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Opinions of Sunday, 14 February 2010

Columnist: Acquaah, Samuel Jude

Why Government Should Stay Away From Apostle Sarfo’s Business

The Magic Of The Market: Why Government Should Stay Away From Apostle Sarfo’s Business

INTRODUCTION

Apostle Dr Kwadwo Sarfo is the well-known founder and leader of Kristo Asafo Church. But he’s more than (or rather different from) your regular “man of God”. His popularity derives from his charisma, unflinching philanthropy, and what few would associate with a pastor - an unquestionably acute technological ingenuity.
For years, this man has dazzled Ghana with a plethora of inventions: electric transformers, breath-controlled television sets, automobiles, block making machines, ceiling fans, micro phones, aeroplanes and many more. Apostle Sarfo has defied the specialisation that characterises contemporary technology. And remarkably so as an individual and not an organisation!

Something else makes Apostle Sarfo unique; the man’s aims are as moving as his industry. He claims, and very confidently so, that he is capable of, and, is actually going to use his inventiveness to transform Ghana and Africa economically through technology. Few pastors, fewer technologists, and yet fewer men of the rare breed of pastor-technologists, are motivated by such powerful socioeconomic objectives. Presently, there are a number of highly respected individuals who apparently share in Apostle Sarfo’s objectives and his confidence in achieving them.

Further, a lot of people are advocating that the state should assist Apostle Sarfo to achieve his objectives. So far, some suggested forms of assistance from government include financial guarantees to enable Apostle Sarfo to produce his inventions on a large, commercial scale; favouring Apostle Sarfo’s products and services in state purchases and contracts; and entering into a commercial partnership with Apostle Sarfo. Apostle Sarfo has not shown to be uninterested in such suggestions and has himself made similar statements.
It is this assistance for Apostle Sarfo that interests me: I am opposed to it. I record here that I am not against requesting government to do something to enable Apostle Sarfo to succeed. I rather contend that, what we must ask of government for Apostle Sarfo (and indeed for every Ghanaian) is what government ought to and is capable of providing: a suitable environment for citizens to freely live and legally pursue their economic aspirations to the best of their abilities.




THE CASE FOR MARKET ECONOMICS
“… the ability to own property and to transmit it to our families gives each of us an incentive to produce to the utmost of our abilities – and, in producing for ourselves, to produce for the common good.” W. Barton Leach, Harvard LawSchool, 1960
My opposition to government’s involvement in Apostle Sarfo’s project may be dismissed from a fundamental philosophical point: that government has a responsibility to do commercial business for the social good, and that, in Apostle Sarfo’s case, government’s responsibility has even been lessened through the resourcefulness and initiative of an enterprising citizen who further appears to be receptive towards the state’s involvement in his business. Therefore, government has no reason to stand by.
Consequently, I find it instructive to present my argument for the fundamental philosophical superiority of government’s non-engagement in commerce over its engagement in it, to counter any such dismissal. In short, I briefly revisit the old debate about capitalism and socialism.
Arguments about an individuals-oriented economy (or capitalism) and a collective-oriented economy (or socialism) have constituted the attention of the world for a very long time. In his book, Global Business, Charles W. L. Hill, traces the argument to as far back as the age of Plato and Aristotle. In the early 1990’s, most people thought the debate had been settled with what Margaret Thatcher said was “… complete victory for the West and the subdued peoples of the Communist Empire” after the collapse of communism. Not so. Leftists are quick to mention the stories of Malaysia, India, China and even the Nordic states as evidence of the strength of their arguments.
I dare say that while the Nordic countries themselves consider their economies- though a very mixed type- more market oriented than command or state-directed, China and India started experiencing their economic progress after they liberalised their economies in 1979 and 1991 respectively. Malaysia’s socio-political history warrants a particularly deeper analysis of its economic achievements than from a strict, economic dimension. But so too, the collectivist may retort, are the experiences of successful market economies like Chile, South Korea, Japan and even the United States and Europe. I’d therefore rest my argument on my own Achebe-inspired logic.
Chinua Achebe provides a very powerful argument for market economics from a most unexpected source. In Things Fall Apart, the sluggard, Unoka tells his son, the ambitious Okonkwo, after a bad harvest year for the whole village that he shouldn’t mope about his losses, for a general failure is not as bad as a personal failure. In Unoka’s words, “It is more difficult and more bitter when a man fails alone”.
Even though Unoka was no wise man as presented in Achebe’s award winning novel, the logic of his saying is formidable. In the literature class, this was my interpretation of his words:
If the score of each student in a test was going to be the average of the sum of the class’s total score, then students will surely have very little incentive to study. After all, no matter how hard you study, you will score only as much as the laziest student or the most studious one. The argument can be extended further that, with no reward to study hard, every student will not study hard and will therefore score a low mark. The total class score will therefore be low and result in a low class average.
On the other hand, if every student is aware he will score only as much as he earned as an individual, students will have cause to study hard and score high marks resulting in a high total class score and therefore, a high class average.
Therefore, the students of the hypothetical class will perform better individually and collectively too as a class, if the motivation to work hard is more personal than collective. Similarly, because in a market economy the incentive to work hard is the individual’s own welfare, everyone will work hard to earn sufficiently to live decently, leading to the creation of a productive and prosperous society.
Therefore, a market economy is ideally a better system than a collectivist system, both for the good of the individual and for the sustenance of the state or society.
The case for a market economy, however, places very important responsibility on government. Edmund Burke argued that, freedom does not mean government should let go the reins of governance, but overseeing a sensible mix of liberty and social discipline.
The duties of government, not charitable involvement in business, I believe, are what we should demand of government to live up to.
Let us turn our attention, then, to the duties of government in a market economy and assess how well they are being discharged in Ghana.



