuesday, 30 November 1999

Columnist: Maxwell Oteng

IT'S THE ECONOMY, STUPID!

The "great" thing about our Economic Recovery Program is that it has offered our opinion leaders the rare opportunity of enriching their economics vocabulary. Yet while ivory-tower mouthfuls such as "enabling environment", "crowding out", etc continue to be the leitmotif of the political elite, average Ghanaians want these people to come out with innovative and visionary ideas and ways to improve their lot. After four decades of nationhood, we are still struggling to find the Moses who can lead us the "hidden treasure". And the clear and present danger of it all is that most Ghanaians, having been disillusioned all these years, insist in their pathetic provincialism that there is nothing out there that can be done to develop the country.

Ghana's economy is at the crossroads, putting a big question mark on our ability to realize the tenets of the much hyped VISION 2020 - the drive to make Ghana a middle-income country by the year 2020. In spite of all these years of Structural Adjustment Program with its concomitant high socio-economic costs, the ugly truth is that the structure of the Ghanaian economy has not improved in any significant way. The economy is as fragile as ever, to say the least:

  • Our exports are still dominated by primary products ( cocoa, timber, minerals, and few non-traditional exports;

  • The agricultural sector is still predominantly subsistence, without any significant increase in productivity in this sector. Food production has been stagnant.
  • The value of the cedi has been nose-diving over the years, because domestic production of goods and services has been woefully inadequate, calling for imports to make up for the inadequacies, and thus putting constant pressure on the cedi. The persistence of high inflation in the economy has meant that even though the cedi is the official medium of exchange, it has lost its other functions of good money, particularly its function as a store of value. People want to own dollars to hedge against the expected inflation in the future, putting additional pressures on the value of the cedi. This has brought about a phenomenon romantically referred to as the "dollarization" of the Ghanaian economy.
  • Inflation is so high and its costs to the economy are obvious: it increases the cost of living for the average Ghanaian' especially the rural poor farmers and monthly salary ( wage) earners. In addition, it weakens the value of the currency, discourages long-term investments, and encourages speculative and unproductive activities. Little wonder Ghana hasn't witnessed any perceptible influx of long-term investments form both domestic and foreign sources despite our mouth-watering investment incentive packages.
  • And if you come to think that our own political leadership has been, overtly or covertly, antagonistic to the development of a viable private sector, you may want to shed tears even in a mawkish way. From the outset of the "Revolution" when political leaders persecuted local businessmen because the former naively thought it was immoral for the latter to earn profits, to the "democratic" days when Ghanaians were shamefully implored not to patronize some locally made goods because their producers belonged to a different political inclination, there is no qualms that prospective investors have been very skeptical about our political leadership. Hence their cautious approach to committing to long-term investments. And if one adds this to stories about government squirming under corruption, abuse of office, favoritism and cronyism, square pegs in round holes, blatant hand-wringing of national political debates, and preposterous mendacity that reduce our political landscape into comic strips, one may want to cry, or go "coochy-coochy-coo", or depending on one's sensibilities, go to the bathroom and retch.
  • The key to achieving the goals of VISION 2020 is education. Yet the standard of our educational system is at its nadir because education doesn't seem to be in our national top priority bracket. After all our leaders can afford to educate their children abroad. So who cares about the deteriorating standards of our education?
  • Think about the "Second Slave Trade" in the form of brain drain. The alarming spate of departure of Ghanaians for other countries to seek "greener pastures" sums up the state of our national economy. One joke has it has it that if there were a plane at Kotoka International Airport asking people who want to leave Ghana to board free-of-charge, even the President would rush to board it.

    One could list a litany of the wrongs in the economy. In a lump, all the basic fundamentals point to a fragile Ghanaian economy.

    WHAT CAN WE DO?



    The answer to our economic ills is to produce, produce and produce! We must produce what we eat and eat what we produce ( at least a larger portion of it). It really amazes me how our political leaders can engage in "double think" defined by George Orwell in his novel "1984" as "the power of holding two contradictory beliefs in one's mind simultaneously and accepting both of them." How do you put inflation in check when a significant source of it is imported, and at the same time engage in an all-out liberalization program? How do you engage in a bone-chewing competition when you have barely developed milk teeth? How can you influence your terms of trade and make stable foreign earnings when you continue to export primary products?

    - The classical argument is that there are gains from free trade if a country produces goods which it has a comparative advantage. But if you continue to export primary products like cocoa and import consumption goods instead of investment goods, then you are doomed to be a drawer of water and hewers of wood in international economic relations.

    Even though we may not have the comparative advantages in most of the consumption goods we import we can create them. We can do this through selective liberalization that allows us to import technology and machines and equipment to improve our agricultural and manufacturing bases, and at the same time discourages the import of consumption goods. For a country like ours that want to catch up with the rest of the world, a greater part of our imports should be made up of investment goods. Historically, all smart countries have borrowed technology and capital to develop. Most economists say that protectionism doesn't work and cite the former Soviet Union and its allies as evidence to support this claim.

