Many former colonies of Western Europe are euphemistically referred to as ‘developing’ countries. The adjective ‘developing’ would be appropriate for describing these treadmill economies if they were moving systematically toward achieving indices of self-reliance in the production of the basic items of food, shelter, health and related services. Thus far, these countries have rapidly become more dependent on ‘aid’ (mostly from Western Europe and Japan) and are net importers of various basic goods and services. For example, Ghana is a net importer of food items that could easily be produced locally, if only the right socio-economic policies were in place. The faltering economies of these low-income, debt-servicing countries lead the author prefer to describe them as ‘underdeveloping’.

Within any low-income, debt-servicing country such as Ghana, the IMF supports the interests of the industrial countries outside. For example, one of its functions is to ensure that underdeveloping countries service the loans that they owe to the industrial countries in a timely manner. For reasons of self-serving commercial and related interests, each of these industrial creditor countries normally insists that any significant level of its ‘assistance’ must be granted on condition that the recipient country has subjected its economy to supervision by the IMF.

While reinforcing underdevelopment in many practical respects, these loans have made former colonies debt-bonded to their previous colonizing intruders. Therefore, while the name has changed from ‘colonial grants’ to ‘foreign aid’, the exploitive activities of these former colonizing nations in these poor countries have rather been intensified. In this essay we explore why, because of the conditions of ‘aid’, dependent, underdeveloping countries have tended to get worse, correspondingly as their external debts keep rising.

There are three major contributors to the dysfunctions in socio-economic management that most of the population presently experiences in Ghana. In this discussion the terms ‘socio-economic’ and ‘macroeconomic’ management are used interchangeably to include all the legislative, taxing and spending policies that are claimed to be responsible for the government’s achieving its objectives of social and economic development for the population. Also, phrases such as ‘most of the population’ and ‘the average Ghanaian’ denote any random sample of the population. The general consensus from such a sample must be the litmus test of whether socio-economic policies are achieving the objectives that the government has advertised. Before we get into the gist of this analysis, we need to spell out categorically the most important source of confusion concerning socio-economic management in Ghana, as in most debt-servicing ‘Third World’ countries. That is the basic ad hoc and undemocratic style of administrative management that obtained during the former colonial period and that has remained the same throughout the post-independence period up to the present. The current literature on economic development typically classifies the economies of most minimally industrialized countries — including that of Ghana — as ‘dualistic’. One aspect of this duality is the existence of a ‘modern’ sector that dominates the rest; in Ghana’s case (which is typical) this sector comprises less than two percent of the population. Its methods of production, consumption and lifestyle are easily recognized as imported from the Western world. This sector inherited its culture from the country’s colonial past and, similarly to that period in history, its concepts and strategies of socio-economic management remain basically ad hoc, opaque, undemocratic, experiment-ridden, environmentally hostile and alien to most of the population.

The other segment of the local economy is the much larger and more pervasive ‘traditional’ sector, wherein one finds 75 percent or more of Ghana’s population. Its methods of production, consumption and lifestyle are centuries old. The culture and administrative procedures in this sector have been — since before colonial intrusion — basically holistic, transparent, relatively more democratic and almost instinctively applied by the consensus of the population. Its strategies of production are environmentally friendly and therefore automatically self-perpetuating, or to use the new jargon, ‘sustainable’. However, during the post-independence period this sector has been subjected to enormous shocks that have equaled or even exceeded those of the colonial period. The results have been very dramatic and traumatic, because they have occurred in a relatively brief period. Still unfolding, the most severe of these shocks started in 1983, when Ghana invited its socio-economic management to be directed by the International Monetary Fund (IMF). One might argue that as a result of this series of shocks to the traditional sector, the values and generally holistic culture of that vast majority of the population continues to be weakened.

The term ‘dualistic economy’ is a suitable description only if one confines one’s view to a single photographic snapshot of any entire ‘Third World’ economy, including that of Ghana. However, to explore the dynamics of the interaction between the socio-economic managers and those who are being managed, a more appropriate description would be ‘counterproductive’ or ‘dysfunctional’.

Most of Ghana’s modern history has been dominated by uninvited or externally imposed British colonialism. It is important to distinguish between ‘imposed’ or ‘uninvited colonialism’ and its more recent ‘invited’ or ‘solicited’ version. The invited type now persists and is being intensified in most low-income, debt-servicing countries. Old style colonialism was a very harsh, crude, extractive, exploitive, parasitic and predatory institution whose costs to its victims have yet to be fully assessed. The strategies that were employed resulted in various distortions that initiated the underdevelopment of the colony structure that has persisted in the post-independence period up to the present.

According to its apologists, colonialism introduced civilization into Ghana, along with Christianity, a unified government and exposure to the modern world. However, the same apologists do not offer any justification for the human rights violations that were committed through colonialism against many defenseless people. For instance millions of these victims were forcibly exported into slavery in distant lands. Meanwhile the fate of those left behind was no different, since they were reduced to similar bondage on their own land. Other victims of colonization (including the indigenous peoples of the Caribbean and other regions) have long become extinct. The struggle for ‘self government’ and ‘independence’ eventually brought about the end of colonization in Ghana some forty years ago. However, the economic reality on the ground is that this ‘independence’ so far has proven to be hollow. In the last four decades, many post-independence government policies have implemented a style of socio-economic management whose methods and effects can be described as a continuation of colonization or a recolonization of the population.

