Investing for future generations through free education

“…[W]e live in a country where women are dying because the road from their villages to a health facility is not done, and you say that the oil wealth God has blessed us with should be left for generations to come while that woman dies today because she can’t go to the hospital? ...” Former President J. D. Mahama.

 

BACKGROUND:

In a recent speech delivered by the President of the Republic of Ghana, in his characteristic pellucid style of which he is well known to be a master, emphatically declared that revenue from natural resources shall be applied to supplement the funding of the Free SHS Programme. Many Ghanaians continue to express interesting perspectives on the feasibility of the programme, and in one case, a well known politician, himself a product of "free education" has ignominiously referred to it as a hoax.

Some have also vehemently opposed any attempt to cause petroleum revenue invested in the Heritage fund to be applied to fund this widely praised policy. This paper published in 2013 and modified for present circumstances seeks to answer the the following question. Whether or not it would be appropriate to apply the accumulated Heritage Fund (HF) to supplement other sources of funding for the continuing implementation of that necessary Programme. 

 

Not surprisingly, some of those political elites who are now most vociferous in their support for an amendment to the law to remove the constraints on the transfer of the funds in the HF for its immediate use were, a few years ago, sharply against it. Conversely, most of the political actors who held the view that the HF ought to be spent now and indeed vehemently propagated it are now being heard loudest from the roof top that the HF must not be accessed to fund the free education Programme. This mutual acts of prevarication may be consistent with the kind of politics that some actors are familiar with. We shall therefore not allow ourselves to be detained by them, at least for now.

 

Some non-politically conspicuous persons have also enriched the debate by expressing their various opinions on the subject. One of such persons is THE AFRICA CENTRE FOR ENERGY POLICY (a.k.a ACEP). In a document entitled: "GOVERNMENT SHOULD STAY AWAY FROM THE HERITAGE FUND" and attributed to ACEP it is argued thus:

"Much as we support the use of oil revenue for financing education, we want government to recognize the significance of the heritage fund and not touch it... Given that most of the cost items for the implementation of the Free SHS are recurrent expenditures, government will have to amend the law to be able to spend more than 30% of the ABFA"    

 

Another think tank that has expressed its conviction on this vexed issue is IMANI Centre for Policy and Education. A piece attributed to them on peace-fmonline.com is to the effect that they have:

"... taken a strong stand against the free senior high school (SHS) education policy, a major campaign promise of the New Patriotic Party (NPP). Accord-ing to IMANI, the issue was not about whether it was possible to implement the free SHS policy; it was about how to make quality education accessible to all.

 

A senior research fellow at IMANI, Mr Kofi Bentil, who made this observation in Accra, said he personally carried out a vox pop on the issue of free education among the various social classes, but the response he got was not what policy makers thought could sway Ghanaians. “Nobody; zero, – rich or poor – has said that they want free education in Ghana,” he said. “Everybody I speak to wants quality education which is accessible regardless of their economic situation. Poor people and rich people want good schools their children can go to.”

 

Speaking at Citi FM’s Roundtable discussion on the topic, “Fixing Ghana’s Education, is free SHS the way to go? "Mr Kofi Bentil said though it was a good idea ... “Free destroys the quality in education. It forces poor people to pay to run away from free schools,” he said. “Throwing money at a problem won’t solve it. It may end up enriching certain people and the poor people will still be disenfranchised.”

 

Needless to emphasize that contrary to the assertion that “Nobody; zero, – rich or poor – has said that they want free education in Ghana,” the subsequent election at which the is-sue of free education formed substantial part of the programmes on which the current President an unprecedented victory, has proven that rather a comfortable margin of the Ghanaian people want free education. Indeed, a piece on social media to which Mr Samuel Atta Mensa aka Samens is credited sums it all that:

 "Just go form a political party and tell the electorate that you don't want free education and see how many people will vote for you... For me the Free education policy will eradicate the inequalities that exist within our educa-tional structure. The have nots will now have access and the haves will also have a choice."

