An economist, Dr. Nii Moi Thompson, has questioned the government's repeated claims of superior economic management and said available evidence from its own policy documents indicate an economy in decline that needs to be saved.
“You can't address a problem that you don't even recognize exists,” noted the outspoken economist, during a lecture jointly organized by the Patriots of the Convention People's Party (CPP) and the Youth for Action Ghana at the University of Cape Coast on March 6, in observance of Ghana's 49th independence anniversary. Dr. Thompson spoke on the topic; 'The Economy of Ghana:
Yesterday, Today, and the Way Forward.'
In a spirited graphs-and-tables-filled presentation that spanned about two hours in a near-capacity university auditorium, Dr. Thompson took his audience through a history of Ghana's economy, starting from the Guggisburg plan of 1920-1930, which he described as the world's first national development plan, through HIPC in 2000 and ultimately, 2006.
He said the government's claim of macroeconomic stability was based on “miscalculations and misrepresentations,” noting that annual inflation averaged 20.0 percent between 1997 and 2000 and 22.0 percent between 2001 and 2004.
“How can this represent a fall in inflation,” he asked, noting that that is one reason why real interest rates are high and businesses are not borrowing. ”Go and look at p.46 of the 2006 budget. Credit to the private sector is declining,” he added.
He said the government's budgets are also riddled with what appear to be deliberate misinformation of Ghanaians about the true pace of development. He said road projects that were reported in the 2005 budget as having been completed in 2004 were again reported in the 2006 budget as having been completed in 2005, while roads reported to be at an advanced stage of completion in 2004 were reported to be at lower stage of completion in 2005.
Dr. Thompson called for a new kind of leadership that would be selfless, modest and visionary. “Building presidential mansions while slashing government allocations to rural water would not bring us development; it will only create a society of extreme privilege and extreme deprivation. In fact, the $1,000 per capita income being advocated by the government for a per capita income status by 2015 will not, I repeat, will not, make Ghana middle income.
With the current cut-off point of US$965, inflation would ensure that we remain low-income in 2015, even if we attain one thousand dollars”
To avoid such a situation, Dr. Thompson said we need to make the Ghanaian economy globally competitive by adopting what he called C-cubed:
Cost containment, cost reduction, and cost management, noting that we should look beyond non-traditional exports like yams and pineapples and consider strategic exports based on knowledge and technical services rather than physical exports.
He said although Gordon Guggisburg, the governor from 1920-1927, could raise only half of the projected 24 million pounds proposed for the plan, he prioritized his expenditures and thus was able to complete certain key development projects which have survived till this day.
As examples, Dr. Thompson listed Korle Bu Hospital, Achimota College, Takoradi Harbour, and over 3,000 miles of paved roads, in addition to the existing 260 miles of road that were then in existence. The proposed Kumasi-Tamale rail line, however, could not be constructed although Akim Tafo and Kumasi were connected by rail as planned.
Dr. Thompson noted that the global economic recession of the late 1920s and early 1930s led to a collapse in exports from the Gold Coast, resulting in widespread social disaffection, including the famous cocoa hold-up in1937. Continued unrest through the 1940s led to the boycott of European goods and stores initiated by Chief Nii Kwabena Bonne of Osu in 1948.
An inquiry into the disturbances that followed laid the ground work for self-government in 1951, he said, and eventually, independence in 1957. Dr. Thompson noted: “During this period, the Nkrumah government continued with the aggressive development of the country, with emphasis on infrastructure, schools, hospitals, electricity, etc.”
He said the 7-year development plan of 1963/64, which was the first comprehensive and coordinated plan in the nation's history, switched emphasis from infrastructure to the productive sectors, namely agriculture and industry.
“The plan was supposed to make Ghana a light-industrial country by 1970 and ultimately by this time 'a heavy industrial country on the scale of the U.S. or Japan,” the eminent economist said to loud applause from the audience. “Unfortunately, the subversion of 1966 set in a period of disarray and retrogression from which we are yet to recover,” he added.
He said in 1962, for example, Ghana's per capita income was $190 while South Korea's was $110. “In 1970 South Korea overtook us at $260, compared to $250 for Ghana. They have not looked back since. As I speak, South Korea has a per capita income of about $18,000, while Ghana's is less than $400. In fact, South Korea now gives aid to Ghana, including Hyundai vehicles, on which they insist we should display their name. How much more demeaning can it get?” he asked.
Dr. Thompson said the retrogression continued through structural adjustment years until 2001, when Ghana officially accepted the tag of Heavily Indebted and Poor Country (HIPC) and went begging for “debt relief”. To qualify for HIPC, Ghana had to meet a number of conditionalities from the IMF, World Bank and the countries's development partners.
According to Dr. Thompson, the costs of meeting these conditionalities have far outweighed the benefits of going HIPC, hence the economy's inability to grow at an appreciable rate.
He explained: Thanks to improvements in the global economy, cocoa and gold prices recovered after 2000, while the rate of change in world oil prices slowed down considerably. How, the insistence by the Bretton Woods Institutions that we raise the price of everything 'petroleum products, electricity, water, etc.' irrespective of the impact on the economy and without any corresponding increases in the quantity and quality of utility services - has made Ghana a high-cost economy and undermined our global competitiveness”
That's why the economy is not growing, why key areas like manufacturing and electricity and water generation, as well as fisheries, have been declining since 2000, despite the government's proclamation of a golden age of business.”
Dr. Thompson noted that the recent increase in fuel prices was unnecessary, arguing that “we can sell petrol for just under ¢30,000, perhaps lower, if we get to know more about TOR's operation. Such price containment, if well managed and aligned with other policies, should give the economy the breathing space that it needs to grow.”