It is within this environment that one needs to explore four sources of the existing counterproductive style of management responsible for the current socio-economic impasse. The first of these is the almost totally disregarded ‘traditional’ sector. The psychology of about 80 percent of the population is influenced by traditional culture. Yet very few of the positive contributions made by indigenous livelihood and home management have been injected into the formulation, implementation and monitoring of national socio-economic development. As noted already, the source of this deliberate oversight can be located in the colonial paradigm itself and its deep influence on the culture of administrators in the ‘modern’ sector that continues to this day. Meanwhile, as has also been suggested, the culture of the ‘traditional’ sector is crumbling very fast, a process that has been intensified ever since the memorable economic nadir of 1983.

A second contributor to the present set of national economic problems is the style of administration throughout the civil service sector hierarchy. Any casual observer can confirm that:

- The objectives of socio-economic management are assembled opaquely by the respective Ministries of the government in formats that do not permit the average citizen to feel their positive effects directly improving his or her quality of life. There is little global coordination of the total set of objectives of all the Ministries, departments and other agencies within the public sector.

- The average civil servant does not know the specific objectives of his or her Ministry, if by ‘objectives’ we mean the accomplishments that average citizens can recognize as positive contributions to improving their quality of life.

- The very few brochures, printed information, seminars and effective public relations efforts spelling out government services for the population are chiefly propaganda. They yield generalities and conclusions that are based on self-monitoring and self-evaluation gestures. These communications explicitly make increasing demands upon the public for more resources to counter perpetually discovered constraints; they are dominated by self-praise for achievements that most citizens cannot sincerely recognize as having improved their lives.

Almost immediately after Ghana attained its independence in 1957, the government bit the bait of ‘foreign aid’. The trend has since intensified to the present situation in which most elements of national prioritizing and related strategies for socio-economic development are formulated and directed increasingly by foreigners. This passive type of recolonization of the economy is just as devastating for the population as the previously imposed type. Nonetheless, the importance of this element of foreign control is clearly defended by routine pronouncements about the economy by various officials of the Brettonwoods institutions that comprise the International Monetary Fund (IMF) and the World Bank. Meanwhile, reinforcements of these statements come from the officials of various other institutions that are owned by the industrial countries. In addition, top Ghanaian government officials strive to confirm that they have produced results that are consistent with existing instructions from the donors of ‘foreign aid’ — collectively referred to as ‘the donor community’. No matter how drastic or draconian the effects of any imported socio-economic policy may be, government officials are usually confident that the population at large can be educated to accept them. This method of governance that avoids consultations with the population when formulating and implementing policies, was inherited from previous colonial administrations and has not changed under post-colonial governments. The ‘ordering’ and ‘instructing’ under the former colonial administration are now replaced by ‘educating’, ‘conscientizing’ and ‘enlightening’ the population. Meanwhile, the threat of state violence as an optional resort for enforcing government decisions always lurks in the background. As confrontation replaces consultation and accommodation, the government and the governed become adversaries of each other. Obviously, strategies of planning for the population but not with them create a lot of stress for the population. Such strategies violate the most important element in the democratic process, i.e. the need to consult with the population in designing what is claimed to benefit them.

POSITIVE VS. NORMATIVE ECONOMICS

One of the first lessons in elementary level economics theory is to clarify the distinction between positive and normative economics. While discussions of positive economics are theoretical and scientific, those related to the normative aspects are highly subjective. This subjective aspect of economics deals with determining what is ‘good’, ‘acceptable’, ‘best’, ‘better’, or ‘worse’ in the choice of socio-economic objectives. Meanwhile, there is no objective or neutral way of justifying any normative prescription. Questions of the legitimacy of a policy should always be addressed by those who seek its benefits and bear the costs of related decisions. Such an approach logically must involve consultation with the affected population. This has been part of the democratic process that was used by indigenous peoples for centuries, including those in West Africa — until such governance was drastically altered by uninvited colonialism, and has been eclipsed ever since by colonialism’s invited version.

Nonetheless, the ideals of democracy still dictate that the choice of socio-economic objectives and related goals should be made voluntarily by the population. Once objectives have been established, experts should be invited subsequently to identify and to offer advice about the alternative strategies for meeting them, so that the citizenry may choose affordable options. Such an approach was never operative under imposed colonialism and it continues to be by-passed under the invited neo-colonialism current in Ghana and in other debt-servicing, underdeveloping countries.

Before we proceed with exploring the effects of these developments, we need to make three clarifications. The first of these is that the IMF and the World Bank reinforce their respective efforts in the socio-economic management of low-income, debt-servicing countries. The second is that these institutions come into a country with their assistance only after the host recipient country has invited them. The third factor is that the governments of host countries are assumed by the IMF and the World Bank to be fully responsible for the problems which compelled them to seek foreign help. Meanwhile, the paradigms under which these foreign institutions operate eventually contribute to further the corrosion of economic conditions in the host country, although this element of the global economy is not officially countenanced. Indeed, it is actively obfuscated by the rhetoric of ‘aid to developing countries’ published and distributed by the World Bank in the form of country reports, discussion papers, symposia proceedings, special issue documents, research reviews, academic journals and advisory pamphlets.

