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Opinions of Monday, 24 August 2009

Columnist: Oteng, Maxwell

A National Conversation About Unconventional Ideas For Development (IV)


By Maxwell Oteng,

Thought #7: Communal/Community Capitalism has Great Potential One of the first basic principles you learn in Economics is that generally the markets are usually a good (efficient) way to organize economic activities. But we also know that sometimes you need government intervention to improve economic outcomes. In fact it is now known that a great deal of the successes of the so-called Asian Tigers was due active government initiatives through robust industrial policies. Since China started market-oriented reforms, its economic growth has been spectacular catapulting it to a global economic power. However it must be noted, as Dani Rodrik observes, that “China did not simply liberalize and open up; it did so by grafting a market track on top of plan track, by relying on Town and Village Enterprises (TVEs) rather than private enterprise, and through special economic zones rather than across-the-board trade liberalization.” In our communities capital market imperfect is so pronounced that it is extremely difficult to establish efficient capital markets to encourage private investments in those communities. Given these circumstances, the government can and should take some of the initiatives to whip up interests among the population in private enterprise and investments. One way the government can do this is through what I call "communal capitalism". 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 is 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 practiced in our communities through government assistance. Using the District Assemblies as springboards, the country can help identify and establish one firm apiece in each district according to the districts' respective comparative advantages. For example, set up a chocolate factory in a relatively abundant cocoa producing district, etc. ?Using all communication media and tools available, the District Assembles should embark on intensive and extensive campaign and education of their residents about business concepts of shares and stock holdings. Then under the auspices of the District Assemblies, float shares/stocks to generate seed money for start of the identified business units. Through shareholding the people in the community become owners of the company (or at best with 5% government ownership). ?The local people will choose the board members and other management personnel. 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 to help the people to buy the necessary equipment to start up the company. In some cases, the government may have to buy the necessary equipment and lease it to the local communities on a well-specified contractual agreement. In some future date these community businesses will not only become sources of employment, but also they will become sources of revenue for the government and the communities in which they operate. They may even help moribund communities (the consequences of rural-urban migration) become vibrant. This is significantly different from the old approach when the government owned the factories, and thus workers, through the problem of the "Tragedy of the commons" and "free riding", did not have the incentives to ensure their profitability.

Thought #8: Create a Jobs Task Force and Job Creation Financial Facility Small businesses are at the engine of economic growth of almost every economy including the industrialized economies of the West. I bet some people will be surprised to know that small businesses are "the heart of the American economy." According to the US Small Business Administration (SBA), in the US small businesses make up more than 99.7% of all employers. These businesses create more than 50 percent of the nonfarm private gross domestic product (GDP). Small businesses employ about 50 percent of all private sector workers, make up 97 percent of exporters and produce 29 percent of all export value. Small patenting firms produce 13 to 14 times more patents per employee than large patenting firms. The latest figures show that small businesses create 75 percent of the net new jobs in our economy. So we need to support or small and medium business. We have to encourage people to develop their “investment minds” and “entrepreneurial spirits” and be risk-takers. But you cannot even take risks when you do not access to a credit facility to fund your risk-taking initiative when you get to the implementation threshold. So I suggest the establishment of a Jobs Task Force and Job Creation Credit Facility in every district. The purpose of the Jobs Task Force will be to encourage individuals or group of individuals to think of ideas for small business, develop business plans for their ideas and compete for government assistance to start the business. Maybe each district will select from among the pool of application, at most ten business ideas with the greatest potential for success for government financial assistance. The Job Creation Facility will be established as an entity that will give interest-free loans to business initiatives that have some potential to be successful.

Thought #9: Using faith-and community-based organizations Maybe we can borrow a page or two from the United States government’s faith-based and Neighborhood Partnerships. This was first started by former President George W. Bush and is being continued by President Obama. The idea behind this initiative is that faith-based and community organizations are well situated to meet the needs of local individuals, and so their capacity must be strengthened and expanded to provide government-funded social services. Most Ghanaians, especially those in our rural communities, belong to at least one form of faith-based or community-based organizations. While these faith-based organizations primarily provide spiritual fulfillment for most poor people, I think that with proper guidance they can be mobilized to play significant roles in poverty alleviation and related socio-economic transformation programs. For example, we can channel some of the District Assembly Common Fund through community- and faith-based organizations. ?To qualify for the fund, these organizations must come up with a development plan that aims at improving the quality of life of their members and communities. These plans should be verified, scrutinized and debated upon by members of the District Assemblies to ensure their relevance and applicability. Obviously we have to make sure that government funds are not used to promote any religion. For this reason there must be clear instructions and guidelines in place to tell qualified faith-based organizations about what they can use the money for and what they cannot.

Thought # 10: National Day of Discussion and Collection of Ideas I wonder how great it would be if we set a day in a year to let our people engage in the discussion and collection of ideas for developing their locales in particular and the country as a whole. For example, suppose on March 6th every year in lieu of all the marching (mostly by unassuming school children in sweltering heat) and other Independence festivities that are increasingly losing their significance, we ask every town and village to hold a town/village-hall meeting or forum to discuss ideas for national development. This will be a great example of active civic engagement and bottom-up development approach. I bet one or two useful ideas will come out from the people of Nyansakrom.

So what are your unconventional ideas or thoughts for moving Ghana forward? Share them. Let the national conversation about ideas begin!