Bawumia and growth policy in post-colonial economies
The spur for this piece is the lecture delivered at the Central University College, Ghana, by Dr Bawumia, the former Vice Presidential candidate of the New Patriotic Party and a visiting professor of economic governance of the university.
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This composition is not conceived as a direct riposte to the lecture but we take the opportunity of the lecture for a national discussion of the identified critical development policy concepts and issues for the growth and development management of post-colonial economies with particular reference to the economy of our dear country.
The lecture illuminates the context for our discussion because as a politician, the views of Dr Bawumia denotes the strict relation between politics and economics and the axiom that political philosophy directs economic development policy choices. The economic development policy choices of the visiting professor by inference reflect his politics and vice versa.
Freedom
The political divide in our country revolves on our struggle for freedom from colonial rule. The political tradition of Dr Bawumia insisted as liberal democrats on the protection of ethnic and minority rights in the establishment of regional assemblies as a condition for freedom from colonial rule. Their tradition became known in local parlance as “Domokrakye” (Scholar of democracy)
The Nkrumaist tradition was resolute and demanded unconditional freedom from colonial rule. They preferred “self-government with danger to servitude in tranquillity.” They were called “vagabonds” and “veranda boys”
Kwame Nkrumah noted from the struggle that there were two types of African scholars; those who seek to implement western concepts lock stock and barrel in their country and the ones that seek an adaptation of these concepts to their societies.
The policy choices, interpretations, and justifications that are deduced from the lecture of Dr Bawumia indicate that he belongs to the former group. His development policy prescriptions are within the box of western liberal democratic economic development concepts.
Fallible Development
The import of the preceding statements is to give the background and context of this discussion to point out that Dr Bawumia only represents a fallible development policy alternative of his political persuasion as we shall show presently. Any assertion, therefore, of a “Bawumiaphobia” as said on the airwaves is untenable because on the issues of economic growth and development policy in post-colonial economies, he is certainly not an authority.
The recognised authority on the development and reconstruction of post-colonial economies is Osagyefo Dr Kwame Nkrumah. This is confirmed by his election as the greatest African of the millennium who has done the most to change and enhance the position of the African in global civilisation. He achieves this by his contribution to the political liberation of the African continent and with his authorship of “Philosophy and Ideology for Development and Decolonisation” or “Consciencism” “Africa Must Unite” and “Towards Colonial Freedom”.
Dr Bawumia dosed his lecture with statistics to show our development trajectory and predicted our development destination and by inference, his policy preferences. His analysis did not examine other development policy alternatives and options. He also did not explain adequately the facts behind the figures and the causative factors of the facts that may direct policy prescriptions and justify his development policy choices.
Dr Bawumia cites the national GDP/Debt ratio of 57 per cent as an impediment to our economic growth and predicts a descent. This view is not validated by recent studies on the correlation between debt and growth.
Research
In a recent research paper, “Growth in a Time of Debt” Carmen Reinhart and Ken Rogoff, professors of Economics at Harvard University, USA, noted that economic growth tends to be substantially slower if a country’s debt/ GDP ratio rises above 90 per cent.
A related study by Thomas Hendon of University of Massachusetts denied the figure of 90 per cent. The significant conclusion from the study was that even if the figure of 90 per cent is accepted, finding a correlation between debt and slow growth is no proof that debt causes slow growth because it is also plausible that slow growth causes debt.
It seems the relevant issue is not the quantum of debt but the demand by Dr Bawumia for proof of an efficient investment of credit finance that promotes growth. The pointer to minuscule road projects as proof of such investments by the leaders of the NDC is disheartening.
Dr Bawumia also raises an objection to monetary expansion to deal with the structural deficits. He believes this “printing of money” causes inflation. He dis-recommends monetary expansion and advances fiscal austerity and discipline. While discipline in fiscal policy management is desirable, fiscal austerity as a policy measure that deals with structural deficits and price stabilisation in post-colonial economies is doubtful.
He is in every respect supportive of the development policy prescription of liberalisation, stabilisation and privatisation demanded by the IMF as a condition for the delivery of “development assistance” to under-developed and post-colonial economies.