…THE MARKET ECONOMY, GHANA, AND THE GOVERNMENT OF GHANA.
“…Life, Liberty, and the pursuit of Happiness [;]… to secure these rights, Governments are instituted among Men…”
American declaration of independence, 1776
A free market economy can be as delicate to manage as it is productive in its results. I consider government or the state’s role in creating an enabling business atmosphere in three ways: securing law and order, overseeing an efficient public administration and managing a stable macro economy.
LAW AND ORDER: A market economy requires citizens to own property and manage it to create wealth for themselves. While citizens do this, it is important that their persons, property and businesses are protected from damage or destruction. This is to enable every citizen derive the maximum reward from his or her industry.
The state must therefore ensure that while it does not frustrate entrepreneurship with too many regulations, legitimate business is allowed to thrive by enforcing law and order through an effective security apparatus. This can be achieved through a well educated, well equipped and well paid police force. Affiliate agencies like the Customs Excise and Preventive Service and the intelligence agencies must be kept equally functional through similar provisions.
Ghana’s police service, especially, is often criticized for substandard performance. Although our criticisms are not unfounded, we must accept that, no amount of criticism can raise the performance of the police service beyond a certain standard if the service is not adequately resourced to do so. Police academies, and indeed, all institutions that train personnel for internal national security jobs should be equipped to train competent security professionals. Additionally, the state should pay security personnel well to motivate them to do their jobs faithfully.
Functioning law enforcement machinery is oiled by an efficient justice system. An efficient justice system, apart from getting law breakers punished, is also necessary to swiftly resolve disputes regarding business and property.
Leading business persons and economists in Ghana, and members of both the past and present governments, agree that an inefficient justice system is one of the biggest problems with doing business in Ghana. I agree. Not because I possess the competency to discern legal inadequacies, but, as witness to a horrid demonstration of the inefficiency of our justice system:
I K Debrah was a successful businessman and educationist until his death in March 1998. Later that year, a legal dispute arose over his estate. Since 1998, the court is yet to declare its ruling in the case concerning his estate. Meanwhile property worth several hundred thousands of Cedis- even by the unskilled estimation of an undergraduate student- remains with no legal owner to manage.
My mother, a daughter of I. K Debrah, and her siblings, are naturally interested in judgment being passed quickly and favourable to them. But my concerns are different; that valuable property which can be managed to yield huge benefits for any developer and the state is practically going waste because of a snail-pace justice system.
We must have a well resourced court in every district. Judges and court officials must also be paid well to motivate them and to prevent them from being influenced by corrupt citizens who may want to buy justice. This will certainly involve huge financial commitment from government. The executive and parliament must appropriate more money to the judiciary in order for it to function well.
Definitely, there are a lot of other things that the state has to spend on. However, for an effective liberal democracy, investing in an efficient justice system is not just a critical social expenditure, it is good business too!
PUBLIC ADMINISTRATION: Government also has an important supervisory role in a free market. It does this to facilitate commerce. It performs this role through a permanent bureaucracy. This bureaucracy, usually called the civil service, includes all the state institutions that are technically referred to as ministries, departments and agencies. The creation of a whole ministry responsible for public sector reforms, for me, evinced the Kufour administration’s acknowledgement of the need to radically revamp Ghana’s civil service. However, Kofi Annan’s experience with his well-intentioned UN reforms and similar unsuccessful attempts to reorganise and reinvigorate government bureaucracy in other parts of the world show that, it can be very difficult- not impossible though- to reform bureaucracy. Sometimes, one is tempted to believe that the bureaucracy is created to be inefficient.
To create a functional bureaucracy, recruitment of professionals into the civil service and promotions within it must be based on performance in specially organised exams and interviews. An independent organisation or agency should be responsible for conducting these examinations. The organisation or agency that will be mandated to do this work must be open for scrutiny by the public and should also directly report to parliament. This will ensure that people who are working for the state are the most competent applicants for their respective jobs. Additionally, performance in promotional tests, which can be considered together with a worker’s experience acquired over the duration of his stay in the service, will provide a more meritorious basis for progression instead of just length-of-stay in the service.
Tests are not the only way of recruiting and retaining quality human resource for the nation’s bureaucracy. Working for the state must also be financially rewarding. Intelligent, resourceful citizens must consider it economically beneficial to work for the state. It is unhealthy for Ghana as a nation that a lot of her young men and women should consider it far less rewarding, and by extension, far less prestigious, to work for the state than for a private organization. Well paid civil servants will effectively carry out the state’s duty of regulating business which is very important for a market economy.
Lastly, modern management practices should be applied to the running of the state’s bureaucracy to make it more responsive, energetic and efficient. Of course, government bureaucracies are inherently different from private corporations, and as American political scientist, Donald F. Kettl, has noted, a lot of successful managers from private organizations enter into public offices only to realise there are some management principles that will simply not work in public institutions. Nevertheless, some strategies can work equally well for both private and public institutions. For example, to make sure all managers are faithfully performing their duties, the interior of office buildings can be constructed with transparent material so that what each manager does in his or her office can be seen by every other person. This is done in a number of private corporations and has yielded good results.
Parliament should also be given more access to the inner happenings of the bureaucracy and should be empowered to scrutinise its performance. The bureaucracy is the tool of the executive. A supervisor (parliament) can best assess a worker (executive) when he knows how good his tool is.
MACROECONOMICS: Fiscal and monetary management of the state are exclusive responsibilities of government. The macroeconomic requirements for good business should be assiduously pursued: low interest rates, low inflation, a stable currency are all required for business to thrive.
However, these macroeconomic benchmarks should not be pursued to the neglect of substantial spending on the part of government to stimulate the economy. Government should readily spend on collective goods like quality public education, roads, national security and promotion of national culture and the arts. Market economies function best with a thrifty government, not a parsimonious one.

