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Opinions of Friday, 22 March 2019

Columnist: Kweku C. Eshun

Chewing our own tongues: The real reason our governments fail to achieve sustainable macroeconomic stability.

Ghana’s fourth republic is our contemporary ‘big’ claim to fame. Based on the fact that we have successfully avoided any breech of our 1992 constitution we have been declared peaceful, stable and investor friendly. Given our natural resources, our ‘brilliant’ people and our numerous investment promotional tours this context should constitute fertile grounds for the rapid development of our country.

Ideally sufficient justification for the ‘Ghana beyond aid’ mantra and its preceding ‘Better Ghana’ agenda. I have forgotten the mantras of Presidents J. A. Kuffour and J. J. Rawlings. All world acclaimed transformational programs. Our very own Marshall plans which have catapulted us to a lower middle-income economy.

Ok, I concede I am exaggerating a little bit. I do not know if these plans were or are world acclaimed but they certainly were sold to us as the panacea for our ailing economy which has so far failed to eradicate extreme poverty, ignorance and unemployment or created the strong, skilful and vibrant middle-class necessary for sustained economic growth.

Many explanations for this failure have been advanced by highly educated and prominent politicians, academicians, financial gurus, inflation arresting Bishops and practicing street level ‘economists’ (I mean the ordinary man and woman on the street constantly adapting and juggling things via pure magic to make ends meet).

A few well-rehearsed excuses include external shocks, structure of our economy, low productivity, the weather, inability to control prices of our main exports, imported inflation, manipulation by predatory imperialist countries and their Bretton Woods appendages, and finally curses from Almighty God The creator for disobedience.

What really is the reason why all our governments achieve only a brief period of success stabilizing the economy or showing some impressive growth before the inevitable downturn begins? Please don’t tell me its naturally cyclical.

If so what is the length of each cycle? Six months? One year? Each opposition party attacks the incumbent and wins elections based on the government’s failure to master the macro economy.

Uncontrolled inflation, unemployment and high prices (of goods, services and currency) clinch the deal for the opposition. That is cyclical indeed. Party Go Party Come. Same problem!!

The big problem, in my opinion, is that they do not understand or respect the power of the real economy and its grand operating mechanism; good old corruption. Two major questions naturally follow from my claim.

First, what is ‘the real economy’? Second what is ‘corruption’? Two big issues I can only address from my street level economics standpoint. I concede I am no expert.

The real economy encompasses and includes all individual decisions and aggregate transactions and interactions of all the people living within a country, for themselves or on behalf their institutions or organizations, which have economic implications.

‘All the people’ includes unemployed persons and the lowly porter cascading through managers and heads of conglomerates right up to the president and his hirelings. We together constitute the real economy even as we pursue individually different agenda using means and opportunities uniquely available to each of us.

Outcomes we seek include both emotional and fiscal gratification. Our enhanced strategic and tactical ability to adapt and respond intelligently to any threat or opportunities, carefully honed since the beginning of creation, makes us collectively a real economic force (Professor Porter missed this 6th force!) with the power to determine the success or otherwise of any economy.

In Ghana, our means of sustenance and personal advancement includes (but is not limited to) subterfuge and corruption of the very system meant to emancipate us.

To wit, we will chew our own tongues if necessary. The hydra headed corruption monster has been actively investigated and researched by serious and well-meaning Professors Thompson, Lessig and Miller (from Havard University I understand) and many others.

They have struggled with definitions, as all academics do, in order to adequately capture what constitutes corruption as a point of reference for examining its relationship to other variables.

Whilst the brilliant professors emphasize grand or institutional corruption I do not.

For me, a non-academic player at the street level in the real economy, corruption is the official or unofficial, illegitimate or legitimate means (covert and overt) in both the formal and informal sectors by which ‘we the people’, at all levels of society, undermine (courtesy Profs Miller, Thompson & Lessig) the economy in our effort to survive the harsh system, obtain some share of the nation’s wealth, even maintain our expensive and ‘undeserved’ life styles and distance ourselves as much as possible from poverty. We are economically active human beings with a natural default setting to maximize utility and self-preservation.

Should we reverse tables and put the lowly porter in the presidency and send the president to the market to replace him the results would be the same if not worse. The problem is not institutions. It is us the thinking and decision-making people ie from the ordinary man in the street right up to and including Presidents (who have another election to win), heads of organizations and their operatives who are the problem.

