TUC Statement: Ghana’s Economy: A Concern for All
BY KOFI ASAMOAH, SECRETARY GENERAL
On behalf of Organised Labour, let me welcome you to this forum. It’s a real pleasure to see so many of you here. The forum is part of the commemoration of the 2014 May Day. And as you may already be aware, Organised Labour decided to focus this year’s activities including discussions on Ghana’s Economy, which in our view isn’t working well for Ghanaians and has become a concern for all us. We are delighted to have the Minister for Finance here with us; in due course he together with the other speakers will share their perspectives and those of the government on the state of the economy and the way forward.
Ladies and Gentlemen: for those of in labour, our views are well known. We have at various points in the last decade issued terse statements drawing attention to the nature and conduct of economic policies. We have, at various forums and interactions with government officials expressed our disquiet about the economic policy direction of the country. Therefore, the current difficulties, challenges and crisis – depending on your specific circumstances – have come as no surprise to us in labour. It did not start today; the difficulties have accumulated over many years and are only coming to a head around this time.
Brother chairman, ladies and gentlemen, let me crave your indulgence to share a few of our perspectives. First, it is our view that Ghana’s economy remains fundamentally a developing third world economy. The economy is faced with challenges of under-developed infrastructure, technology whether in industry or agriculture is rudimentary, literacy is high and the quality of education is low. Our exports coalesced around natural resources. The bulk of the workforce is trapped in low productivity employment in agriculture and services. Many citizens including those in agriculture are finding it ever more difficult to meet their daily food needs. Manufacturing base is shallow and shrinking. The social indicators whether in the realm of access to sanitation, decent housing, safe drinking water or affordable healthcare are nothing to write home about. These are but a few of the characteristic feature of our economy and society.
Second, in a country characterized by these features of under-development economic policy should be radically different from one in which the basic necessities of life have been achieved. Addressing this fundamental ethos of under-development through a liberal or neo-liberal economic framework has never worked anywhere. The ‘official’ account of globalization as told by the World Bank and the IMF will tell you it is doable, and they point to South Korea and Malaysia. When in fact, we now know from many other credible sources that these countries did something different from what we have been led to believe. But after all we have China to look up to. When Chinese officials repudiate the characterization of their development model as “Beijing Consensus” they simply are telling us that development does not follow any linear path; it is a process of pragmatism and adaptation to both internal and external circumstances. And as a formal Chief Economist of the World Bank Justin Lin, has noted, at all times in the last fifty years countries that followed dominant economic policies failed to change their economic structure; they also failed to catch up.
Thirdly, Organised Labour believes that overcoming our development challenges requires a skillful interplay of both the visible hand of government and the invisible had of the market. In the first, two decades after independence, we sought and fail to develop using the apparatus of the state; in the process we destroyed the private sector and killed market incentives. In the last thirty years, we have unleashed market forces, not only pushing back the state but also thoroughly deforming it. It is our view that development cannot be achieved through market fundamentalism. There are many aspects of national development for which market incentives do not exist, but that does not mean that they should not be attended to. In all successful cases of economic transformation markets were tamed, like the wind, for the purpose of reaching a defined goal or destination; they were however, not strangulated; they were simply governed. And in all such cases the STATE was a developmental, purposeful one, with efficient institutions that designed and implemented smart rules knowing its power and its limits. Unfortunately, our state has become deformed, and unable to undertake the simple task of governing. All the high and low profile corruption that have become all too pervasive are symptoms of a weak and failing state. We need to rescue, and rehabilitate the state, and place at the front and centre of national development.
Brother Chairman, in tune with the neo-liberal economic orchestra, a weakening state has retreated into the comfort zones of politics leaving economic governance to market forces in the name of laissez-faire. But as history teaches us, the winds of laissez-faire are not likely to blow in the desired direction when a country is steeped in under-development. Therefore, financial liberalisation has brought in more banks, which are announcing huge profits but the rest of the business community is reeling under high interest rate regime that makes domestic production almost suicidal. A developmental state should not stand aloof; it should intervene strategically to bring down interest rates because in the long, this business model isn’t in the interest of anyone including the banks themselves.
Comrades, in the name of laissez-faire, we have adopted for ourselves perhaps the most liberal trade regime ever in the history of mankind. And there is pressure from within and without to liberalize further. History has no example of a country that developed in such liberal trade environment. Our trade deficit has continued to worsen because our low-priced primary commodity exports are not paying for our manufactured imports; the terms of trade has always favoured manufactures. Three decades ago, a ton of cocoa bought one VW. Today, we require twenty (20) tons or more to buy one VW. This is because, cocoa beans has remained cocoa beans while VW has moved from the beetle of the 1970s to the Touareg of today.
The trade deficit is exacerbated by two factors. First, foreigners control the bulk of our exports (the raw materials). Foreigners own the gold mines and other solid mining concerns. The Jubilee oil is over 80 percent owned by foreign companies. And it is important to note that these companies have been guaranteed the right to retain up to 80 percent of their earnings outside the country. Effectively, however, some of them keep over 90 percent of their earnings in offshore accounts. This means, out of the over 40 percent of our exports revenues that come from gold, no more than 20 percent of that gets retain in the country.
Second, is the rate at which we allow transfer of foreign currencies out of the country particularly by companies that do not themselves generate foreign currencies. Take the case of the telecom companies. These are service companies dealing in what economist refer to as non-tradables. That is, they deal in products that do not cross national borders. What it means is that they do not bring in foreign currency beyond their initial capital requirements. At the same time, these companies generate so much domestic revenues and they are super-profitable. They are foreign owned, which also means that they need to transfer profit to their shareholders in London, Johannesburg and other foreign destinations. And they definitely cannot transfer the cedis they generate in large quantities on a daily basis. What they do is to exchange those cedis for the dollars our hardworking cocoa farmers bring in.
Ladies and Gentlemen, in such a situation as we find ourselves, the grand depreciation of the cedi against all major international currencies is only a matter of course. No currency can withstand such onslaught. The measures by the Bank of Ghana, in our view represent a panic reaction that attempts abysmally to tackle the symptoms leaving the structural causes intact.
Therefore, the challenges that confront Ghana’s economy emanate directly from the economic policies that we are pursuing. The economic policies that have led to unbridled liberalization of the economy, made imports trade super lucrative, penalizes domestic production and reduced the economy to buying and selling. Added, to these are the regime of investment rules that favour foreign investors over domestic investors, caved strategic sectors of the economy for foreign capital and grants them mouth-watering incentives, which we are not prepared to give to domestic producers. These bad economic policies have been made worse by a number of domestic challenges including widespread corruption in high and low places, cronyism, incompetence and extreme partisanship.
Ladies and Gentlemen, the sad aspect is that our policymakers and politicians continue to play ostrich, focusing on red herrings. They are pointing to GDP growth when they know that growth isn’t creating decent employment. They are pointing to our middle income status when they know that we have come into middle income with all the characteristics of a lower income country; paying the lowest wage rate and with deteriorating social indicators. Suddenly, the public sector wage bill has become the cause of all the difficulties; the evidence does not support it. Instead of addressing the many challenges that face domestic industry we are busy creating platforms for 21st century Lugards to lecture Ghanaians about the virtues of free trade and Economic Partnership Agreements when in fact all analyses show that, that agreement will constitute a major stumbling bloc to national development.
These provide a summary of our views on the economy and with these, let me officially declare this forum opened and welcome our distinguished speakers. I thank you for your attention.
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