Loans for Economic Resuscitation: Where is NDC Job Creation Plan?

Konongo Fordjour - 03 July 2009

>From medieval Iron Age era through industrialization to present day computer age, advanced nations have developed strategic economic policies around two areas, primary and secondary sectors. The primary sector normally comprises of the production stage ranging from agriculture to all the mechanized systems. The primary sector is better known as the Manufacturing sector. The secondary sector, on the other hand, considers all the factors that can be brought up to cause the efficient functioning of the primary sector. The secondary sector is also better known as the Services sector.

The history of civilization began from when nations started manufacturing for subsistence in their national economies. Over the years, over-production caused nations to develop their services sector. Rich and powerful nations have both highly developed primary and secondary sectors; and they keep developing more technologically advanced methods to further improve them. National incomes were solely determined by national governments for quite a long time.

However, beginning late 1970s through early 1980s witnessed the period when these powerful nations shed off most of their government-controlled productions for citizens to pick up in the much publicized privatization of industries. Today redistribution of national wealth and poverty reduction or alleviation through privatization in advanced countries has contributed immensely to human freedom and development.

In advanced democracies, for instance, governments control very few areas of income generation, mostly natural resources like minerals, oil, etc. as well as national defence. Smart governments today provide enabling and business-friendly environments for citizens’ small businesses to thrive. Smart governments provide the best directions through consultancies and advice for citizens’ small businesses to grow. Small businesses today form almost 80% of national employments and job creation in individual countries in advanced democracies.

Advanced democracies also provide easily accessible funds for citizens to develop their small businesses. Interest rates on the money loaned are paid, as well as taxes to increase the national coffers. When citizens provide jobs for citizens, the national wealth redistribution machinery continues to be lubricated and blessings and harmony befall the nation.

The question that remains unanswered is: where does Ghana advance with her newly-founded democracy from here? Does Ghana need an insatiable government-thirst for loans to create government jobs? Government jobs create collectivist-unionist work environment with poor output and waste. Alternatively, should governments inculcate nationalism in citizens’ job creation? Citizen-inspired job creation has always been the winning factor, and our government must concentrate on that.

The Politics of Economic Policies:

The basics of economic precepts are that there are also two areas of economics, which are Micro-economics and Macro-economics. Micro-economics looks at the smaller picture of the economy, such as the market participants like producers, employers, workers, consumers, etc. Macro-economics also looks at the larger overall picture of the economy, such as national employment rate, government spending, national deficit, interest rates, and the nation’s money supply. Because of the fundamental division in the economics teaching, a huge disagreement exists between micro- and macro-economists as to how best the national cake must be shared.

Although positivist and normative economists do get the national policies on check, our failure in allocating the scarce resources on our kind of production-possibilities frontier effectively, is the major cause of our jerky trailing on foreign aids. Regardless of which side of the national economy one is watching - be it small picture or big picture - the difficulty of the caretaker to make the optimal allocation of the nation’s scarce resources, is one cause of economic failure.

The above brief look at economics tells us of the implied behavioural positioning of our successive governments (CPP, NPP, and NDC) with their economic leanings. Micro-economic policies look more into individual citizens’ development. Micro-economists believe the best method of sharing the national cake is through identifying entrepreneurial citizenry to develop small businesses. The macro-economists, on the other hand, think big from the collectivist social-democratic perspectives.

Macro-economics is relatively a young branch of economic science. Macro-economics is in the state of flux; which makes it exciting in its search of answers. This brings us to the reference of the two immediate past British prime ministers. In his humble submission, Mr. Tony Blair with all his macro-economic brilliance that brought the windfall to turn the economy around always recognized Mr. John Major’s up-to-the-minute micro-economic knowledge of the country. Recently, our finance minister made a statement that he has stabilized the economy within three to five months that he took office. This author questioned him about what was in a flux before his takeover? And the minister has not come back again. The nature of macro-economic is that some government investments might appear sustainable, but only for a very short time mostly three years. Our difficulty to sustain long-term projects is because of succeeding governments abandoning the previous government prudent policies.

