GHANA UNDER RAWLINGS EARLY YEARS Emmanuel Hansen Chapter 6 Economics of Adjustment and Adjustment of Politics . . . production and efficiency . . . must be our watchwords. Populist nonsense must give way to popular sense. Many of us have spent too much time worrying about who owns what, but there can be no ownership without production first. Jerry Rawlings The above quotation from a speech made by Jerry Rawlings gives a clear indication of the new changes following the IMF/World Bank [30]. Gone were the days of excessive emphasis on distribution and equity. The emphasis now was to be on production. The interesting point was that the problem of production has never been entirely separate from the issue of distribution; it was a departure from the populist pretensions of the early part of the regime’s policies and thus gave a clear indication of what was to come. The previous chapter has detailed the political preparation and the creating of the conditions for this shift. On 30 December the government announced its programme of adjustment called officially the ‘programme of reconstruction and development’. The first year was to be devoted to a period of preparation and the further creation of the social and political conditions for the full implementation of the programme. The programme itself was a three-year medium term programme. The first programme was designated as a holding operation during which attempts were to be made to stem the tide of the declining growth rates in the economy, and to remove the political and social conditions perceived as obstacles to recovery, and the implementation of the medium-term plan, namely the perceived strong position of organized labour, peoples’ power organized through populist institutions, the strength and the improvement on the strength of capital vis-à-vis labour as well as the strength of the managerial class, which, as we have seen in the previous pages, had come in for a lot of battering from the urban working class and the organs of popular power. The remaining period was for the implementation of the medium-term economic strategy launched in 1984. To understand the programme fully, it was important to comprehend the thinking which went into its making, and the basic assumption which underlay it. This was important since it constituted one of the main divides, not only between the mass of the people and the petty bourgeoisie, but also among the petty bourgeoisie themselves as different fractions saw different cause of the crisis and consequently recommended different solutions. First, although the statement was unequivocal in seeing the problem of the crisis of the Ghanaian economy as not only confined to Ghana, it saw the problem also as mainly due to the internal problems of the country: . . . there can be no doubt that our problems have been greatly aggravated by the pursuit over the years, particularly from the mid-seventies, of monetary, fiscal and foreign exchange and pricing policies which systematically destroyed or discouraged local production in agriculture and manufacturing, brought the export sector, and thus our foreign exchange earning capability, to the point of virtual collapse, severely penalized productive effort, hard work and creative initiative, while lavishly rewarding idleness, the most flagrant violation of existing laws (ERP, p. 3) It then went on to indicate specific policies in the past which had contributed to the economic crisis, again concentrating on the internal policy failures: We set up factories with expensive foreign loans, denied them raw materials and then turn round to import with scarce foreign exchange the very products which they were set up to produce. And, if the imported raw materials for them, we forced low prices for the finished products on them, ostensibly to protect the working people but in practice only to confer windfall gains on corrupt company officials and profiteering middlemen who through their connections obtained goods at the official prices and resold them to the very working people for whom the official prices were instituted at cut-throat prices. The entire spectrum of our national economy, every aspect of it, became a massive contradiction marked by overall decline which our skilled personnel soon began to flee from in great numbers. (ERP, p. 4) Starting from the assumption that the basic problem sprang from the internal policy failures it was not surprising that its proposed solutions, as we shall soon see, all sought to respond to the problem at this level. The ERP addressed itself to certain basic institutions of the national economy, namely the import/export trade, internal trade, certain fiscal and monetary policies, banking, insurance, the structure of public ownership, prices and incomes policy and issues of social policy (ERP, p. 5). In what would appear as an attempt to mollify its left-wing critics who expressed anxiety about the government’s preoccupation with monetary and fiscal policies to the neglect of reforms within the structure of social organization of production, the programme stated that what was being aimed at was a ‘proper complementality between the restructuring of production relations and sound financial management’. The goals of the programme were stated to lay the foundations for a self-reliant and integrated national economy (ERP, p. 5). Its more specific aims were stated as follows: (i) to eliminate, through the planned institutional changes, local and foreign exploitation which manifests itself in rampant malpractices in internal and external tax evasion and