 

This writer, as an "active Citizen Spectator" has also found it necessary to express my humble view on the matter by modifying a paper authored sometime in the year 2013.

 

BACKGROUND

 

Sometime in June 2007, Ghana discovered oil in commercial quantities. Many Ghanaians hailed it as “…an answer to prayers made by some Ghanaians seeking special blessings from God” . Chief Justice Theodora Wood further declared that “…the discovery of oil in Ghana should be seen as God’s blessing over the nation.”  Similarly, President John Evans Atta Mills,  the then president re-echoed the belief of many Ghanaians expressed by the Chief Justice thus: “This is a gift from God, a resource that belongs to all the people of Ghana, including generations yet to be born. I have always and will say further that the money that will come from the oil will benefit all Ghanaian people, and not just a few.”  

A BBC report, also reiterated the expectations of many Ghanaians who viewed the discovery of oil as “A gift from God.”  These declarations are indeed representative of the belief of the generality of Ghanaians as expressed in the popular cliché; ‘Who Jah bless no man can curse!’

 

As it is to be expected, a number of people from Ghana and across Africa however ex-pressed some pessimism about the high expectation of Ghanaians as contained in a BBC report and summarized in a book by Duncan Clarke, thus:

 

"…oil creates a structural imbalance in the economy… it means more dicta-tors, tyrants and foreign interference with the legitimized looting of re-sources…the problems come from those who drill oil…they take advantage of the corrupt African governments… eventually Ghana will be corrupted by dubious western companies in time… in Nigeria it became a bane due to corruption… oil benefits only the ruling elite… oil is usually abused and misused by African leaders… oil corrupts absolutely…. it stokes the embers of conflict in Africa… it creates rebel groups…the greedy elites will be rubbing their hands with glee…Nigeria, Cameroon, Equatorial Guinea and Angola have nothing to show despite having oil…” 

 

We partly share the sentiments expressed above by a cross-section of Africans who, with-out doubt are frustrated by the non-fulfillment of their high expectations upon discovery of oil in their home countries.

 

In addition to the above theories explaining the the reasons accounting for the inability of resource rich but poor nations to maximize the benefits of natural resources (that is the so-called resource curse) other proponents such as Thorvaldul Gylfason  has fashioned out the "Human Capital" theory in an attempt to explain the phenomenon of the resource curse. According to Gylfason, natural resource abundance if not properly managed could  lead to the neglect of human development through education that affects quality institu-tions, national growth and development. Gylfason further posits that:

“... nations that are confident that their natural resources are their most im-portant asset may inadvertently and perhaps even deliberately, neglect the development of their human resources by devoting inadequate attention…to education.’’ 

 

Saving the resources 

Paul Stevens  like some other proponents of the resource curse, has proposed that, al-though it would seem extreme, it is better to leave natural resources in the ground. Ste-vens explains however that, it is not being suggested that natural resources ought to be left in the ground indefinitely, rather, the proposition is that natural resources ought to be developed at a slower pace than is currently being done. 

 

Even though Stevens accepts the proposition that the need for economic development calls for an expeditious extraction of natural resources, he however posits that if a country is to address the resource curse problem, then a slower development pace is common sense.  Again the Paramount Chief of the Akyem Abuakwa Traditional Council is known to have engaged in a crusade against the destruction of the environment as a result of illicit mining operations and had stated that, it would be better to protect butterflies than engage in mining operations which do not benefit the people substantially.

 

This proposition has been corroborated by Humphrey’s et.al.  who has said that:

 “… leaving oil in the ground… just might be the safest place for the asset, especially if there exists the risk that governments may use revenue for their purposes rather than for the good of society as has happened so often already.” This position has also been em-phasized by Joseph E. Stiglitz who, in justifying the proposition for the need to delay the extraction of oil has opined that “…there is a strong argument for awaiting: the assets will not disappear. Indeed if the price of oil rises overtime, the value of the assets beneath the ground grows overtime…the return to waiting may be higher than on any other investment the government might make.” 