Taking advantage of goodwill expressed by the populace our ‘tax and spend’ governments introduce new policies and legislation aimed at stabilizing or growing the economy.

They always require that the real economy makes huge sacrifices to support their ‘noble’ effort. Never mind the promises they made when seeking our votes. ‘Tighten your belts” for a brief period they admonish us in order to enable them to remedy the ills of the previous government.

New fiscal regimes comprising new taxes, higher tolls, higher port charges, better enforcement and a wider tax net to increase revenue collection, rebasing of the economy all in the bid to identify and capture each transaction for tax purposes and application of new fuel and utility prices calculated using highly guarded secret ‘nulear powered’ formulae are visited on the unsuspecting real economy. Retrenchment swells up the ranks of the unemployed.

Monetary policy is tightened resulting in higher interest rates in order to force savings and reduce pressure on the exchange rate. The government works to reduce money supply and simultaneously couples this with tricks to reduce government spending.

These tricks include delayed payments of debts owed contractors (including NHIS contractors) and refusal to pay approved budgetary allocations to government agencies, refinancing of debts so the payment schedule is deferred to the period they are no more in government (real smart!!) and even delayed or non-payment of scholarships etc.

For a while the economy is ‘bullied’ and artificially stabilized. The debt to GDP ratio is back within acceptable limits and our reserves are impressive. Our Bretton Woods advisers are happy even though they, better than anyone else, know we are chewing our own tongues. Self-annihilation so to speak. The micro economic level destruction of our productive capacity through the death of SMEs and large businesses resulting from the ‘squeeze’ affects the real economy with dire consequences.

Yes, the naïve government is also happy for a while because as every student of economics worth his salt knows there is a time lag between the period policies are introduced and the response from the real economy.

This means the economy receives some short term positive reviews and is seemingly victorious. The economic management team pats itself gleefully and proceeds on investment promotion tours!! They do not understand that the real economy needs time to work its corruption machinery to fashion out a fitting response to the harsh un-innovative, unrealistic and ineffective measures introduced by them.

And that we, the people, working from the ground up, right up to, and including, the President himself (after all he has an election campaign to finance) will have the last laugh even if it means chewing our own tongues!! Ghana’s (suspect) peaceful demeanour, maintained even under these harsh conditions, is the direct result of us, the real economy, quietly using our ‘ways and means’ (specifically, corruption) to resolve imbalances in our attempt to close the yawning inequality gap. Do not be fooled. It is our choice!!

Ok the lag is over. Time is up for the response of the real economy! The previously docile and trustworthy female porter turns a sharp corner and miraculously vanishes with the week’s shopping belonging to a limping 85-year-old lady. If she can successfully elude another 20% of her clients that will make up for her losses resulting from the higher cost of living.

Meanwhile the newly employed waiter at a new drinking spot pockets cash from early morning sales to cover increased transport fares. Unknown to him the manager is unofficially encouraging waiters to supplement their incomes by fleecing unsuspecting clients. He cannot afford to increase salaries due to reduced profits. Policemen, privileged to be assigned to the streets, are given new ‘sales’ targets to reflect the new ‘working’ conditions. Drivers and vehicle owners in response now carry heavier loads, way beyond their assigned tonnage, to mitigate their increased overheads resulting from the new police ‘toll’.

Our cracked-up roads bear witness to this. The unemployed and underemployed youth take a second look at armed robbery, internet fraud, the drug trade, illegal mining and kidnapping. The improvement in the risk to benefit ratio and reduced opportunity cost, due to the harsh economic conditions, makes these professions more attractive.

Why bother with farming or hawking? Young, smart women with a knack for the subtleties of finance, quickly evaluate investment options and boldly confirm the escort business is lucrative under both short and long-term conditions. The source of wealth of their clients is no barrier. Indeed, they are willing to partner them or commence independent operations if the terms are right.

Smart farmers (both land and sea) open small fuel stations and feed, fertilizer or veterinary products dealerships, for example, to sell products obtained on credit from the government originally meant for their farms. Low patronage of their business and an economy open to external competition is making them extinct. Fuel adulteration continues with lower purity levels. They need to compensate for the increased costs and loss of profits from higher fuel prices. All business owners are also feverishly making necessary adjustments in response to the new policies.

