We have read the observations of Dr Bawumia, the running mate of the NPP presidential candidate for elections 2012 in the “Daily Graphic” of Thursday May 3, 2012. His recent lecture is an opportunity to debate the development policy alternatives of our country with an expectation that the policy prescriptions of the various political parties will be the pertinent basis of our political and electoral choices.
According to the vice presidential candidate, he is surprised that the single digit inflation of the economy has not achieved a lower cost of living in Ghana. He suspects a statistical error or that the claim by the NDC is simply false. It is interesting and instructive that government response was not in denial of his assertion, but split hairs on statistical definitions, assumptions and clarifications that were not easy to follow and said nothing about the economic and living condition of the people.
The Convention People's Party (CPP) is however amazed at Dr. Bawumia's surprise that expenditure cuts and tight monetary policy to reduce deficits and control inflation in under-developed and post -colonial economies are not sufficient and do not necessarily lead to a reduction in the cost of living or improve the quality of life of the people.
In fact, Dr Ashong formerly of Centre for Policy Analysis and a former Deputy Minister of Finance and Economic Planning expressed the view that equitable growth and job creation capacity of under-developed economies could be sacrificed by a tight fiscal and monetary policy approach in stabilisation. He warned at the Homecoming Economic Conference of the Kufour administration that “government should not sacrifice growth in the fight against inflation.”
We are again surprised by the view expressed by Dr Bawumia in the light of the experience of researchers, policy makers and development managers in under-developed and post- colonial economies. The contemporary knowledge is that stabilisation measures by expenditure cuts and tight monetary policy only treat the symptoms of the deficits because the deficits do not by themselves cause inflation but propagate inflationary pressures caused by structural distortions such as fluctuations in export earnings, rise in import expenditure levels (“external shocks”) and stagnation in domestic agri-business.
This is in fact the conclusion of a study on “Economic Stabilisation in Ghana” by Dudley Seers and David Felix in World Bank Report No AF 75 A of 24th May 1968. The observation is also affirmed by the article “Inflation in Chile- An Unorthodox Approach” in International Economic Papers by Osvaldo Sunkel, a respected world class economist.
Indeed the cause of the deficits in Ghana is explained correctly and succinctly by Dr J.K Kwakye a Senior Economist at the Institute of Economic Affairs as reported in the Daily Graphic of Thursday May 3, 2012. Dr Kwakye pointed out that “the continuous high trade and current account deficits reflected large imbalances between exports and imports.”
The Nkrumaist development policy direction that price stability, the prosperity of our nation, an improvement in the quality of life of our people and a less dependent economy in a post-colonial economy lie in a reduction of import expenditure, the substitution of imports with domestic production to create jobs and an increase in export earnings is confirmed by the findings of Dr. Kwakye.
The policy recommendation of Dr Kwakye is that “reducing the imbalances calls for policies to increase export earnings including the expansion and increase of value content of exports and to reduce import demand.” He also recommended “support for domestic industries to produce more import substitutes.”
The Nkrumaist policy prescriptions from the standpoint of its development philosophy of decolonisation thus include,
1 The development the productive resources of the country to satisfy domestic demand and export.
2 The diversification of the agricultural export commodity sector.
3 An increase in the production of food and raw material agriculture for food security and industrialisation.
4 The development of inter-regional and continental trade.
5 Investments in the social sectors of education, health and housing.
The policy justification is that fiscal and monetary policy for sustainable long term stability is complemented and underpinned by investments in the productive sectors of the economy to increase export receipts and reduce import expenditure.
The implementation strategy of the CPP in this regard will be the development of a partnership between a CPP Government as provider of public goods and services such as research and technology, the private sector as strategic investors in processing plants with government support where necessary and applicable, and organised farmers in food and raw material agriculture with support from government as producers of primary produce with market access to the processing plants.
The policy outcomes will be;
1 The creation of jobs in the agricultural and manufacturing sectors.
2 Modernisation of agriculture from subsistence to industrial and commercial agriculture.
3 Increase in agricultural and rural incomes.
4 The linkage of the manufacturing and agricultural sectors.
5 Growth and expansion of the manufacturing sector.
6 Reduction in balance of trade deficits.
7 An internally sustained and rigorous price stability.
Dr. Bawumia also stressed that we cannot do the same things and expect different results. The lesson is that it may perhaps be the case that sustainable price stability that delivers quality life to our people may not necessarily be the adoption of tight fiscal and monetary policy but a fiscal strategy that balances short term stimulus and long term stability within the policy framework of the CPP development philosophy of decolonisation of our economy.
The study of Dr. Kwakye confirms that our development imperative is the transformation of our colonial import dependent peasant agricultural economy with structural deficits to an internally sustained and less dependent industrialised economy that is supported not by subsistence but commercial and industrial agriculture.
Dr Bawumia has given an indication that there have been monumental policy and leadership failures in the economic development management of our country by the P/NDC and NPP because after twenty nine years of implementation of tight fiscal and monetary policy, the deficits and currency depreciation are recurrent if not endemic.
Dr. Bawumia has truthfully and correctly noted with dismay and regret that in spite of these policy measures or because of it, we remain a dependent economy on “donor support”, a fragile peasant agricultural economy with mass unemployment and a low standard and high cost of living. What the Vice Presidential candidate did not say however, were the reasons for the adoption of the policy in the light of its patent failure.
The deficit reduction strategy of tight fiscal and monetary policy is deliberate and self-serving. The concessionary loans that are extended by multi-lateral financial institutions as a condition for its adoption gives procurement rights to our decision makers and serves as the feedstock of their corruption for the purchase of political power and self-satisfaction. (The NPP and NDC have their preferred road construction firms). For the multi-lateral financial institutions, the policy condition that the loans are precluded from utilisation in the directly productive sectors of the economy and the exclusion of commercial loans to Government ensures that we are debt tied and dependent on them.
The economic development history of Asia has demonstrated that the economies of Malaysia, China South Korea, Indonesia and India were transformed from peasant agricultural economies to be industrialised within twenty years. Ghana can achieve same with the relevant policy that is cognisant of its development history and mission that necessarily means the abrogation of colonial relations and selfishness in our development efforts.
The time is now for Ghana to re-commit herself to her mission in history in the struggle for economic freedom and prosperity under the vanguard leadership of the CPP. A vote for the CPP is therefore a positive vote for the most patriotic, nationalist and non-ethnic based political party with the most relevant and viable development policy guidelines and prescriptions that are founded on our development history of anti-colonialism and Nkrumaist enlightened self-interest.
The bedrock of the development philosophy of the CPP is that “We prefer self-government with danger to servitude in tranquillity”and we embrace the development responsibility of colonial freedom that “Our independence should demonstrate that the black man is capable of managing his own affairs.” We acknowledge the additional responsibility to make a contribution to global civilisation from the perspective of the “African Personality” and the quest of continental union as the necessary condition for our growth and development. These are the creeds that founded our nation and remain the foundations of its existence. They are our commitments, our path to development, our historic mission, and the footholds of our prosperity and dignity.
Ekow Duncan
CPP Shadow Cabinet Member on Agriculture
www.conventionpeoplesparty.org
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