General News of 2014-02-02

We can’t borrow our way out of economic woes – Sakara

The 2012 Presidential candidate of the Convention People’s Party (CPP), Dr Abu Sakara Foster, has warned against excessive borrowing as a conduit to fixing Ghana’s economic problems.

According to him, “it is time to abandon the obsessive pursuit of economic indicators purely to enable us secure more loans”, adding that: “We cannot borrow our way out of our economic woes if we never invest in areas of growth that will generate sufficient income to keep up with rising costs of living We must end the habit of taking loans just to survive”.

He says “it is time to fashion a comprehensive and measured approach that will find and apply fundamental solutions to fundamental problems”.

Dr Sakara, in an article, warned that: “Knee jerk reactions to individual social and economic problems in isolation cannot work because the situation is now compounded”.

The agricultural economist said: “We have a complex composite of high import bill and trade deficits, burgeoning unemployment (especially among our youth) and low incomes, low productivity and rapidly increasing living costs topped with chronic over manning in public sector. Ghana has at least 650,000 public service workers in a nation of only 25 million. This gives approximately one public worker for every 30 persons in Ghana compared to one public worker for every 300 persons in USA”.

He has suggested that the Government should take measures to cut down the number of public sector workers as one of the measures toward fixing the economic problems of the country.

“We must galvanise sufficient political will to cut down the numbers of public sector employees to a manageable level that is balanced with significant increase in internal revenues especially from areas of growth. It is only then that we can afford to pay public sector employees real living wages in return for much increased productivity. This twin track approach (reduction of size of government and increase in revenue accruing from investment in areas of growth and development) must be the heart of a comprehensive national effort to get out of the current economic doldrums”.

In the article, Dr Sakara bewailed the situation where in spite of relatively lower wages for public sector workers, Ghana spends nearly 70% of internal revenue on wages of public sector workers who form less than 3% of the population.

“This coupled with spending 23% of internal revenue to service national debts leaves only 7% of revenue for investment infrastructure and support for private sector. In reality the nation is left ‘spread eagled’ with little or no capacity to deliberately invest in growing the economy for development in key areas of value addition. This lack of investment in income generating areas is at the heart of the incapacity of government to grow the economy from within. Subsequently it can’t pay wages that keep up with increasing in living costs”.

Below is the full article by Dr Abu Sakara Foster

SAKARA SUGGESTS A MEASURED APPROACH TO GET OUT OF ECONOMIC CRISIS

“Our socio-economic problems are largely the result of our collective acts of omissions and commissions that have simply caught up with us. We need to follow a measured and consistent approach in the medium to long term in order to extricate ourselves from the clutches of a myriad of problems…simplistic knee jerk reactions won’t do the job! So let us focus on the economy, specifically what will grow the economy in a sustainable way and what will concurrently reduce wasteful leakages!”

Over the last year a sense of heightened apprehension gripped the nation over the resolution of the 2012 election dispute and then over pay disputes. Harsh global economic conditions reinforced a sense of local desperation in spite of our best efforts to remain optimistic and hopeful about the country’s future. Ghanaians indeed have every reason to be hopeful for a bright future if only we increase our capacity to react in a measured way to complex socio-economic problems. This will demand that we objectively analyze these problems taking into account trends rather than individual events of the moment. Perhaps we will then recognize that many of our socio-economic problems are largely the result of our past collective acts of omissions and commissions that have simply caught up with us. “The chickens have simply come home to roost”. The neglect of critical areas of growth of the economy has resulted in reduced capacity to generate sufficient income to pay wages that keep up with the rising cost of living. To make matters worse, mismanagement born of the attitude that government owes people a living, has increased numbers and cost of public sector employees beyond what our national revenue income can bear.

The long term effect of deviating from the first republic’s path of growing a robust home grown economy is now glaring in a greatly diminished manufacturing sector and incapacity of government to pay wages that keep up with the rising costs of living. Wasteful public expenditures and unrealistic wage expectations of the single spine have exposed the fallacy that government can sustainably keep raising taxes to meet its budget demands. The pattern of an export led economy based on primary produce and extractive minerals has become entrenched. The prognosis of impending doom is however premature. We have a lifeline if we use our oil income carefully and in a targeted way to grow key strategic sectors of our economy like agriculture. It must be in concert with high priority infrastructure that give the highest internal rates of return and have the most pervasive impact in reduction of transaction costs.

A Socio-economic disaster is avoidable if we reverse government’s incapacity to pay real living wages by increasing national income and reducing cost of government. Incapacity to pay the public sector wage bill is not a permanent condition. It can be reversed if fundamental changes are made in our priorities and the way we run government. We must galvanize sufficient political will to cut down the numbers of public sector employees to a manageable level that is balanced with significant increase in internal revenues especially from areas of growth. It is only then that we can afford to pay public sector employees real living wages in return for much increased productivity. This twin track approach (reduction of size of government and increase in revenue accruing from investment in areas of growth and development) must be the heart of a comprehensive national effort to get out of the current economic doldrums.