The pursuit of ‘economic development’ is such a broad and vague objective that nobody with goodwill can be counted rationally as standing against it. However, it is when we delve into the details and the processes of achieving this objective that we can identify serious problems. Deliberate preoccupation with implementing specific strategies for economic development by ‘Third World’ countries was inspired by previous experiments of a similar nature in Russia, China and other communist or socialist countries. This resulted in all types of imported ideologies and strategies which eventually led to the form of invited colonization and progressive impoverishment that most low-income countries now suffer. Imported strategies of economic development management, including those currently imposed by the IMF and the World Bank, typically aim at achieving many broadly stated socio-economic targets; e.g. projected annual increases in per capita Gross National Product (GNP) by five percent (or some other percentage), reducing the level of inflation from, say, fifteen percent to ten percent, reducing the government budget deficit by ten percent, improving the nation’s balance of payments during the next decade, and other publicized objectives of this nature.

In contrast, it is easier for average citizens to monitor what is happening to them when the socio-economic objectives of the government are stated in graphic and precise terms. For example, a specific target for national development might be the provision of 300 boreholes or wells, one hospital, ten secondary schools and 100 miles of tarred roads for each region of the country, to be completed within a specified number of years. This is the type of planning that most of the population in Ghana and throughout the world can understand and deal with. Here, what is important to emphasize is that people seek solutions to specific problems and the removal of specific impediments to their enjoyment of the good life as determined by themselves. Insofar as this agenda is not pursued, the current system of socio-economic management is just as alien and as opaque to the average citizen as it was during the previous colonial period. Economic growth in Ghana has been slow when it is contrasted with growth rates in the population and in the aspirations of the population for improvements in the material quality of their lives.

A combination of these factors together with strenuous sales campaigns by foreign peddlers, eventually led to the conviction of post-independence governments that a variety of very expensive external loans — popularly termed ‘foreign aid’ — could get the economy out of its difficulties. There are two types of such loans. The bilateral type, as noted earlier, comes from one donor government to a recipient ‘Third World’ country. The multilateral type comes from the World Bank or from any of several regional development banks, almost all of which are owned by (or their policies are controlled by) the Western, industrially affluent countries including Japan.

A coherent rationale for an individual (or a country such as Ghana) to resort to borrowing capital is that the money is expected to solve problems and thereby to achieve two objectives. One of these objectives is that the money they borrow should be so productive as to enable their pay-off while still leaving a surplus of benefits. Thus the loan contract should yield less stress or no stress on the borrower. The second rational motivation for borrowing is that a series of loans may eventually yield enough surplus so as to enable the borrower to accrue gradually fewer and fewer external debts. Neither of these conditions has materialized for Ghana, nor have such circumstances obtained for most other low-income, debt-servicing countries. An estimate of the total volume of external loans that Ghana has used during the past forty years of its independence is not available, but this amount must be several billions of dollars. Ironically there has been very little to show as net benefits, in terms of improving the quality of life for the average citizen. Note that this analysis does not touch upon internal domestic debts nor upon those that the government owes to private citizens and to private institutions within the country. The data in Table 1 below present the current situation related to these external debts.

Considering the size and level of performance of Ghana’s economy — even at its highest levels of productivity — these debts are very high indeed. The extent of the related stress on the economy is partly revealed by the volume of short and medium term loans, since these must be paid off within a period of three years or less. And they must be paid by a country in which 60 percent of the population lives on or under the poverty line. Meanwhile, similar to those of most low-income countries, Ghana’s external debts will keep growing through the following channels:

1. The interest payments on these loans continue to pile up faster than the capacity of the country to pay them off.

2. The government continues to contract for more loans for two main reasons: to reduce the level of previous loans (some of which are due, but cannot be paid off), and to finance fresh projects (for which the government has insufficient or no revenue).

CATEGORY 1991 1992 1993 1994 1995 1996

Short- 29.4 71.2 197.2 267.6 270.5 286.0

Medium- 1329.8 1262.1 1252.3 1212.9 976.0 881.7

Long-term 2437.7 2731.6 3230.5 3541.7 3827.8 4179.3

TOTAL 3796.9 4064.9 4680.0 5022.2 5074.3 5347.0

Short and

Medium term

Total 1359.2 1333.3 1449.5 1480.5 1246.5 1167.7 Percent of

Total 35.8 32.8 31.0 29.5 24.6 21.8

Source: 1997 Macroeconomic Review and Outlook, Centre for Policy Analysis, Box 19010, Accra-North, Ghana.

Throughout the remainder of this discussion it should be borne in mind that we are dealing with normative issues. That is to say, the very expression of a goal or objective or standard describes neither just what has happened nor what will happen in an economy, but what should happen. Consequently, it may be argued that, contrary to the present methods employed by the IMF and host governments, any program that is meant to benefit the population should be subjected to transparent procedures and to public debate. Both a choice of national objectives and the strategies selected to meet those objectives are normative matters that should not be entrusted solely to local or foreign experts. Rather, what is called for is the use of genuine forms of public consultation consistent with the customs and cultures of the population. In Ghana’s pre-colonial history there are clear protocols for the way ruling chiefs follow consensual democratic procedure. The consensus that emerges then reflects the genuine wishes of the population. Citizens would have compared the anticipated costs with the benefits that they strive every day to achieve. Any strategy of socio-economic management failing in these key respects of democratic procedure is counterproductive from the perspective of average citizens.