 

 SAVING THE NATURAL RESOURCE REVENUE

 

A number of Resource curse theorists have variously proposed that resource funds should be saved in STABILIZATION and HERITAGE FUNDS, instead of utilizing them as capital expenditure, in order to avoid the resource curse. One of the fundamental reasons for this policy is to stabilize public spending and save resource revenue for future generations. This means that a resource-rich country ought not increase its spending even if its revenue is more than budgeted for as a result of resource booms. This policy, it is argued, helps to prevent a situation where spending commitments cannot be kept and sustained when commodity prices collapse. According to, Eifert, Gelb and Tallroth , high quality spending mainly prevents rent-seeking, patronage and waste, and that:

 

“Rapid growth in public spending, which often follows oil price increases, re-duces spending quality and introduces entitlements, including recurrent cost commitments, which are often not sustainable in the long run. Efficiency often suffers from a high proportion of unfinished projects as well as from capital investments that cannot be effectively used because of shortages of recurrent resources.”

 

 The overriding principle for the setting aside of a portion of oil revenue and saved in an account is to ensure that it:

 

a. Cushions the impact on or sustain public expenditure capacity during periods of unanticipated revenue short falls whether caused by a fail in the petroleum price or through adverse production charges.  This is the rational for the establishment of the Ghana Stabilization Fund. 

b. "The object of the Ghana Heritage Fund is to provide an endowment to support de-velopment for future generations when petroleum reserves have been depleted" as stipulated under section 10 (2) of Act 815.

 

Savings, especially for future generations is rooted in the concept of “Intergenerational Equity.” This concept proposes that “humans hold the natural and cultural environment of the Earth in common both with other members of the present generation and with other generations, past and future.” 

 

The concept is based on the under-listed principles, which should not be seen as exhaustive. It includes the principles that; 

a. All humans must treat the Earth well.  This means that;

i. Humans need to treat the Earth (including all natural resources) as if it was not given to us by our parents.

ii. That the Earth (including all the natural resources) is loaned to humans by our children.

iii. That the Earth (and all the natural resources) is borrowed by humans from their children.

 

The concept further draws from economic principles of “Generational Savings and Dis-savings”. Savings in this sense refers to the transfer of capital, which ought to be greater than the quantum inherited. The second strand, referred to as Dis-savings also refers to the transfer of capital smaller than as inherited. The advocates of the concept of intergenerational equity have also fashioned out the principle of ‘Everlasting Mortgage’ and ‘Everlasting Partnership’ between the Dead, the living and the yet unborn. 

 

Whilst we agree with the concept of intergenerational equity, we are of the opinion that in reference to resource-rich but poor countries, only capital savings as proposed by Jeffrey Sachs  should be pursued to ensure the maximization of the benefits of natural resources for both the current and future generations. In recent times, savings in petroleum funds in the form of investment in financial institutions in particular have become popular in most oil-rich countries  as against savings in the nature of investment expenditure on projects such as education to develop human capital, or on transport infrastructure to provide market access and reduce transportation costs in doing business. 

 

The Norwegian Government Petroleum Fund, now called Government Pension Fund – Global, established by legislation is usually touted as one of the best petroleum funds with the objective (a) to shield the economy from fluctuations in prices and extraction rates in the petroleum sector and (b) to act as a savings fund. As has been vehemently proposed in this paper however, in the case of resource rich but poor nations such as Ghana, our preference is for investment in public goods especially infrastructure for the enhancement of educational and health programmes of the country and support for health workers and teachers respectively. Where necessary portions of the funds may be applied to the construction or maintenance of roads in the country.

 

Is there a better way "to provide an endowment to support development for future genera-tions than to provide for them now "freely", their educational and health needs, including appropriate and relevant health and infrastructure, and adequate support and congenial environment to the necessary workers? No. In fact, the provision of these public goods and services is the fundamental mechanism to achieve "development for future genera-tions".

 

EDUCATION AND HUMAN RESOURCE DEVELOPMENT

 

The need for accumulation of human capital which is undoubtedly a potent tool for the realization by a resource-abundant country of its development goals has been succinctly established by numerous experts and commentators on the subject. One of such experts is Thorvaldus Gylfason who has firmly emphasised the position that education is the en-gine of growth and that more and better education tends to shift comparative advantage away from primary production towards manufacturing and services which leads to the ac-celeration of learning by doing and growth. 

