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01.12.2019 Feature Article

Investigate The Economic Growth Of The NPP Gov't [Part 1]

Investigate The Economic Growth Of The NPP Gov't [Part 1]
DEC 1, 2019 FEATURE ARTICLE

Fellow Ghanaians, sometimes it is more tearfully painful than menstrual cramps to note that many of our leaders are nothing more than political vultures, leeches, and scammers, masquerading as public officials. And their sole aim not of service but to downplay the intelligence of the citizens even if by crossing the line of decency in our moral fabric.

In Book of Luke 17:1 we read that "offences will come: but woe unto him, through whom they come."

Is it not fascinating that a political party that claims to be a liberal democrat, has studiously ignored the principles of liberal democracy and rather clinched to the principles of Social Democracy they constantly bastardize?

The National Democratic Congress, NDC, espouses Social Democracy as its ideology and approach to governance; and the New Patriotic Party, NPP, claims to be Liberal Democratic political party. But one finds that both political parties appear confused. Whereas the NPP deserts its ideals of liberal democracy and finds comfort in Social Democracy, its biggest opponent NDC appears to have also found tranquility in the ideals of liberal democracy. Yet both political parties' communicators beat their chests and claim to be affiliated with what they are not.

For instance, president Akufo-Addo in the 2016 NPP manifesto, bragged that Ghanaians know them (NPP) to be staunchest liberal democrats and that, they always stand for their values as liberal democrats since their formation years. President Akufo-Addo pointed out that unlike the National Democratic Congress, NDC, that seems to have just woken up one morning to call themselves Social Democrats with little or nothing to show for it, the NPP has always stood for what they believe in. But one is rather at a lost why such a liberal democrat can vamoose and vacate his party's ideals and cling to what he always lambaste? Is it ignorance or incompetence?

Isn't something fishy about that? Indeed, there's something fishy which I want to uncover in this epistle.

For those who are not Political First Class Animals and do not know what these approaches of governance mean (social democracy and liberal democracy claimed to be championed by the NDC and the NPP respectively is), let me with all political jargons put aside define them for you.

Social democracy is a method of governance or governmental ideology in which much effort is made by government to try to regulate the affairs of the people's endeavors especially in the markets. There's some degree of monitoring by government every now and then to ensure the well-being of the citizens. In social democracy, government embarks upon social intervention programs by lessening citizens' stress.

On the other hand, liberal democracy is the opposite of social democracy, where there is a kind of free range economy or markets. Governments that champion liberal democracy allows the system to work for itself. Citizens find themselves, under liberal democracy, in a state of survival of the fittest kind of environment. Only the might, the smartest, and the wisest should dominate. Competition is higher. Government hardly comes in to provide a level playing field for all, and there are no social intervention policies!

In summary, social democracy tends to exhibit features of Socialism (that was championed by the Soviet Union) and the liberal democracy tends to portray the characteristics of Capitalism (championed by the United States of America). One striking difference is that, social democracy cherishes social intervention programs and liberal democracy does not.

Now, my Ghanaian readers should look at the methods or approaches to governance by both the NPP and the NDC and identify which political party belongs to what? It is quite clear that both NPP 1 under former President Kufuor and the current NPP 2 under President Akufo-Addo, prioritized social intervention policies thus abandoning the ideals of liberal democracy and holding tightly onto the values of social democracy!

At least under former president Kufuor we witnessed National Health Insurance Scheme (NHIS), and the School Feeding Program, as a major social intervention programs carried out by a supposed liberal Democratic Party. Then, in this current NPP government 2 under President Akufo-Addo, we are witnessing again, social intervention programs embarked upon by the NPP as a liberal Democratic Party.

Why? Are the members of the NPP confused? Or they simply have zero knowledge about what liberal democracy is all about?

I would try to find answers to these pugnacious questions and point out the reason why the NPP always try to steal or snatch the ideals of social democracy proclaimed by the NDC to the neglect of their own values, and how that is related to their much celebrated "competence" in economic management. I would try to also point out why the NDC is the major believer in social democracy but refusing, sometimes, to utilize its ideals and rather relying on seemingly liberal democratic ideals espoused by the NPP.

And with this, I will draw a conclusion to prove which political party, between the NDC and the NPP, has Ghana at heart.

Now, when we talk about economic growth, according to Kimberly Amadeo, and Riane Eisler in his book, "The Real Wealth of Nations," it is an increase in the production of goods and services over a specific period. Kimberly continued that "economic growth creates more profit for businesses. As a result, stock prices rise. That gives companies capital to invest and hire more employees. As more jobs are created, incomes rise. Consumers have more money to buy additional products and services. Purchases drive higher economic growth."

So, the main drivers of economic growth are one: world-class education, social programs, and high standard of living. These factors create a skilled and motivated workforce. As a result, the best way to measure a country's economic growth is to use its Gross Domestic Product, GDP. There are two forms of GDP according to Kimberly: Real GDP and Nominal GDP with the former considered the best.

