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Whither Ghana’s economic ideology?

By B&FT/ Ghanabusinessnews

A collection of some of the best brains in the country were holed up in Akosombo for three days to plan how much better our lives can be, within the constraints of our resources specifically for the next one year but essentially to define the direction of Ghana's development over the next four years.

President Atta Mills gave an indication of what to expect when he suggested that participants should consider how best to improve those policies of the previous administration that are in consonance with the National Democratic Congress's development philosophy, but also to come up with a plan that strongly emphasises the aspirations of the NDC as outlined in the party's manifesto and also as per their campaign promises.

At the risk of sounding simplistic, this simply is that the socialist philosophy should drive Ghana's development agenda; that is, the comfort of the masses should be the overriding concern of government as against the desires of a relatively few owners of productive resources who think they should be pampered because they are the creators of wealth.

Whatever one's ideological inclination, the most relevant question now would be whether the budget plan, arrived at, would allow for the rapid expansion of the economy while also, intrinsically, creating space for the exercise of budgetary discipline by government.

Clearly, close scrutiny of the Ghanaian economy since the early 1970s as observed by Professor Killick last year in a lecture paper “Can we go on like this?” reveals a pattern that is instructive and which must guide us on what and where we place emphasis in our national development planning.

The 1970s to date
Four distinct periods, each of almost ten-year duration, are discernible over the past three-and­ half decades.

The first period (1973-1982), was characterised by a succession of short lived governments, but was however dominated in its early years by the Acheampong regime. It was mainly a period of hopelessly bankrupt governance. Budgetary discipline was non-existent and markets ceased to function. Production and incomes also almost ceased. Incomes and wealth came to be determined largely by whether­ one had access to licences and goods at official prices, which were then sold on the all-pervading black market at largely inflated prices. The economy just went to the dogs.

The next decade-long period (1983-1992) was under the rule of the left-leaning Rawlings PNDC military government.

Ironically, the period was characterised by the most sweeping, capitalist-inspired reforms. The World Bank/IMF-prescribed Economic Recovery Programme (ERP) was adopted and implemented. There were serious moves to depreciate the grossly over-valued exchange rate, as well as measures to re-build government revenues by controlling government spending and scaling back budget deficits. Inflation was halved, and there was also a retreat from control in favour of market mechanisms. Economic sanity was restored with purchasing power growing at an average of 2.5 percent annually - albeit, recovery in private investments and exports were rather disappointing.

The third period (1993-2002) straddles the Rawlings NDC government and the first couple years of the Kufuor administration.

Much as it was a continuity of the same political head and party through 2000, it did not have continuity in the management of the economy. Obviously, Rawlings was a better ruler as a military authoritarian than a democratic president. During this period, budgetary discipline was weakened, government deficits grew rapidly, financed through a rapid expansion of the money supply, and inflation soared. While investment continued to increase, the expansion of the economy slowed - indicating that much of the investment was not very productive.

The last period runs from 2003 to date. The Kufuor administration came to power in 2001 but could not get a grip on the public finances and economic policies till 2003, and the five years since then (except for the last four months) have been characterised by reduced inflation, further increases in investment and quite a sharp acceleration in the speed of economic expansion, with the GDP growth rate averaging six percent.

It also has been characterised by greater emphasis on the private sector, improvements in the business environment and further increases in private sector investment. The period also saw less of the ambiguity that marked the 1990s in regard to reducing the economic role of the state and developing the business sector.

There was increased budgetary discipline that witnessed the improvement of the country's reserves from a paltry US$300 million in 2000, to­ approximately US$2.9 billion in 2008. But that discipline largely broke down in Kufuor's final year. Currently, the cedi has depreciated over 25 percent against the dollar over the last year alone.

Discipline is paramount
Obviously, budgetary discipline has been key to the improved performance of Ghana's economy in the two periods of expansion - while the absence of it was characterised by economic decline. Not clearly obvious, but however not missing from the equation, has been the decline in economic performance attributable to government's antagonism towards the private sector. In the Acheampong and second Rawlings periods, a lack of respect and support for the private sector was a drag on the economy.

More unclear, but also very real, has been the negative impact of our political system which tends to be driven by political patronage - where the resources of state are used to maintain the ruling group or party, and therefore the state effectively becomes an apparatus, serving the interests of particular groups.

Development experts have been seriously advocating an end to that practice, as well as its reverse of the ruling government suppressing businesses perceived to be aligned to political opponents.

Credit: Emmanuel Kwablah
Email: [email protected]
Source: B&FT / Ghanabusinessnews

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