IT’S NOT A PERFECT MARKET THOUGH
When there is law and order, business is properly regulated through a functional bureaucracy, and there is macroeconomic stability, business thrives to create a prosperous nation.
But it’s not as simple as that. The world, though analogous, is different from the hypothetical class of students who are motivated by their individual interests to study hard to excel. In the harsh and messy reality of life, some students may not be as gifted as others and will need extra attention; others may be frustrated by family problems and will need special counselling; the class may not even have the required number of teachers or text books. However, whatever the situation, every member of the class will have to be well prepared by the school to pass his or her exams and graduate.
So it is with the real world, especially in this era of globalisation. Ghana’s entire budget is about 200 times less than what the United States spends on subsidies for farmers; abundant, cheap, and – increasingly - highly skilled labour enables China to flood the world with cheap “super” competitive goods; the underdeveloped physical infrastructure in Ghana and inadequate research facilities in this country all place a very important paternalistic responsibility on the state as far as indigenous businesses and the nation’s economy are concerned.
This special responsibility of government is indefinable and different governments handle it in different ways. For example, similar to what the US government did for Boeing, Japan and South Korea provided heavy financial incentives to their electronic and semi-conductor industries to make them succeed; the Indian government will rather keep hundreds of millions of Indians underfed than open its market to heavily subsidised Western farm products which may eventually destroy India’s agric industry; Evo Morales chose to suspend mining in Bolivia until foreign mineral firms agreed to renegotiate “exploitative” contracts.
For Ghana, we must definitely consider some degree of protectionism to save some indigenous businesses from undue foreign competition. Government should enter businesses like the production of bio diesel from jatropha which is not just overwhelmingly promising and doesn’t need the market to prove so, but is also critical to meeting our energy requirements. Additionally, for reasons of national sovereignty, we should restrict some businesses like to only Ghanaian entrepreneurs. These are things every serious nation does. We choose to disregard them if we want to be martyrs for capitalism!