There are factors responsible for a GDP growth as well, such as land/natural resources, labor, capital equipment, and entrepreneurship which has a reflection and correlation with the drivers of economic growth stated above (world-class education, social programs, and high standard of living).

What happens is that, countries which cannot rely on these factors of economic growth to spur their economies' growth due to lack or insufficiency of them thereof, tend to adopt other palliative measures in order to spur and realize economic growth as the second or alternative way of growing economy. These palliative measures as alternative ways of growing economies that do not have world-class education, strong entrepreneurship, high standard of living etcetera like Ghana, are Expansionary Fiscal Policy (which have a link with Expansionary Monetary Policy), and Contractionary Fiscal Policy (also having a correlation with Contractionary Monetary Policy).

According to Kimberly Amadeo, "Expansionary fiscal policy is when the government expands the money supply in the economy using budgetary tools to either increase spending or cut taxes —both of which provide consumers and businesses with more money to spend."

Purposely, this policy is to boost growth to a "healthy economic level", which is needed during the contractionary phase of the business cycle according to Kimberly. To do this, the government reduces unemployment, increase consumer demand, cuts taxes, and embark upon social intervention policies.

On the other hand, Contractionary fiscal policy is "when the government either cuts spending or raises taxes. It gets its name from the way it contracts the economy. It reduces the amount of money available for businesses and consumers to spend" according to Kimberly. With this policy, government also cuts subsidies, unkind to social intervention programs, but raises taxes! Purposely, contractionary fiscal policy is to slow growth to a 'healthy economic level' to between 2 percent to 3 percent a year."

With these two types of economic growth methods, we can see that one is sweet and cool with the citizens, and the other is bitter and hot with the citizens. The expansionary fiscal policy makes live comfortable though in a short-term but with dire consequences in the long-term especially if DEBT-TO-GDP ratio is inching up like we have in Ghana. $62 billion GDP and over ¢210 billion debt stock. Hence, expansionary fiscal policy is not the best policy to be used to spur economic growth in Ghana at the moment.

Now, let's analyze. We find clearly that the NPP aligns itself with the expansionary fiscal policy over the years, while the NDC aligns itself with the contractionary fiscal policy at least in 2014. Meanwhile, ordinarily, per the ideologies of both political parties, the social democrats which is espoused by the NDC should have rather championed the Expansionary Fiscal Policy, and the liberal democrats settle for the Contractionary Fiscal Policy. However, the reverse is the case.

Why? According to Kimberly Amadeo, politicians or elected officials hardly use the contractionary fiscal policy because citizens always want it cool even though there are consequences. Responsible politicians who have the people at heart do not use the expansionary fiscal policy unless in some acute circumstances. For example, in 1929 President Franklin D. Roosevelt of the USA used this policy to counter the USA economic depression.

President George Bush also used it after the 911 terrorist attack. President Obama used it because of the global financial crisis in 2008.

Therefore, Expansionary Fiscal Policy is always and only resort to in acute economic situations by countries that have drivers of economic growth such as world-class education, skilled labor, entrepreneurship capability etc. to help stage a come back in terms of economic development after experiencing a nosedive. But in countries where the choice is only between Contractionary and Expansionary fiscal policies due to lack of vibrant economic drivers, many serious economists prefer the former.

That is, countries that have little or nothing of these drivers of economic growth, have a choice to squeeze their citizens to attain economic growth with the contractionary fiscal policy which is nobler, or expansionary fiscal policy by comforting the citizens but with an economic danger looming at the long-run.

To substantiate this view, my readers should refer to the IMF economic measure or method suggested to the NDC in August 2014. When the Mahama-led government went to the IMF for bailout the institution suggested cutting subsidies, raising taxes, placing ban on employment, and generally limiting the government expenditure. That was Contractionary Fiscal Policy!

Why didn't the IMF suggest the expansionary fiscal policy? Your guess is as good as mine.

The Holy Qur'an says in 2:216 that "You may dislike a thing yet it may be good for you, or a thing may haply please you but maybe bad for you. Only God has knowledge (of both the bad and good things), and you do not know".

Ghanaians could not tolerate that hardship in that short-term with better conditions in the long-term under the Mahama-led government with this economic policy in operation. So, they voted for change.

With the new government that came to power on the back of economic hardship inflicted by contractionary fiscal policy endorsed by the IMF, it was unwise to continue with it. They had to adopt it's opponent expansionary fiscal policy! Quickly, the NPP went and opted out of the IMF literally putting an end to Contractionary Fiscal Policy because of the expansionary policy that is juicy in the short-term but disastrous in the long-term.

There is a reason to that I shall uncover in my next epistle.

To Be Continued....

Long Live Ghana,

God Bless us all.

The Writer, Iddrisu Abdul Hakeem, is a MasterCard Foundation Scholar (Alumnus) At KNUST.

E-mail: [email protected]

Phone: 0261669954 (What'sApp Only)

Iddrisu ABDUL HAKEEM
Iddrisu ABDUL HAKEEM, © 2019

The author has 32 publications published on Modern Ghana. Column Page: IddrisuABDULHAKEEM

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