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Ghana The Economy
Ghana - Unavailable
Gold weight in the form of a striking scorpion
(Asante)
GHANA'S ECONOMY HAS LEFT an indelible imprint on the country's
social and political structures. Just as the presence of gold gave
rise to the Asante confederacy and empire and attracted European
traders and colonial rulers, so, too, were modern day politicians
moved to try to protect the country's wealth by establishing the
first socialist regime in twentieth-century Africa. As the
ambitious plans initiated by Ghana's first president, Kwame
Nkrumah, unraveled, however, military officers seized control of
the country and promised to overturn what they perceived as a
corrupt ruling class enriching itself from the nation's coffers. In
the 1980s, military and civilian officials failed to revive the
economy through stringent anti-corruption measures and embarked
instead upon a restructuring of the economy.
The transformation of Ghana's economy undertaken in the 1980s
was considered a test case for "structural adjustment"
prescriptions advocated by international banking institutions.
Faced with growing impoverishment in Africa as well as in much of
the so-called developing world, the World Bank and the
International Monetary Fund proposed radical programs to revive
troubled economies and to restore their productivity. The
government of Jerry John Rawlings turned to these agencies in 1983
and accepted their recommendations in exchange for assistance
packages to ease Ghana's economic and social transformation.
Foremost among the changes enacted in Ghana were the disengagement
of the government from an active role in the economy and the
encouragement of free-market forces to promote the efficient and
productive development of local resources. The reformers cut
government budgets, privatized state enterprises, devalued the
currency, and rebuilt industrial infrastructure by means of
assistance programs. As in other countries of Africa in the 1980s,
government was identified as the problem, and free-market forces
were seen as the solution.
By the 1990s, the effects of structural adjustment in Ghana
were beginning to be assessed. According to the World Bank and
other western financial institutions, the economy had become much
more stable, and production was on a more solid footing than it had
been a decade earlier. Exports were up, government deficits had
been reduced, and inflation was down. Many Ghanaians, however,
questioned whether the structural adjustment benefited all
Ghanaians or just a few sectors of the economy. Critics of the
World Bank charged, moreover, that it concentrated on
infrastructure such as airports, roads, and other macro-economic
projects that did little to improve the lives of the average
Ghanaian.
Under the sway of free-market forces, production had increased
in Ghana's traditionally strong sectors, cocoa and gold, thereby
reverting to the pre-independence economic structure; still, a more
broadly based economy had not developed. In addition, substantial
loans had been incurred by the government to promote those sectors-
-at the expense of recurrent budget expenditures such as health and
education--without a compensatory increase in government revenues.
Ironically, the tax breaks prescribed to encourage these sectors
worked against increased government revenues, so that by 1992, tax
revenues began to drop. In addition, jobs not only had been cut
from the once bloated public sector but also had not expanded in
the more successful export sectors. Although the government claimed
its finances were much healthier in the 1990s than in the 1980s,
the long-term economic and social impact of structural adjustment
was uncertain.
Relying heavily on the exploitation of some non-renewable and
even endangered resources, Ghana's economic recovery will have to
expand to create a broader and better balanced economy. In addition
to cocoa, Ghana's leading export commodities are gold, a nonrenewable resource, and timber, the harvesting of which has
included more than eighteen endangered species of trees and has led
to alarming deforestation. Furthermore, Ghana's ocean waters are
seriously overfished, leading the government to ban the catching of
shellfish.
According to the Ghanaian government, these resources could be
used to develop local manufacturing, the goal Nkrumah tried to
reach through direct state intervention thirty years ago. Local
manufacturing could create jobs, cut the import bill, and provide
a more diversified economic base. The question for Ghana is whether
free-market forces will be more successful in promoting healthy
economic expansion than the failed policies of direct state
intervention.
Data as of November 1994
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