On the contrary, studies by Osvaldo Sunkel titled, “Inflation in Chile –An Unorthodox Approach” presented in “International Economic Papers” noted that public sector expenditure deficits do not by themselves cause inflation but propagate inflationary pressures caused by structural distortions such as fluctuations in export earnings and stagnation in domestic agri-business. Dudley Seers and David Felix made similar observation in World Bank Report No AF75A of May 24, 1968 in a study titled “Economic Stabilisation in Ghana”.
Fiscal austerity
The fact is that fiscal austerity restricts public sector expenditure and investments that reduces the capacity of the sector to create employment. The usual result is low demand and contraction of the economy. This is shown by the experience of our country. After more than 30 years of implementation of price stabilisation measures, unemployment is rising and sticky, inflation continues to soar and the exchange rate deteriorates persistently if not insistently in reaction to our huge external trade deficits that is partly an outcome of a trade liberalisation policy and an uncompetitive domestic production.
The appropriate and effective policy for sustainable price stability is a soft monetary policy for investments in the productive resources of the country to satisfy domestic demand and export, create wealth and employment in an economic structural reform.
The justification is that a certain level of inflation in the short to medium term is preferred to a rising and sticky unemployment and lack of income. The investments are also necessary to promote capital formation in the post-colonial economies that is hampered by the structure of the colonial economy we inherited.
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The right to print our own currency is valuable in economic development and growth management. It enables us to create and manage debt for investments. This is noted by Warren Buffet, (the Oracle of Omaha) who in reference to the Greek debt crisis remarked that if a nation has the right to print her own currency, she should never give it up. The United Kingdom concurs and has not given up the Pound in spite of her membership of the EU. The preference of the visiting professor for the structure of the West African Currency Board (WACB) principally as a safeguard against currency depreciation and inflation is therefore strange indeed.
We get an indication that Dr Bawumia is perhaps unaware of the global economic development and management policy disputes within the IMF. The competing policies are those that are supported by the likes of Joseph Stiglitz and Paul Krugman both Economic Science Nobel laureates who recommend full employment for global economic development in fulfilment of the vision of the founding fathers of the IMF that includes John Maynard Keynes.
The other competing policy is fiscal austerity, liberalisation of global trade and financial markets and the institution of central banks as independent monetary authority. The objective is to expand the role and control of western financial and commercial institutions at the expense of the public sector in global economic development. It also explains the financial support George Soros and his cronies give to Aung Sang Suu Kyi of Myanmar. It is not about human rights and liberal democracy but private profits for the one per cent
They dominate current policy and the ousting or perhaps the fall from grace of the former Managing Director of the IMF is not far removed from this policy dispute and power struggle. Joseph Stiglitz was also dismissed or forced to resign as Chief Economist of the World Bank. It is no co-incidence that their economics and politics is centre left.
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Risk of shocks
The vision of the founding fathers of the IMF, after the Great Depression of the 1930s that saw a steep decline in global investments and demand and an upsurge in global mass unemployment, was that governments should not cut back on their expenditures but stimulate their economies through investments.
The objective was to keep the global economy in full employment and sustain demand to protect the global economy from the risk of shocks. The IMF was created specifically to support governments in this effort. The current policy of fiscal austerity is, thus, a right wing deviation from the mission and remit of the IMF in global economic growth and development policy management.
We may conclude that the critical development policy issues for an internally generated and balanced GDP growth is the development of our national productive resources and human capabilities and capacities to satisfy domestic demand and export with structural reforms. This is the path for the reconstruction of the colonial economy, employment and wealth creation, technological advancement and the delivery of prosperity to our people.
The requirements of our growth and development policy are an original ideology for development that is founded on our history of slavery and colonialism, innovation, creativity, pragmatism and common sense and not the rote propagation and execution of western development policy and growth management concepts.
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Growth and development policy advice from forces who denied us political rights and economic opportunities under colonial rule is not likely to be well- intentioned. We should never forget that they have not abandoned their struggle to dominate and control global resources and markets.
Policy development and growth management in post-colonial economies in particular is peculiar and an unusual business. It demands a keen appreciation of and alertness to the machinations of forces that seek to dominate and control our resources and markets as evident in the current European Partnership Agreement (EPA).
The inclination to political propaganda rather than a scientific appraisal of growth and development policy obscures the debate of development policy alternatives and diverts from the urgency of a focus on critical national growth and development policy issues.
It is time to say NO to inflation targeting in our development and growth management policy and take on investments for job creation in a structural transformation of our economy.
(The writer is the Chairman of the Political Committee of the CPP)