    Protectionism doesn't work in societies where the government is the principal producer and distributor of economic resources, but it works in areas where private individuals are the owners of the factors of production. It worked in Japan, and it's working in the so-called "Tiger Economies" of Asia. If we think that foreign capital will flow in to develop our country, we may be deceiving ourselves. The economic development of Ghana lies in the hands of indigenous Ghanaians, especially the small and medium scale manufacturers. That's the more reason why we need to encourage our local entrepreneurs to face the challenge of national development. In fact, if we had a long-term vision for the country, we would have given preference to local people in the sale of our national industries in the Divestiture Program, even if it meant selling them at a loss. The Japanese government of the Meiji era, sold industries to local people at a loss in its de-nationalization program. The reason is obvious: in addition to having our meager capital stay in the country, as against the desire of foreign interests to repatriating their profits, it's very likely that local people may make greater commitment to national economic development than may foreigner businessmen.

    - More importantly though, Ghana needs to adopt what I call "Communal Capitalism", a capitalist system based on our traditional value systems of community relationships. We can't leave the fate of development in the hands of the "invincible hand" or the so-called market forces of demand and supply alone. We need to consciously design an industrial system that will raise industrial productivity and keep it growing fast. One of our greatest cultural strengths is our communal relationships and we may want to develop based on these relationships. Here are 2 short illustrations:

    To improve agricultural productivity, we need to adopt appropriate modern production techniques, and equipment such as tractors, combined harvesters, etc. One needs a great deal of money to purchase these items. But in Ghana, farmers are so poor that they can't afford these things. What's more, they don't have any valuable assets to act as the oft-required collateral securities to qualify them for bank loans to buy the necessary equipment and machines. To deal with this problem, we must enforce strong community relationships between our banks ( particularly, the Rural Banks) and the communities in which they operate. The banks can buy these machines and equipment and lease them out to the farmers. These machines should be operated by skilled personnel employed by the banks. In addition, the banks ( or any agency interested ) can make use of the large under-utilized services of our National Service labor to give technical education to farmers. How would the farmers pay for the human and technical services provided by the banks? They can do that either in cash or in kind when they harvest their produce. For instance a bank can ask for a fifth ( 1/5 ) of a farmers produce in harvest time and sell this to cover the costs of the services leased out. This suggestion has the flavor of the age-long "abunu" system in parts of our traditional society. In this way, we'll not only be increasing agricultural production, but also the farmers will learn scientific and technical skills of production and earn more money beyond the usual subsistence level while the banks can make some profits from their services. We'll also be making good use of National Service labor.

    Communal Capitalism means that we should encourage joint ventures among citizens at the community level. Because in Ghana incomes are so low and individual savings are also so low, it's virtually impossible for a large segment of the population to start up business ventures ( especially medium to large scale firms ) of their own. This is why the virtues of joint ownership must be preached and practised in our communities through government assistance. There are 110 districts in Ghana now. Let the government identify 110 firms, one apiece in each district according to the districts' respective comparative advantages. Thus for example, set up a chocolate factory in a relatively abundant cocoa producing district, etc. Then float shares and ask citizens in the district to buy ( but not exclusive to them ) the shares and own the the factory wholly ( or at best with 5% government ownership ). Ask these shareholders to choose their own Chief Executive Officers and management staff etc without any government interference. The shareholders will be the workers themselves. Once shareholders know that profits from the factory or firm will be accrued to them, they will make sure that it remains profitable. The government's only role in this approach is buying ( or borrowing ) the necessary equipment ( probably from foreign sources ) to start up and loaning it to the community. This is significantly different from the old approach when the government owned the factories, and thus workers didn't have the incentives to ensure their profitability.

    -While our educational reforms rightly identifies the need to shift our educational goals from the liberal arts to science and technical education, we haven't been doing enough to attract our fecund minds to pursue careers in science and technical fields. The recent confusion about the status of polytechnical education in Ghana attests to this. Even though general education offers a lot of benefits, if we invest in education purely as a means to stimulate economic development, only a limited outlay of general education beyond the achievement of literacy may be justified. But technical education is quite different. There is a potentially high payoff to training technicians such as electricians, mechanists, construction workers, draftsmen, etc. But over the years, we have been holding such skills in low esteem and considering them to be inferior to training in the liberal arts. As a result, technical education has been constrained by low budgetary allocations, inadequate teachers and low teacher salaries, as well as societal prejudice against potential students. This discourages people from entering the field.

    - Lastly, most Ghanaians, especially the educated elite, have not been patriotic enough. Almost all of us, having been trained in one way or another, with scarce national resources, want to leave the country in the lurch for comfort lives abroad. What we forget is that the comforts of life that we chase or want to chase in other countries have only been made possible by their citizens who put the interest of their nation above theirs some times in their lives.

    National development involves so much pain and sacrifices, and requires the collective effort of all and sundry, and until we are prepared to endure the pains so we can share in the joys at a later date, we'll continue to be "marking time" in our development endeavors.