 

The importance of education and human resource development as a potent tool for the realization and maximization of the benefits of natural resources has been further hig-hlighted in the literature on the subject. According to the Gylfason, "... more, and better, education is a prerequisite for rapid economic development around the world…” The au-thor asserts further that education stimulates economic growth and improves people’s lives through many channels; such as increasing the efficiency of the labour force by fostering democracy, thereby creating better conditions for good governance by improving health and by enhancing equality. 

 

Glaeser, Laporta, Loezde-Suleifar, have put the matter beyond dispute when they said that:

“… much evidence points to the primacy of human capital for good growth and democratization ... More recently, it might be less profitable to look for the “deep” factors explaining economic development than policies favouring human accumulation. Our evidence suggests that countries that emerge from poverty accumulate human and physical capital and then, once they become richer, are increasingly likely to improve their institutions."   

 

For instance, the United States of America and Norway have been cited as excellent ex-amples of the proposition that human capital accumulation leads to economic growth. Ac-cording to Gavin Wright and Jesse Czelusta, based on the US historical experience as the World’s leading educator in mining engineering and metallurgy by the late nineteenth century, natural resource must not be seen as a mere “gifts of nature” or resource en-dowment. But that they are better understood as the results of investment of various kinds in capital infrastructure and knowledge in a broad sense.

 

A writer in the ‘Legal Janitor’, an internationally accredited source of information, in disputing the claim by many resource theorists that Singapore lacks natural resources the view that, Singapore is indeed endowed with rare natural resources which are ‘human ingenuity and creativity’, hence underscoring the importance of human capital development thus;

 

 

“The fact is that throughout human history, there has ever been only one natural resource, and that is human ingenuity and creativity. A lump of iron ore is just a thing lying in the ground. Without human hands to shape it, without human intelligence and ingenuity to put that iron to use, a lump of iron ore has… no purpose and no use. Crude oil pumped from the ground is just black goo. Prior to the invention of machines that use petroleum as fuel, crude oil had absolutely no value whatsoever, was not considered a “re-source”. The only reason why things in the ground and sea can be extracted, and refined, moulded and manipulated into things of value, is because hu-mans have exercised their ingenuity and creativity into thinking up these processes.” 

 

The resource curse theorists usually justify the “foreign savings” policy on the ground that:

“Holding the account (for the savings) in domestic institutions or in domestic currency would increase the vulnerability of the country to the “Dutch Dis-ease”, which would result in further distortions of the economy.”  Even more preposterous, with all due deference, is the suggestion that “…most domestic banking systems do not have the controls and capacity necessary to ensure the integrity and safety of an oil account, particularly given its potential magnitude. Further, the selection of a domestic institution to be custodian [of oil revenue] is likely to be a highly politicized process”. 

 

In the opinion of this author and many others, the overriding motive for the insistence by the powerful institutions and individuals from the developed countries that resource rich but poor countries ought to invest a reasonable portion of their resource revenue in foreign financial instruments like the Eurobond is to enable those developed countries and their institutions recycle these same monies back to those resource rich but poor countries as loans and investment by the IOCs in the oil and gas sector which further ensures their subjugation of those countries indebted to them.

 

Furthermore, inquiries conducted by this writer at a number of commercial banks and other finance houses in Ghana sometime in the year 2013, revealed that had the Stabilization and Heritage funds been invested in Ghanaian financial instruments, like bonds, they would have yielded far higher returns than currently accruing to Ghana from the foreign investment instruments and financial institutions. For in-stance, the return on investment in foreign instruments and financial institutions on Ghana’s Heritage and Stabilization funds yielded 0.18% and 0.29% respectively in the first half of the year 2012. 