An IMF structural adjustment program (SAP) usually creates immediate and dramatic economic hardship for the majority of the population. This situation will now be sustained for decades. Although a low-income country cannot refuse to implement its instructions, the IMF does not normally provide what is referred to as ‘bridging finance’. These are funds that would be used in preparing the ground in a manner that would cushion the economy in relation to the immediate impact of the typically draconian elements of a structural adjustment program (SAP). For example, one of the immediate effects of these imported policies is a sudden increase in the prices of most goods. (With ‘bridging’ funds, the government can increase the stocks of selected critical items and have them ready. These can then progressively be released into the economy in order to reduce the rate at which related prices will rise during some transitional period.) A few of the elements of an SAP are illustrated below to show how some of them make absolutely no economic sense, while they simultaneously leave most of the population worse off than before any economic recovery was initiated.

Significant Devaluation of the National Currency. The IMF is committed to ensuring that the respective values of all the currencies of its members will freely fluctuate against each other, as determined by the market forces of demand and supply. This process is referred to as floating the currencies. The devaluation of the currency by a developing country is only a first step. Eventually it will be made to ‘float’ and, most predictably, it will continue in free fall almost indefinitely. This is what has happened in Ghana.ust before Ghana started implementing its IMF-supervised SAP in 1983, the exchange value of the local currency (the cedi) as revealed in local parallel markets was under ten cedis = one US dollar.

However, during the period of IMF tutelage, the exchange value for the cedi has continued to depreciate, as can readily be seen in Table 2. Indeed, in the IMF process the exchange value has tended to reflect a bias in favor of imports. As stated below Ghana is a net importer of a variety of items that range from food to machines. The monetary value of the import content of locally produced items can range upward about 60 percent. Meanwhile, the level of manufacturing in Ghana is low, and due to the costs of production (which include the cost of uneliminable manufacturing inputs) the quality of most outputs cannot survive international competition. Therefore floating the Ghanaian cedi has increased the cost of imported manufacturing and industrial inputs; this has impelled many local businesses to favor imported goods that can be retailed directly to the public for immediate cash returns.

Ironically, although devaluing and eventually floating the cedi was meant to increase Ghana’s exports, it has rather worked in the opposite direction. The data in Table 2 show that the value of the floated cedi has continued to decline, as more of it is exchanged per unit of the US dollar. Meanwhile, the data in Table 3 shows that firms engaged in imports earn more cedis to the dollar than they get from exports.

Nominal 1991 1992 1993 1994 1995 1996

Exchange

Rate(Cedi/US$)

Interbank Rate 388.1 498.3 799.5 1046.8 1430.0 1734.1

Forex Bureau 399.0 541.0 816.5 1068.9 1519.2 1767.0

Rate

Source: 1997 Macroeconomic Review and Outlook, Centre for Policy Analysis, Box 19010, Accra-North, Ghana.

ITEM 1991 1992 1993 1994 1995 1996 Imports 110.2 130.3 162.6 165.7 144.0 129.6

Exports 84.8 98.2 114.5 128.4 103.8 78.5

Anti-Export 1.30 1.33 1.42 1.29 1.39 1.65

Bias*

Source: 1997 Macroeconomic Review and Outlook, Centre for Policy Analysis, Box 19010, Accra-North.

*This bias is defined as the ratio between the effective exchange rate on imports and that of exports. Values greater than one indicate an anti-export bias.

As inflation has now become endemic and is getting worse, the average Ghanaian salary and wage earner is further impoverished. Although his nominal income has been increasing, it has not kept pace with the rate at which the cedi has been depreciating in value. That is why — if these wages and salaries are adjusted for domestic inflation — the current minimum wage for workers in the public sector is only a fraction of the level it was about fifteen years ago. Rates of inflation during recent years are presented in Table 4. Judging from most of the population’s experience, the data in this table grossly understate existing inflationary trends in the economy. This conclusion is easy to confirm through sampling the opinions of households or of any other group within the population.

ITEM 1990 1991 1992 1993 1994 1995 1996

Comb’n 37.2 18.0 10.1 25.0 24.9 59.5 46.6

Food 40.3 9.0 10.4 25.0 25.9 62.2 35.8

Non-Food 35.0 23.2 9.9 25.0 24.4 58.0 52.3

Source: 1997 Macroeconomic Review and Outlook, Centre for Policy Analysis, Box 19010, Accra-North, Ghana.

Meanwhile, the evasive strategies of the private sector are not available to most salary and wage earners. These employees cannot have their incomes indexed to changes in domestic inflation nor expressed in equivalent convertible currencies. If viable solutions to the worsening economic conditions are not forthcoming, the crisis is likely to result in labor unrest and possibly violent demonstrations. Unfortunately, nominal increases of incomes do not solve the underlying problems of disjointed socio-economic management and its resulting retarded economic growth. In theory, if a country previously had an overvalued currency, its new devalued or floating value would subsequently increase its exports to a higher level than would have occurred without such an adjustment. This is because a devaluation makes locally produced goods cheaper for foreign buyers. For reasons presented below this principle fails to apply for almost all low-income, debt-servicing countries. In contrast, the theory works for industrialized countries because each of them produces a very wide range of manufactured products that easily substitute for each other.