It is time to fashion a comprehensive and measured approach that will find and apply fundamental solutions to fundamental problems. It is time to abandon the obsessive pursuit of economic indicators purely to enable us secure more loans. We cannot borrow our way out of our economic woes if we never invest in areas of growth that will generate sufficient income to keep up with rising costs of living We must end the habit of taking loans just to survive. Knee jerk reactions to individual social and economic problems in isolation cannot work because the situation is now compounded. We have a complex composite of high import bill and trade deficits, burgeoning unemployment (especially among our youth) and low incomes, low productivity and rapidly increasing living costs topped with chronic over manning in public sector. Ghana has at least 650,000 public service workers in a nation of only 25 million. This gives approximately one public worker for every 30 persons in Ghana compared to one public worker for every 300 persons in USA.

In spite of relatively lower wages for public sector workers, Ghana spends nearly 70% of internal revenue on wages of public sector workers who form less than 3% of the population. This coupled with spending 23% of internal revenue to service national debts leaves only 7% of revenue for investment infrastructure and support for private sector. In reality the nation is left “spread eagled” with little or no capacity to deliberately invest in growing the economy for development in key areas of value addition. This lack of investment in income generating areas is at the heart of the incapacity of government to grow the economy from within. Subsequently it can’t pay wages that keep up with increasing in living costs.

We are reaping what we have sown over decades, but lucky as we are, all is not lost. There is still hope for a bright future if we can only focus on achieving the common good in spite of the struggle for private interests.

Our myriad of social, economic and political problems have all peaked at the same time to present a significant daunting challenge. It seems there is a crisis of confidence in our nation to meet this challenge. Such self doubt is because we have not yet galvanized a comprehensive approach that involves all of us giving our best efforts to fashion balanced workable solutions. The tendency to seek a single cause for our economic woes, or to cast blame on a particular person, group of persons, institution or political party for our collective failure is a big diversion and an obstacle to solving our current social, economic and political problems.

We currently cannot agree on any solutions because we see the problems very differently from different sides. Each interest group casts blame whilst seeking to promote their solution as the panacea to all our problems. In reality the problem is more complex and cannot be solved by “knee jerk” reactions that are born out of extreme partisanship and a tendency for interest groups to fend for themselves at the expense of the common good.

Yes, corruption is a cancer in our society! The heart of it is selfishness that curtails ability to work for the common good. Let who is without sin cast the first stone. Let all who want to change the situation first divest themselves of egocentric hypocrisy. If we are to travel a common path as a people, then we must set our moral compass together based on shared values and principles that have withstood the test time. Our commitment to such shared values can only be sustained through pursuit of a shared vision for attainment of our national development goals.

On the surface it appears that our labor disputes are because the employer has refused to pay specific wages that satisfy employees. However a central issue in the recent labor disputes is also that the employer is not sharing fairly the burdens that arise out of his eroded capacity to pay real living wages. Any solution to the dispute must therefore be broad enough to share the burdens fairly between employers and employees through fairer wage levels, improved work conditions and reduction of waste so as to raise productivity. The savings and additional income gained, if properly invested in areas of growth, will restore employer’s capacity to pay real living wages.

For the moment it would appear that “sky high” increases in price of utilities coupled with high cost of other essential necessities (food, clothing and shelter) is the “last straw that will break the “camel’s back”. I would however argue that the fundamental problem, an overburdened public sector wage bill, already existed and just needed a little push to bring government to its knees. It is President Mahama’s unhappy lot that it has finally happened on his watch. It is upon him to stir the nation into action using every resource at his disposal, to ensure that we overcome these challenging times. To waste time finger pointing is pointless and will certainly ensure our collective failure if that is all we do.

Yes we must demand accountability. We must ensure that we deter would be saboteurs of our common prosperity by ensuring that the wheels of justice grind forward inexorably until all culprits of corruption are apprehended and dealt with. We must not allow anger and just demand for retribution to make us loose our focus on the way forward out of a tight economic situation. It is infuriating when the public purse is wastefully used for selfish ends. It would however be a more wasteful loss of opportunity to spend our time in a never ending blame game at this crucial point.

We must galvanize ourselves into action for a change in direction to save our nation. We must face the bitter reality that we cannot pay increased wages of the single spine because it is beyond our national income. Furthermore to do so at all costs would be imprudent and morally questionable to use the 70% of national revenue to pay less than 3% of the population. In the short to medium term, we must face the task of reducing the public sector wage bill by cuts in numbers of public sector workers whilst demanding a significant increase in their productivity. We must quickly empower the public sector with tools of e-government and demand improved work ethic so as to improve productivity to justify commensurate increases in wages.

Effecting an economic turn-around calls for a firm hand and a measured approach to make Ghana work for all of us and not just for a few at the expense of the many!

Let us move forward together as a nation. Forward ever backward never!