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Opinions of Wednesday, 1 October 2008

Columnist: Agbodza, Kwami

Free Market Socialism

Economic theory has always stated that nationalisation and privatisation are part of a continuum in an economic toolbox for the economic management of a society’s economy.

Under nationalisation, society does a number of things including what has historically been transferring ownership of a free market firm, e.g. VALCO to public ownership with or without compensation.

Under privatisation, society also does a number of things including transferring to full or partial private ownership publicly owned organisations (e.g. Ghana Telecom).

The two examples indicate that the terms, conditions and circumstances of such transfer can be anything but proper and legitimate.

In a free market, economic agents are supposed to compete for business and it is the most efficient firm that is supposed to survive with social and economic consequences for society for the better. That is the theory. In practice, free market firms hate competition and in practice, institutions are set up by society to prevent free market abuses arising from free market hatred for anything remotely resembling real competition. Free markets prefer monopoly or oligopoly selfishly. That way they face reduced or no competition and thrive profitably in the same.

The resemblance of possible competition can make free markets panic leading them therefore to take all steps to nip it in the bud. The tools they use historically have been as wide as depraved human nature will allow. It has included imposition of illegal regimes, unconstitutional removal of democratically elected governments, murders, killings and the kind of British High Commission supported gross human rights violations that happened in Ghana after the February 1966 coup as detailed in Dark Days in Ghana.

In the turmoil, that has gripped the global financial markets of late we have witnessed some of the following: the bailouts of Bear Stearns, Fannie Mae, Freddie Mac, Northern Rock and AIG; and the collapse of Lehman Brothers and HBOS. The American Federal Reserve for instance now privately owns AIG and the British State publicly owns Northern Rock. Nobody sees anything wrong with this Western-type free market except of course if Ghana wants to do something similar in other economic areas.

Some level of rationalisation has been expected in the Ghanaian financial industry; so far, it appears nothing serious has happened. Ghanaweb, in the Business News of Thursday, 31 July 2008, reported only “members of the North-Eastern and Western Chapters of the Association of Rural Banks (ARB) have expressed worry about the directives from Bank of Ghana (BOG) to increase the minimum share capital for the operations of rural banks to 150,000 Ghana Cedis.” Whatever the source of this increased share capital, it is no more a worry even if Communists come to their aid. They did in the case of Barclays Bank in the UK.

In all these free market manoeuvres, the Free Market Ideologues have been dishonest about why it is okay to bail out free market private sector firms but wrong to bail out civil sector firms, by which I mean ordinary families in a theoretical sense. Private families just like private businesses can both be seen as firms with well-specified goals.

Granted that the case has been made that society can use nationalisation and privatisation to assist private sector business firms in the interest of society.

The case can equally be made that society can also use nationalisation and privatisation to assist civil society families in the interest of society. Public and private educations are examples based on the argument of externalities.

Free Market institutions and ideologues have advanced alternative economic justification for these actions although the two scenarios are similar in essential aspects.

Economic justification has been advanced in the public mind that it is justified in the case of the former because the private sector is the engine of economic growth. Similarly, macroeconomic policies aimed at assisting civil society families are described as socialism.

These false premises then become the basis for people who attack the free market being labelled as socialists. Both are socialism. The former is also socialism but for the private sector only. So today, we have socialism in America for the corporate sector but if suggested for civil society say in health care, it is deemed unacceptable.

This duplicity disallows freemarket societies in practice from being just and free.

If the Bank of Ghana steps in to prop up the Rural Banks for arguments sake because their capital base threatens Ghana’s financial stability, it is no different if Government fiscal policy steps in to fund free education because the capital base of families threatens Ghana’s vision of a just and free society. Freedom at least assumes an educated society. In addition, justice assumes a balanced economy in the economic sense; hence an educated and trained workforce.

Ghanaian political leaders must stop listening to fraudulent economic arguments from members of the donor community and international organisations that stop us from subjecting the political policy of the Ghanaian State to the aspirations of the poor Ghanaian Majority.

The Ghana conservative-liberal political class that opposed Kwame Nkrumah because of socialism cannot today be practising state socialism for the same political class, through which they now own fleet of cars, houses, hotels, farms, businesses to name a few, some fraudulently. The wealth of Ghana must go to establish a just and free society for all Ghanaians in all sectors of the economy.

Kwami Agbodza