avoidance; (ii) to increase production to modest but realistic targets in selected number of agricultural products and select manufacturing industries in the first year; (iii) to increase the production of food and industrial raw material to planned levels in the context of the Three-Year Medium Term Plan; (iv) to lower the rate of inflation; and (v) to improve the distribution of goods, services and incomes (p. 5). There were also specific changes to be effected in the areas of import/export trade, banking and insurance, agricultural policy, state enterprises, incomes policy and manufacturing. Interestingly enough, for obvious political reasons, the most controversial aspect of the adjustment programme, the adjustment downwards of the exchange rate of the cedi was not mentioned. We shall now examine the provisions of the ERP, taking each point in turn. Import/Export Trade The export-import trade was the main hub of the colonial economy. As the colonial economy, like the neo-classical economy, regarded trade as the engine of growth it paid a great deal of attention to this sector. In Ghana like every other colonial territory, it was possible to have minute details of the imports and exports, but hardly any reliable records of goods produced for internal consumption. If there was one thing which underlay the external orientation of the external economy of the colonial economy, it was this. It was therefore not surprising that the report began with this instead of with production. Here the programme called for state monopoly of external trade. This was rather surprising as the whole gamut of thinking behind the IMF/World Bank strategy of development which informed the programme of structural adjustment was to decentralize the economy and to reduce the level of state control of the economy. This of course will raise less of any enigma when it was realized that it was never intended to be implemented and was included only for the benefit of the domestic left which may feel alienated at the prospect of the state relinquishing control of the economic resources. It is not surprising that not only have these measures not been implemented, but on the contrary, specific measures for further withdrawal of the state from economic ventures have been implemented under the tenets of the structural adjustment programme. It was claimed at the time that the measure was meant to curb economic malpractices such as over-invoicing of imports and under-invoicing of exports, a practice in which not only foreign multinationals but also local businessmen indulged freely. But considering that the only wholly controlled sector of foreign trade in cocoa was in such a bad state, it was surprising that it was intended to rectify the situation by the addition of another state monopoly control. Foreign diplomats who expressed surprise of how Ghana could get away with that from the World Bank and the IMF had obviously not read the cues correctly. With regard to the questions of state monopoly the report stated as follows: The major advantage of state monopoly of foreign trade, particularly import trade, is that it would eliminate quickly the incentive to corrupt the business community. The bulk buying of imports had already proved its advantages through the limited success of the GNPA (Ghana National Procurement Agency), “Confidential Rebates” which now accrue to private importers as well as discounts to commissions retained overseas by manufacturers’ representatives would now end. Under the new scheme, this income will accrue to the benefit of the state. In addition to these the tendency to over-invoice and under-invoice imports and exports would be considerably minimized particularly with the vigilance of the WDCs (report p. ) The inclination of this provision was a surprise to many foreign and diplomatic observers of the Ghanaian scene for at least two reasons. In the first place, the only state monopoly of external trade, the Cocoa Marketing Board had been riddled by corruption, inefficiency and overmanning. The same could be said of the Ghana National Procurement Agency whose shortcoming had been freely acknowledged by not only the PNDC but also previous administrations. It was therefore odd that with such a record of performance, a state which puts premium on efficiency and accountability should multiply its problems by creating further instruments of monopolistic control. The second reason is that it was not in accordance with the spirit of the liberalization and deregulation which were the guiding principles of the adjustment programme. It was on account of this that the Secretary of Finance and Economic Planning was to claim later that the country was following its own programme of recovery which only happened to coincide with the IMF/World Bank programme and that it was not following the dictation of both. It was clear, however, that its inclusion was more of the purpose of satisfying its domestic left than a serious addition to its strategy of development because these were never implemented as they were quietly dropped. And not only that; specific programmes which reduced the level of state participation in the economy were launched soon afterwards. It was therefore somewhat of a surprise for the NDM to claim later that its ‘critical support’ for the ERP was premised on the implementation of these aspects of the programme and that the programme they supported was not the one being implemented, hence its withdrawal of support from the regime was a logical consequence of the failure of the regime to implement the plan [37]. Secondly, the mention of the WDCs in enforcing this measure was most ironic especially when it is remembered that the suppression of the Defence Committees was one of the preconditions for the implementation of the programme of structural adjustment. In a manner reminiscent of the concept of Designated Supermarkets and the Essential Commodities of the period of Acheampong, the programme envisaged a nation-network of Peoples’ Shops to be established in order to facilitate popular control of the distribution of basic goods. The only difference here was that this time the shops and distribution would be under popular control, that is, to be supervised by distribution committees, elected from amongst the people who live in the area where it served, the principal control being assembled in their pDCs. Selected essential items would be sold only by the Peoples’ Shops. This was also one of the measures put into the programme to satisfy the domestic left at the time when the regime did not feel itself strong enough to risk outright confrontation with it. Soon after these proposals were made to the public and the left was made to feel that they constituted the sweeteners to assuage the drastic impact the programme might have on the mass of the people, the defence committees as well as the peoples’ shops were suppressed. The Secretary of trade who was very sympathetic to the idea of the defence committees and insisted on their defence was sacked. On the insistence of the workers he was reinstated only to be sacked again and finally found himself in jail. He was regarded as the embodiment of the defence committees. Investment Policy The report proposed to give more encouragement to joint ventures between foreign multi-national corporations and local enterprises in the areas of mineral exploration, mineral processing, quarrying, timber logging, wood processing, deep-sea fishing, food processing and what it called ‘home resource-based manufacturing industries’. (ERP, p. 7) Proposed changes in investment policy sought to set up a separate mineral code, provision of external accounts for new projects and guarantee of ‘free transferability’ of dividends and debt-service payments, the only provision being that such industries should be net earners of foreign exchange (ERP, p. 7). Also contained in the report were provisions for finance to rehabilitate the export sector, especially gold and other agricultural products through a consortium of banks (ERP, p. 7). Transportation As we saw from the chapter on the crisis of the Ghanaian economy, one of the serious obstacles to economic development in the country in the seventies was crippling bottlenecks in the transportation system. It has threatened to bring communication virtually to a standstill. From the fact that there were hardly any vehicles to take workers to their offices on time, with the result that several working hours were lost each day as workers trudged long distances to and from work on foot; and given the inability to transport cocoa and other agricultural commodities to the ports for export as a serious constraint on the development potential of the economy, any plan for economic recovery would therefore have to pay special attention to transport. Here there were two main problems. Quite apart from the fact of a serious shortage of vehicles, the transportation system in the country betrayed a serious lack of coordination and planning. There were many cases of ruinous competition between road and rail. This had to the virtual destruction of the railway system. It was important to have an integrated transport system which would respond to the basic problems of the country. The Report therefore proposed the establishment of a Ghana Transport Board to be made up of Ghana Railway Corporation, Ghana Ports Authority, Ghana Lighterage Company Ltd, State Shipping Corporation (Black Star Line), Cargo Handling Company Ltd, Ghana Airways Corporation, Volta Lake Transport Company Ltd, State Transport Corporation, Omnibus Services Authority and City Express Corporation to advise the government on transport policy. In addition to these there was a proposed merger of the Omnibus Services Authority and City Express to be called National Bus Holdings Ltd, with ten regional autonomous subsidiaries. The report also proposed the conversion of the State Transport Corporation into a holding company with ten regional subsidiaries, a suggestion that was unlikely to ameliorate the transport problem in the country. In actual fact what the state did was to withdraw further from the transport service and leave the area to private initiative. This was particularly so in the cities where the State Transport System in the inter-city service still operate but its performance has been far from satisfactory. Other proposals relating to transportation were aimed at turning the Black star Line was one of the first public corporations to be established by the nationalist government. By 1982 it had a fleet of 16 ships with a host of problems. The proposal was turn each of these into a self-accounting subsidiary ‘so that by the end of the year the crew in each vessel will know the operational results and bonuses paid according to profitability’ (ERP, p. 10). It proposed that by the end of the period, 1984 – 1986, the share of the Black Star Line in maritime trade should increase by no less than 40% (ERP, p. 10). Finance and Banking Just as in the other sectors of the economy, finance and banking also had from the time of the colonial period been controlled by the multinational corporations. What