WHY GOVERNMENT SHOULD STAY AWAY FROM APOSTLE SARFO
I believe it is assistance like what Japan and South Korea offered to their semi-conductor related firms, or what the United States’ government did for Boeing, or what I myself advocate should be done with regard to biodiesel production, that some people are asking for Apostle Sarfo. I oppose this for the following reasons:
Firstly, if Apostle Sarfo, a man who has fared pretty well with a number of businesses including running very successful commercial farms is finding it difficult to proceed into commercial production of his creations, then it can be reasonably concluded that the business environment for manufacturing may still not be congenial enough. Otherwise, Apostle Sarfo’s products do not show enough promise to attract financial capital to enable himto enter into commercial production.
Either way, the state may be able to get Apostle Sarfo started, but he will be unable to sustain the business without continuous government support. For those who may want government to support him for a substantial period, if government will need to support him for a considerable length of time after the business has been started, it would mean that public money is being spent on a venture which cannot run without state support because it is actually not profitable.
Secondly, it serves Apostle Sarfo’s own interest that government refrains from interfering in his project. Apostle Sarfo is claimed to be very efficient in utilising resources for his manufacturing. Should he start receiving financial assistance from the state, the pressure to sustain and improve his efficiency might wane and reduce his competitiveness and the profitability of his business. We must not forget because of the state’s involvement, such a loss to Apostle Sarfo will also be at the cost of the tax payer.
Furthermore, I believe Apostle Sarfo’s creations, if they are all for commercial purposes, may be too many. He may rather want to concentrate on a few items that he is most efficient at producing and will sell very well. His wide technological interest moves him to what I dare say will pass for adventurism. If he does not concentrate on fewer items for commercial production, I am sure his losses in the sale of some items will compel him to consider producing fewer items. Otherwise - and we pray so - if he makes profits from the sale of all his items, then he will be properly informed through the market mechanism to commercially produce every single one of his creations.
If government provides support for Apostle Sarfo, I fear the man may create and produce a lot more items; more for the fulfilment he understandably appears to derive from his inventiveness rather than making profit to sustain his business. Here again, because of the state’s involvement, public money would have been spent uneconomically.
Fourthly, I don’t believe Apostle Sarfo’s projects have been shown to be OVERWHELMINGLY promising. However, a lot of his inventions will require substantial capital to produce commercially. It will therefore be risky for the state to commit public funds to such a venture. A more optimistic person may say that there are no businesses without risks. But I think unlike America’s ability to support Boeing, or what South Korea did for its semi-conductor industry with billions of dollars of grants and loans from Japan and the United States, it will be impolitic for Ghana to throw scarce money at Apostle Sarfo’s project when it has not been shown to be overwhelmingly promising, no matter how lofty his aims are.
Lastly, Apostle Sarfo is not alone in his innovation and resourcefulness and drive. There are many diligent Ghanaians who want to start one business or the other but are finding it difficult to do so in a legal, dignified way because they are constrained by an improving but still difficult business environment. Government should be impressed upon to create the best possible environment for entrepreneurship to thrive. Charitable support like what people are advocating should be offered to Apostle Sarfo cannot be an adequate substitute for a congenial business environment.
I believe a good business environment is what groups like the Association of Ghana Industries are advocating. What businessmen like Apostle Sarfo need and should be demanded is not charity from government, but an obligation that government owes citizens and itself. This is what all Ghanaians must impress on the nation’s leadership to provide. And when it is provided, every good business will benefit.
THE MAGIC OF THE MARKET
The magic of a market economy has less to do with the London Stock Exchange or the intricacies of Financial Accounting. It is personified by Celine Dion, David Beckham, Oprah Winfrey, Jerry Yang, and John Grisham– singer, footballer, talk show hostess, engineer and writer: individuals who do what they do to the “utmost of [their] abilities” and earn what they are worth. It is not just about making money, but being the best you can be.
But the magic of the market can only occur in a system of merit; a system where you get only as much as you deserve or as much as society values what you offer. Government’s role in making the magic work is to create the system of merit. When the system is created and commerce is brisk, society prospers and government itself gets more revenue through taxes to provide more of the collective goods that we can’t provide for ourselves individually.
SAMUEL JUDE ACQUAAH
atoacquaah@yahoo.com
August, 2007