Let us take the example of the American dollar being devalued in relation to the Japanese yen, as happened in recent years. This was good news for American producers. They exported more to Japan because US-produced goods and services were attractive substitutes for similar items produced in Japan as the U.S. products became cheaper for holders or earners of Japanese yens. The Japanese spent their vacations in the US and imported more American-made products, including Japanese cars produced in America by Japanese firms.

The situation among countries in the European Union has been quite different. In accord with the theory concerning overvalued currencies stated above, members of the European Union (EU) have considered it unwise for their respective currencies to float freely against each other. Therefore, no EU country is allowed to use the devaluation of its currency for increasing its exports at the loss of other countries’ markets. Thus in March 1979 the EU established its Exchange Rate Mechanism (ERM) which permits the respective currencies to fluctuate against each other only within very narrow limits. On this scheme the EU countries peg the values of their respective currencies against each other. Of course, this is a precaution that an exclusive club of powerful countries is capable of taking. These countries are very effective in formulating the policies of the IMF and consequently would hardly allow themselves to be supervised by that institution to the extent that it dominates the economic policies of low-income countries.

In contrast, a devalued or floated currency is really bad news for the populations in most low-income, debt-servicing underdeveloping countries, for the following reasons:

a) The prices of all their exports are quoted in US dollars or in currencies of the other industrialized countries. Only a very few items and services are sold in local currency to visiting foreign tourists and foreign residents. For most countries, these sales constitute a very tiny portion of their total exports. Therefore, devaluing the local currency changes nothing except to make imports more expensive.

c) Economies that are nearly stagnant or growing at inadequate rates already produce at low levels, and prices will already be high. As we have noted, devaluing or floating a local currency increases the prices of imports. Meanwhile, as we also noted, imports can account for as high as 60 percent of the inputs of many locally produced goods. Therefore, whether in terms of imports or locally produced goods, devaluing or floating a local currency adds to already existing domestic inflationary pressures. Since this depresses the material conditions of living for most of the population, more fuel is then added to the domestic unrest that moves an entire population in the direction of social explosion and political instability.

d) Most of the exports of underdeveloping countries — mainly primary products — go to the industrialized countries. Under enormous pressure from the IMF and the industrialized countries to provoke the servicing of ‘Third World’ external debts, most low-income, debt-servicing countries are now using various environmentally hostile strategies — including those financed through ‘foreign aid’ channels — for rapidly harvesting whatever they can of their natural resources for export markets.

The export of raw materials is the only outlet available to these low-income, debt-servicing countries, especially as the industrialized countries keep increasing the effectiveness of their tariff and non-tariff barriers against imports of migrant labor and of processed or finished imports from the ‘underdeveloped’ countries. For example, the tariff or import duty levied on chocolate by the industrialized countries is higher than that for cocoa beans. The same can be said for all byproducts of various raw materials that are currently exported to the industrialized countries. Meanwhile, in the face of all these protectionist measures by the industrialized countries, the institutions that they control — the IMF, World Bank, various regional developing banks and bilateral financing channels — all insist on ensuring that developing countries open up their markets and implement related liberal trade policies.

As a result, SAPs encourage these poor countries to sustain the only types of export that face minimal restrictions to market access within the industrialized countries. These are their ‘traditional’ exports of extractive raw materials, primary and low value-added products. As per Table 5, in Ghana these primary exports of cocoa, gold, timber and other raw goods could be processed before export into many byproducts. However, if Ghana were to convert her cocoa beans into chocolate or her timber into furniture, the tariff walls against the related imports moving into industrialized countries would be so high that the manufacturing venture would not be financially feasible.

As the data in Table 5 show, after forty years of its independence and more than a decade of pursuing an IMF-supervised SAP, Ghana’s most important sources of export earnings are mainly those classified as ‘traditional’ — so-named because they originated in colonial times. ‘Non-traditional’ exports include handicrafts, local textiles, tourist services, a few processed items and even some raw materials that the country has tried to develop in the post-independence period. The value of non-traditional exports forms a very small proportion of total exports, as also revealed in the table below.

(Million US$) 1991 1992 1993 1994 1995 1996 ITEM

Cocoa Beans 315.9 276.81 250.46 295.00 361.06 482.49

Cocoa Products 33.10 25.65 35.41 25.22 28.42 26.19

Gold 304.44 343.36 433.95 548.62 647.27 612.18

Timber 124.22 113.87 147.37 165.36 190.57 141.39

Other

Traditional 163.15 160.06 122.79 114.71 101.87 247.97

TOTAL

Traditional 940.50 919.75 989.98 1148.91 1329.19 1234.59

Non-Traditional 58.83 66.50 73.65 88.63 101.98 275.63

TOTAL

EXPORTS 999.33 986.3 1063.6 1237.7 1431.2 1510.22

Percent of

Non-traditional 5.89 6.74 6.92 7.16 7.13 18.25

Source: 1997 Macroeconomic Review and Outlook, Centre for Policy Analysis, Box 19010, Accra-North, Ghana.