 

This author holds the view that instead of investing oil revenue in some financial institu-tions, usually foreign financial institutions, as in the case of Ghana, the State should invest all the funds in infrastructural projects and other relevant “public goods” that will lead to the facilitation of free education up to the end of Secondary school and affordable education up to the tertiary level. This current author is not by this assertion discounting the enormous importance in saving of liquid-that is cash- in a bank or a financial instrument as Norway has done. The position of this author is that in view of the infrastructural deficit of most of the resource-rich but poor countries, it is more prudent to invest in these ‘public goods’ until such time that those countries have used their natural resources to provide substantially for the basic infrastructural needs of their countries.

 

This position re-echoes similar sentiments expressed sometime in the year 2010, by the then Vice President of the Republic of Ghana, His Excellency John Dramani Mahama who later became the President and subsequently ceased to be the President of the Republic of Ghana on 7th January 2017, sometime in the year 2010, thus: 

 

“I know that in drafting this bill  we received help from some Norwegian ex-perts. I have spoken to them and they said that at the time they drafted their bill, they had their entire infrastructure in place… but we live in a country where women are dying because the road from their villages to a health facility is not done, and you say that the oil wealth God has blessed us with should be left for generations to come while that woman dies today because she can’t go to the hospital? ...We have a huge infrastructural deficit.  People need water, electricity and health facilities to keep them alive and God has given us opportunity to give them such infrastructure and you want us to wait for the oil to continue dripping …It is not done anywhere…” 

 

 These emotional sentiments expressed by the Former President Mahama are indeed shared by prominent resource curse theorists like Jeffrey Sachs when he essayed that

"…Norway with extensive physical and human capital already in place, the best choice might well be to accumulate financial assets… For poor coun-tries however, it is likely to make much more sense to turn oil earnings quick-ly into physical assets and human capital.” 

 

This erudite proposition indeed summarizes one of the propositions being championed by this author which is; that instead of investing a reasonable portion of resource revenues in a foreign financial institution which in turn recycles such huge funds as loans to and investment in natural resource projects in poor but resource-rich countries, such countries should rather invest such moneys in ‘public goods’ such as education, health and road infrastructure. This is because, apart from the claim that such oil revenues invested in foreign institutions are recycled back to these same resource-rich but poor countries like Ghana, as has been shown earlier, the evidence which is to the effect that such funds are not yielding the expected returns for these underdeveloped resource-rich-nations iOS not in short supply.

 

It is a truism that at least all persons who ever had the opportunity to attend a government school enjoyed at least a limited or sometimes substantial form of free education. At least we all did not pay tuition fee, which is usually about half of the entire cost of the fees we were to pay. Is the case that all forms of free education should be based on inability to pay as some have strenuously argued sustainable? We don't think so. 

 

Is there not sufficient evidence that a large number of persons who are now engaged in the provision of beneficial public and private services enjoyed free education.? Yes there is  and the beneficiaries are available and forever grateful to our Beloved Ghana.They enjoyed wholesale free education. Why must it be varied to the detriment of the so-called wealthy in society? It is said that some persons who could no doubt afford to pay school fees of a reasonable quantum moved their wards from some public schools to others to enable them enjoy wholesale free education. It is rumoured that this practice persists.

 

Other pertinent questions are; what is meant by "free"? Are we not simply asking the President who holds a position of trust to apply our own money to support us as beneficiaries in education so we can apply our income to other beneficial ventures? Yes we are. The savings the so-called wealthy make are they not expected to invest even in the welfare of their dependents? Don't we all have such dependents that we maintain in all respects? Yes we do.

In any case, it is a constitutional imperative. Isn't 25 years long enough to justify its non- compliance on the alter of absence of sufficient funds nor that there is no or limited empirical evidence of fruitful results? It is time to support the programme with all our strength and might. It is proposed that even if the government will have to halt the implementation of the other policies so be it! A skillful present generation will produce skillful future generations who will be equipped with appropriate, diversified skills that will in turn make them self-sufficient and not dependent on natural resources. The nation will be the ultimate beneficiary. The implementation is, and will encounter some challenges but nothing ventured nothing gained. 

 

This is not a superior argument; is only a humble perspective.