was particularly interesting was that these foreign banks, quite apart from the fact that they no longer brought any new money into the country, actually mobilized local banks and resources for trade and profit. They were to be prohibited from retail trading, and be encouraged to redirect their activities to specialist banking. It also proposed to increase the state share of foreign-controlled banks from 40 to 80% with effect from 31 January 1983. This also, like some of the earlier populist measures, was not meant to be implemented. Similarly he state’s share of foreign-controlled insurance companies was to go up from 40 to 80% and the state was to take up 45% shares in Ghanaian-owned companies. The idea was to persuade foreign-controlled banks to take more interest in development financing and social development as a whole, and to de-emphasize their interest in finance and speculative as well as retail trade. The Bank for Housing and Construction was to serve as the main financial institution for the control of all public sector construction projects, while the Social Security Bank was to shift from hire-purchase financing of consumer goods or the financing of development projects such as irrigation schemes, plant pools or plant-hire companies, servicing agriculture, timber logging, inland and deep-sea fishing, agro-industrial projects and rural development projects of which due to class nature of society they would not be immediate beneficiaries (WERP, p. 11). It announced plans to convert the social security scheme into a National Pensions Scheme, but in a period of rampant inflation, people should be less interested in a non-indexed pensions scheme being more interested in price reduction and improving their current standard of living. Taxation has been one of the most serious problems in the country as indeed in other underdeveloped countries. There are two main problems with regard to this. One is the structure of taxation and the other is the limited ability of the state to collect taxes from those who are liable. In other words, there are widespread cases of tax evasion and tax avoidance. The first issue concerns the fact that the tax base is far too narrow and the burden falls disproportionately on the middle income group in wage employment. A large number of people in professional and self-employed categories pay either no tax at all because of the weaknesses in the tax structure or through evasion, or pay far less than what they should in terms of their real income. Of this group, lawyers in private practice are the notorious of all. The second concerns the capacity of the state to collect taxes. This ranges from lack of personnel to cumbersome tax collection procedures which in the long run discourage people from paying taxes. The ERP proposed to streamline and reorganize the administration of the tax machinery and proposed that 15% of personal and corporate tax collected by the Central Government should be remitted or transferred to the District Councils as of right. There is also to be less government direct control of the tax collection agency. This is to be achieved through changing the central revenue department into a central revenue service with a Board of Directors and Auditors licensed annually. In other words, this came very close to privatization of the tax collection function of the state. Also proposed was a tax court to handle cause of ax evasion and tax default. State Enterprise There has been a source of intense public debate since 1866 when the idea of selling some of the state enterprises was first mooted following the overthrow of the CPP and a reversal of the policy of active state intervention in the economy. During the time of the First Republic a large number of state enterprises were established, in the view of the government, as a way of gaining some control of the domestic economy against monopoly of foreign companies. Although this was the main or ostensible reason, in course of time they came to be established more to reward political followers than as specific responses to genuine economic problems. The claims of particularist groups also meant that a large number of these were established as a way of responding to such local pressures. Their personnel was not very strong and the control of central government over their operating procedures was weak, consequently their performance record has not evoked much enthusiasm even among their supporters largely as a result of bad management and corruption. In course of time they came to be plagued by corruption, inefficiency, overmanning and used as conduits for the rewards of party activists. Successive regimes have made plans to eliminate or restructure them without much avail because each time powerful forces had always intervened to limit the extent of restructuring or operations which the state had been willing to impose upon them. Although an attempt was made to scale down their actions and reduce their number to the extent to which it was politically possible, taking into consideration the employment effects of the measures, during the Second Republic, they were to gain a new lease of life under the military rule of Acheampong with its policy of expansion of the public sector. And by 1982 they had become a burden on the state. It is against this background that intense public debate ensued as to their future. Generally, the Right advocated their abolition whereas the left, seeing them as symbols of public control of the economy urged their retention and position and position; and this constituted