Truly there is often enormous waste in the activities of government and public institutions. A very crucial reason is the perpetuation and enlargement (chiefly by default) of colonial-oriented institutions that are unsuitable for the new post-independence demands of socio-economic development. These institutions include the public sector (government ministries, agencies and public corporations). The waste inherent in the activities of these structures should be reduced to the lowest feasible level. However, since this entails widespread down-scaling of staff, it would make sense if the cuts and (ideal) levels of expenditure were based on attaining specific socio-economic objectives that enjoy widespread public endorsement. In the case of Ghana, employment in the public sector was reduced by 53 percent during the period 1987-1991. The increase in unemployment, combined with other factors in the SAP, caused simultaneous declines in the volume and quality of social services, including health and education. The resulting reduction of investment in human capital has since added its share to already increasing trends in unemployment and increased material poverty in the population. Ironically, operators in the ‘foreign aid’ industry in Ghana have recently been implementing programs of ‘capacity-building’ for the public sector, but with no clear links to attaining specific socio-economic objectives that might be assessed by average citizens. Projects of this nature mean more expensive loans, with an increase in debts for Ghana and its subsequent debt-bondage to foreign governments and institutions.

Privatization. This refers to the sale of public enterprises to private firms. Similar to most sub-Saharan African countries, Ghana has a relatively underdeveloped private sector. There are hardly any citizens wealthy enough to buy large enterprises, such as those that were previously run by the government. The most lucrative of these enterprises have now been sold to non-Ghanaians using rather opaque methods. Therefore, it is not possible to comment on how these assets were sold to foreigners or whether this was at less than their market value, nor if these transactions have further consolidated more wealth in the hands of the privileged few within the Ghanaian population.

Increases in Interest Rates. This policy is meant to boost the level of domestic savings. It is also meant to ensure that financial resources are put to the most productive uses, such as the export sector that is expected to boom. Table 6 below has recent information on interest rates within the Ghana economy.

It is obvious that high interest rates in any low-income, slow-growing economy encourage business entrepreneurs to switch from riskier activities such as farming, manufacturing and other forms of production to those that are less risky and bring in the speediest returns, such as trade. To this factor we must add two compounding determinants. One comes from the import bias in floating the cedi, as discussed earlier. The other concerns removing import controls, as addressed below. The overall result has been that local manufacturers switch to import trade activities. That is why the warehouses of many of these enterprises now stock imported finished products waiting release for sale. The IMF, World Bank and other supporters of these SAP policies effectively disregard all these counterproductive effects of the SAP, as if to say, ‘We pursue the correct theories; don’t confuse us with the facts.’

1991 1992 1993 1994 1995 1996 Bank Rate 31.8 19.4 34.2 30.8 41.5 45.0

SECTOR

Agric,

Fishing &

Forestry 8.5 23.5 28.9 27.8 33.3 38.6

Export Trade 29.2 22.8 28.2 27.3 32.3 39.6

Manufacturing 29.6 24.0 29.5 29.9 34.4 41.5

Others 29.9 24.8 30.9 31.6 37.1 42.9

Source: 1997 Macroeconomic Review and Outlook, Centre for Policy Analysis, Box 19010, Accra-North, Ghana.

Increases in Taxes. This is meant to improve levels of government revenue and government savings. Presumably, in virtue of these revenues, the government is able to provide a greater variety of public services from its increased investments in infrastructural projects such as roads, irrigation dams, generation of power, provision of telecommunications facilities and environmental sanitation. These and other projects are socially useful but the private sector finds them insufficiently profitable. Most of the taxes are indirect types, such as sales taxes and value-added taxes. Being basically regressive, they hit hardest the relatively poorer, more vulnerable and less vocal people in the population. As stated earlier, the percentage of Ghana’s population that is living below the poverty line has been increasing more rapidly during this recent period of macroeconomic management of the economy by the IMF. The current estimated level of people living below the poverty line is about 60 percent of the total population of the country. This fact alone means that as taxes have become more regressive, those that are hit the hardest are the same people who already have enormous problems with physical survival.

Removal of Import Controls. This policy is meant to stimulate competition from abroad and to make local industries more efficient and competitive. It is analogous to forcing physically handicapped novices to compete against Olympic medalists. This policy encourages local business people and their partners abroad to dump relatively cheap imports into the economy. The following Tables 7 and 8 show that non-oil items make up more than 80 percent of Ghana’s total imports in recent years. Most of these imports are second-hand consumer items that range from used clothes, bicycles and car parts, to refrigerators and other items that enterprising citizens import for recycling in the local economy. Therefore the poor, whose numbers are increasing, can at least manage to afford some relatively cheap used clothes and other rejects from the industrialized countries.

ITEM 1991 1992 1993 1994 1995 1996 1991-96

Non-Oil 1153.6 1299.0 1574.4 1408.8 1496.8 1563.9 1416.1

Oil 165.1 157.5 153.6 171.1 191.0 259.1 182.9

Source: 1997 Macroeconomic Review and Outlook, Centre for Policy Analysis, Box 19010, Accra-North, Ghana.

ITEM 1991 1992 1993 1994 1995 1996 1991-96

Non-Oil 87.5 89.2 91.1 89.2 88.7 85.8 88.6

Oil 12.5 10.8 8.9 10.8 11.3 14.2 11.4

Source: 1997 Macroeconomic Review and Outlook, Centre for Policy Analysis, Box 19010, Accra-North, Ghana.