These include reduced employee emoluments, redundancy, bankruptcy, capital flight, increased tax evasion and avoidance, closure of production facilities, move to purely trading operations and importation of inferior quality products to serve an increasingly price –sensitive clientele.

Some, with the right expertise, even move to the underground economy to produce or import fake goods (drinks, drugs, food, equipment etc). Do not forget ‘practical’ adjustments to utility costs which constitute an ever-increasing component of production costs.

The real economy always finds a ‘practical’ way to access utilities at the right price (or at no price) hence the continued inability of utility organizations to account for up to 50% of their production. All investment in experimentation and R&D dry up. Too risky and expensive in a shrinking market.

The least said about regulatory and revenue collecting agencies the better. Our ‘real economy colleagues’ in these institutions use their new-found power to negotiate better deals for themselves whilst seemingly meeting set targets.

The all wise multinationals in the banking, food, pharmaceutical and extractive industries for example already have the experience, backed by real muscle and international influence, to counter this economic onslaught.

The naïve economic team is no match for these multinational conglomerates (some of which have turnovers bigger than Ghana's GDP) so they sheepishly negotiate and concede new and even more favourable investment terms to avoid confrontation. Procurement in both the public and private sectors is of special interest. Even Presidents, all their appointees and special interest groups play in this arena.

'Gerrymandering’ aka rigging is the name of the game. Can you explain the constant raging battles between board Chairmen and their CEOs? As for the legislature just monitor all issues on which they reach quick consensus. Emoluments, Gratuity and any issue concerning their individual self-preservation. They even engage in staged ‘chicken’ fights ostensibly to fool us. They are our members. We know them well.

Do not forget that the individuals who constitute the Economic management team are also de facto members of the real economy. They feel the heat too. They also have their individual responses to the situation!! The mind boggling and incomprehensible ‘filthy’ agreements signed by seemingly responsible heads of organizations with the tacit approval of (or instructions from) presidents are the handy work of proud members of the real economy speeding furiously away from personal poverty.

By far, our members controlling the 4th Estate of the Republic (the media) give me the most unbridled joy and pride. By taking advantage of new, pervasive and instant social media platforms as well low cost technically advanced recording equipment they have fashioned out new 'terrorist' cells from which they unleash instant justice or threats of annihilation at the least opportunity.

Even the mafia would be impressed. At least they, the mafia, have been reputed to have a code of honor. Our media people now simply work for the highest bidder arguing the toughest cases in the court of public opinion for good money. They, 'hard working' media men also deserve to eat and live well too in any type of economy. The media terrain is a blood stained red ocean. Competition for scoops is tough.

Like hyenas they eat everything and anything including their own tongues. Peoples hard won reputations, truth, integrity, diligence and professionalism are consumed without remorse. They are no more sacrosanct. The days of the poor journalist just scraping by are gone forever. They will manufacture their own news if necessary to fill 'irritating' gaps in stories. They make and unmake even the toughest crooks. Their new-found power is amazingly impressive and they milk it unashamedly. These, are just a few practical examples of our responses.

For now, suffice to warn that until and unless these governments and their Bretton Woods collaborators eschew arrogance, recognize and respect the real economy ie the powerful 6th force (apologies to Prof Porter) and do away with their meaningless, disrespectful assumptions and theories they will continue to contend with our disrupting responses. We have the right to defend our way of life by any means possible.

For now, we choose corruption. It is existential!! The governments will last no more than 2 terms (we are working hard to limit them to one term only) as we disrupt all their attempts at achieving sustained macroeconomic stability at our peril. They are no gurus compared to us. Our corruption experience dates back to creation.

They are advised that only a genuine, transparent, impartial and comprehensive attempt at fully integrated, inclusive economic reforms guided by demonstrable humility and integrity while expertly designed with inbuilt continuous improvement mechanisms will appease us. The concerns and interests of the real economy at all levels should be progressively resolved.

Then and only then will we ask our members to renounce corruption as an economic weapon of choice. Then and only then will corruption be controlled or reduced and sustainable growth and macro-economic stability achieved in Ghana. Talk to the Norwegians and the Danish first then humbly come to the negotiation table for discussions with our team. We are ready when you are.

But till then remember that we, the people who constitute the real economy, will continue to chew our tongues if necessary.