one of the most salient ideological debates in the country during the turbulent period. The ERP in line with the drive for the reduction of the public sector and the activities of the state generally advocated abolishing the state enterprises. It particularly turned its critical attention to two main agencies whose performance left a lot to be desired: The Food Production Corporation and the Ghana National Reconstruction Corporation are to be dismantled. Their forms and lands will be apportioned among workers interested in operating on a co-operative basis. Title to their lands will be leased to the co-operative. Credits will be provided for the preparation of feasibility studies (ERP p. 13). Interestingly enough the same position has been announced several times as we have said above but the actual had always fallen short of the intended activity. Organizations with large number of workers constantly embarked on retrenchments whereas those with heavy representation from the petty bourgeoisie had been often reprieved. This sort of action was taken at the time of the Second Republic under the administration of the Progress Party and abolition of the state enterprises did not go well with projected creation of more of them in the form of peoples’ shops in the distribution sector. This is one of the more contradictory aspects of the ERP. More in the direction of privatization of these state enterprises were to come later in the Economic Adjustment Plan itself and was to lead to considerable tension in the country and cost the government much of its populist support here. We have already referred to the crisis of Ghanaian agriculture in chapter Two. Like the Limann administration before it, the ERP envisaged a crash programme for agriculture. The ERP planned for modest increases in the same levels of acreage. It envisaged to spend US $61 million in order to increase maize production by 81%, rice production by 39%, cassava, yam and millet production by 10% and 50% in poultry and 16% in fish (ERP, 1). Manufacturing In the areas of manufacturing the ERP envisaged ‘major rationalization to achieve greater concentration and better economies’, better integration between research and production and maximum reliance on local raw materials (ERP, p. 14). There was also a hint that local industries set up and whose purposes appear to be siphoning of foreign exchange will be curtailed and eventually driven out of production (ERP, p. 14). It is interesting that one of the most controversial aspects of the recovery plan, the adjustment of the exchange rate of the cedi was not mentioned at all, except in oblique terms as a system of bonuses and surcharges with a promise that details increases in local prices were to be expected although there were pointers in that direction: The financial aspect of the recovery programme is to take the principle of reprising to its logical conclusion and thus to ensure that what used to be large unearned incomes, that over the years accrued to social parasites, would now be collected and paid into Government chest for use in promoting the objectives of the Reconstruction and Development Programme. It is unacceptable and not in the national interest to perpetuate a situation where genuine exporters are faced with financial bankruptcy while users of foreign exchange are either subsidized or else are allowed to pocket huge profits in the name of protecting the average consumer with officially low priced imports and foreign exchange. It is unacceptable to the PNDC government to have to resort to the printing of cedis at high cost in foreign exchange to finance its programme or to give to cocoa farmers or exporters in general. What was particularly intriguing about ERP was that what was to become, from the point of view of the government, the most important, and from the point of view of the workers, the most controversial, the adjustment of the exchange rate of the cedi was alluded to only casually in the programme. The programme itself as a one year stabilization plan only hints of things to come. It only named the development principles to be followed. The question now is to examine the specific policies embarked on by the PNDC in order to give concrete expression to the principles and direction alluded to in the ERP. For this we have to turn to the annual budget, and in particular the budget of 1983, the three year Adjustment Plan which followed and specific acts and policies embarked on by the government to meet theends enunciated in the plan. Bibliography Hansen, Emmanuel and Paul Collins [1980], ‘The Army, the state and the ‘Rawlings Revolution’ in Ghana’, African Affairs, Vol. 79, N. 314 Hansen, Emmanuel [1982]. ‘The Military and Revolution in Ghana’, Journal of African Marxists, 2 (August) – [1987]: Popular Struggles for Democracy in Ghana, in Peter Anyang Nyongo (ed), Popular Struggles for Democracy in Africa, London, Zed Press Hutchful, Eboe [1979], Organizational Instability in African Military Forces; the case of the Ghana Army’, International Social Science Journal, Vol. 31, 4 – [1986] ‘New Elements In Militarism in Africa: Ethiopia, Ghana and Burkina’, International Journal, XL1, 4 (Autumn). Luckman, Robin [1971], The Nigerian Army: A Sociological Study of Authority and Revolt, London: Cambridge University Press. Ndu, Eme [1989]. ‘Ghana: Transition to Socialism?’, Labour, Capital and Society 21, 1 (April) Robotham, Don [1989] ‘The Ghana Problem’, Labour, Capital and Society 21 1 (April).
Posted on: Wed, 31 Jul 2013 14:12:22 +0000
Trending Topics
Recently Viewed Topics
© 2015