In addition to the IMF-induced policy of floating the currency, a second factor that motivates this reaction from the business community is the increasing of domestic interest rates. As happened in Ghana, locally owned industries in these poorer countries simply collapse and release more adults into unemployment.

NGOs. Yet another factor adding to the inversions, confusion and counterproductivity in socio-economic management is the role of foreign NGOs alluded to earlier. Observers estimate that there must be more than 900 NGOs altogether in Ghana, and their number seems to be increasing rapidly. Of this number, about 100 are foreign NGOs. There is neither economy-wide monitoring nor coordination of the respective agenda and activities of these institutions. They simply do whatever pleases their foreign sponsors and themselves. In their own separate efforts, each of them carves out its own sub-macro-economic (i.e. micro-economic) sphere within its chosen location in the country for pursuing its own brand of experiments at socio-economic management. Whether their effectiveness can be confirmed or not, an increasing number of community leaders in Ghana now actively seek the support of foreign NGOs as solutions for their local problems. This reflects an unfortunate but pervasive situation called the ‘culture of dependency’ in which people have lost their indigenous resourcefulness, self-confidence and self-esteem in tackling their own local problems. Therefore, these community leaders unwittingly invite recolonization of their local areas.

In this essay, we do not pursue the effects on the Ghanaian society of imported movies, video films, radio, TV programs and advertising, informatics (particularly the facilities available through the Internet), public entertainment and other creations of the electronics revolution and related media. These have made their own contributions toward compounding the inverted processes and socio-economic confusion in Ghana, as well as throughout the current ‘Third World’.

1. The imports into the industrialized countries that would continue to be restricted include manufactured items, migrant labor and raw materials for which synthetic substitutes have been developed.

2. The technology that the ‘Third World’ can acquire is that which the industrialized countries have sanctioned, mostly channeled through ‘foreign aid’ programs.

3. Mainly for realizing commercial and related privileges, the industrialized countries keep tightening their domination over most other countries through the monopoly of decision-making in the United Nations Security Council and other fora, as well as the debt-bondage orchestrated through the counterproductive effects of ‘foreign aid’ programs.

Meanwhile, regardless of their respective status in Ghanaian society, most citizens feel that many important aspects of their society are crumbling. Under the conditions of the emerging market-driven environment, all forms of theft, embezzlement by bankers and public officials, the persistent diversion of public vehicles and other resources for private ends, corruption, ritual murders for mystically increasing material wealth, all sorts of ‘white collar’ crime and dishonesty, have been increasing. Resigning themselves to fate and with the hope of getting a break in life, most of the population routinely patronizes more than 50 state-established lotteries and hundreds of lottery-related games used by various firms to sell their wares. Part of this increasingly pervasive fatalistic syndrome is exploited by a proliferation of Christian churches. Many are used by their operators as convenient channels for exploiting their respective congregations financially and in other ways. Meanwhile, material poverty is now endemic, deepening and widening to embrace many more people in the population. All these drastically adverse changes have occurred and are unfolding within the lifetime of the majority of the population.

Within the currently prevailing circumstances of the population in zero-sum and negative-sum paradigms, socio-economic conditions are likely to get worse. These are the ingredients that breed social revolts and revolutions. The solution to most of the problems in Ghana will come when its socio-economic managers eventually return to the basics. The essentials of these basics include instituting genuinely holistic, democratic, environmentally friendly and progressively self-reliant systems. The current strategies are no more productive than chasing mirages.

The type of capitalism which is now being pushed into underdeveloping countries is a system in which individuals relentlessly pursue private interests, profits and the accumulation of private property rights over increasing volumes of disposable wealth that can be measured in monetary terms. In theory, capitalism uses open markets where money, goods and services freely exchange with each other. However, there are hardly any such markets under the Western type of capitalism today, for the following reasons:

a) Enormous disparities exist in the distribution of resources among the contestants.

b) A prevalence of monopolies, (e.g. multinational corporations) mercantilism and cartels dominating international trade.

c) Prevalent restrictions made by industrial countries that undermine various imports of goods and labor from ‘Third World’ countries.

These factors create serious disparities and destroy the possibility of a level playing field for all participants in the global market game. This socio-economic environment is highly competitive or even predatory. The fittest, i.e. the wealthiest, survive. In the process, material wealth is consolidated in the possession of a decreasing proportion of the population, simultaneously more and more of the population is reduced into deepening levels of poverty. Even with the tiny example that Ghana represents, the proportion of the population that lives on or below the poverty line has increased from about 20 percent some 40 years ago to its present estimated level of about 60 percent.

The essence of nineteenth century mercantilism is that the state’s power is used to support private enterprise for achieving the following goals:

(1) to increase national wealth such as precious metals and money;

(2) to achieve foreign trade surplus for the nation, boosting exports and using tariffs for restricting imports;

(3) to foster national commercial interests;

(4) to strengthen national military might; and

(5) to establish colonies.

1. In theory, the International Monetary Fund (IMF) is a cooperative institution, although some of its methods look as if it were a multilateral financing institution like the World Bank. Its assistance is short-term in nature, i.e. up to about three years for countries to repay loans it has made to them.

2. Resources that keep growing make positive additions to existing stocks. Hence any such situation is referred to as a ‘positive-sum’ game. Using the same logic, a ‘zero-sum’ game means that existing stocks of resources e.g. land, remain the same — neither growing nor decreasing. This means that when someone takes a portion e.g. three percent of a resource, then the remainder of contestants has the rest — that is, 70 percent — to share among themselves. Continuing with the same logic, a ‘negative-sum’ game means that the set of resources so described are diminishing. The fact that most citizens feel their conditions are getting worse and worse makes them have zero-sum and negative-sum perceptions which in turn condition their behavior — making them more acquisitive, for example. Under these conditions, it is obvious that the privileged few in the population will tend to keep grabbing more and more, given their felt sense of scarcity, while the underprivileged majority will have to contend with the diminishing residue.

3. An excellent review of the consensual, participatory and inclusive practices of democracy characteristic of traditional chieftaincy rule in pre-colonial Ghana can be found in Chapter IV of Kwame Gyekye’s Tradition and Modernity (Oxford University Press, 1997).

4. The reasons for this preference for ‘aid’ rather than trade are elaborated in the author’s Useful Development Economics, Chapters 8 and 9, ISBN 9964-980-50-7.

5. Mainly for purposes of disinformation, the term ‘foreign aid’ is used in this modern and fast-expanding industry to refer to loans and related resources from industrial countries to other countries located outside of Europe and North America. If Ghana gives a loan to the Sudan, or if Saudi Arabia gives a loan to the US, these are not referred to as ‘foreign aid’.

6. Lest the significance of IMF directives seem overemphasized here, note that in 1994 Ghana owed 76 percent of its entire GNP to the World Bank for repayment of loans scheduled under IMF conditions; cf. Table I below.

7. One example out of thousands of covert agendas was reported by the NGO ‘Friends of the Earth’, in the exploitation of Ghana’s timber. Apparently, a host of foreign and local firms benefiting from World Bank and British Government credits, plundered 250 square kilometers of Ghana’s tropical forests, exported logs valued at US $44.8 million, repatriated $9.9 million and pocketed about $34 million. This is documented in Plunder in Ghana’s Rainforest for Illegal Profit, vols. 1 and 2, March 1992 (Friends of the Earth Ltd., 26-28 Underwood Street, London N1 7JQ).

8. Established to serve the interests of the industrialized countries, the ‘London Club’ deals with commercial debts owed by ‘Third World’ countries to commercial banks of industrialized countries. These debts are owed mainly by middle and high-income developing countries. The ‘Paris Club’ deals with debts owed to governments of the industrialized countries. These are referred to as bilateral debts; the type of debts that most low-income countries owe. Therefore each such country appears before the Paris Club, a cartel of lenders in which the IMF is also represented.

Some officials who have taken part in the negotiations at these Clubs have described them as "slippery terrain over which many Third World countries have continuously lost their footing." The "proceedings are a humiliation which should be avoided at all costs." For more information on foreign debt rescheduling exercises at these two clubs, cf. Debt Re-structuring (Geneva: United Nations Institute for Training and Research (UNITAR), 1992).

9. Ever since agrarian cultures began, the world has been dominated by private enterprise capitalism of one type or another. Private enterprise and the use of private initiatives are common attributes of all human collectives, regardless of their respective cultures. That which creates the differences that are historically evident in the uses of private initiative and capital is the effects of each within the different social structures and value systems comprising a distinct culture or sub-culture. Thus private enterprise capitalism as a mode of economic activity is not at all new. What is new is the Western European brand of it, which — for reasons of ideology, commercial advantage and one-sided self interest — is being enforced through the IMF, the World Bank and various development financing institutions, embassies, security agencies, and NGOs that are maintained by the industrialized countries.

10. In January 1999 the cedi’s value fell to 2,450 per US dollar, and in August 1999 it fell again to 2,800 per US dollar.

11. The interest rate for even a government-favored, subsidized manufacturer’s loan to produce road-building materials and roofing tiles using chiefly local inputs, is currently 45 percent.

12. See Useful Development Economics by the author, op.cit.

13. Cf. K. Afreh-Nuamah, "Participatory Integrated Pest Management (IPM) Training Methodology for Ghana" in this volume.

14. Cf. W.A. Asomaning, "Gold: the link between ancient and modern Ghana" in this volume.

15. The industrialized countries strive to work as a cartel when dealing with ‘Third World’ countries in such matters as debt-servicing, trade and the transfer of certain types of technology even when this is exclusively between these less developed countries. For example when India launched its Insat-2A satellite in July l992, the US immediately stopped various economic cooperation arrangements with that country. In August l993 the US insisted, contrary to international law and in the absence of any war, that a Chinese ship heading for Iran could not proceed to its destination unless its cargo was inspected, to ensure that certain items of technology did not get into the hands of the Iranians. These are examples of how the material power of the wealthy G-10 nations is used to ensure that developing countries remain weak and backward technologically and, therefore, economically. J.A. Amuzu, "The Nuclear Option for Ghana" in this volume.

16. Cf. ". . . Traditional Ga and Dangme Attitudes to Change and Modernization" for samples of these moral codes of conduct in proverbs, by J.N. Kudadjie, in this volume.

17. Cf. J. Songsore, "Population growth and ecological degradation in Northern Ghana: The Complex Reality" in this volume.