Our current finance and economic planner, the honourable Dr. Kwabena Duffour, is a macro-economist with extensive research work in macro-economic policies. He is a socialist of CPP training. Consequently Hon. Duffour’s macro-economic policies look at collecting all national revenues for redistribution. How will that kind of redistribution policy take is another long inconclusive debate, which must be generated from the NDC group itself. Having served extremely well for the International Monetary Fund (IMF) for quite a long time, it is therefore not hard to find why our distinguished finance minister is hard to wean from IMF, World Bank, etc. loans.

Economists are a varied lot. John Maynard Keynes, a great economist and a most fascinating personality, once explained how the ideas of economists become widely applied. John stated, and I quote: “…..the ideas of economists…..both when they are right and wrong are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of defunct economist. Madmen in authority, who fear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval, for in the field of economics…..there are not many who are influenced by new theories…..so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But soon or late, it is ideas, not vested interests, which are dangerous for good or evil”. (JM Keynes, The General Theory of Employment, Interest, and Money, New York, HBJ 1936, pp. 383-384).

Failure to Identify the Right Investments to Engage in:

As a teenage democracy and still growing with international reputation of promising economic stability, Ghana should be leading the West African sub-region in the area of investments and economic superiority. However, in spite of our presumed long illusionary peace in the country, we have failed to arrest the numerous opportunities to create jobs. Ghana wastes too much food which tends to cause hunger and starvation, water and electricity are extremely scarce, and the environment is too dirty and very unhealthy.

Instead of the government’s poor allocation of over $12-million loan facility for MP luxury cars, the same amount of money could have been securitized for citizen loans specifically targeting building of silos. Modern silo building technology can store nearly everything, from fresh fruits and vegetables through grannies, meats, plantains, bananas, cassava, cocoyam and yams, to beans and cocoa. Northern Ghana alone requires more than a thousand silos that can generate more than $50-million a year from serving the countries beyond with stored produce; and the misallocation of the $12-million will be more than needed to build nearly all the required number of silos mentioned.

Modern technology converts wind into clean drinking water that contributes to longer lifespan. Ten percent of the proposed $12-million MP luxury car loan is also more than enough to supply clean water to all the northern territories in Ghana and still sell more to neighboring Benin, Burkina Faso, Mali, Niger and Togo. Technology today is also hungry for heaped dirt as there are in Nima, Kanda, Bukom, etc. The killer mountainous garbage is a very good source of electrons to add onto the national grid to earn income and put a perpetual end to problems in electricity supply in the country, while at the same time improving environmental health.

It is the duty of the government to find external market for citizen production to earn foreign currency. The more foreign currency in our economy, the stronger our local currency becomes. To boost this macro-economic strategy, a micro-economic policy of local brick production can be targeted through government’s deliberate campaign targeting environmental health and beauty by building with bricks. The campaign can infectiously target neighboring countries as well to help local investors.

Quality fruit processing is also another line of investment, as well as salt production, cement, and warehousing. If Ghana intends to attract serious foreign direct investments (FDI), then quality modern infrastructure such as warehouses must be readily available for rent.

With the above free information to the government, I have not been unrealistic, mean, or too unfair critic of our dear NDC government, I hope!

One most important thing to underline here is that because of the government’s incapability to relate micro-economic policies with the big macro-economic picture, failure always looms from the unsettled grounds in the NDC planning. In advanced economies, macro-economic policies work effectively because of the strong micro-economic foundations. Without these strong foundations, social services such as unemployment insurance benefits, social security benefits, affordable state-supported homes, food stamps, free Medicaid and Medicare, keeping unemployment and currency on checks, and so forth, would not have existed in the first place.

As we can see, even Capitalist America, and mother of all democracies that all nations under the sun are emulating, exhibits some social democratic credentials in its delivery of human services for development. Therefore, it should be declared that there is no problem with the NDC group pursuing socialist-democratic ideals, as they have been preaching around. But the problem is that the NDC fails to wean itself from the basic failures of the socialist-communist teachings that the owners of these freezing economic strategies have abandoned themselves.

The following section traces the World Bank from the "Third World" era to present day "Developing Countries" era. Some excerpts are drawn from the "Games Nations Play", and how the world's financial giant has helped to destroy promising nations. Loans are good but there must be targeted projects that will alleviate rural poverty and improve on the people’s plight. Anything short of that is not good enough. However, in the NDC world of wonders, generating economic pressure by increasing fuel prices, increasing electricity prices, charging water rates heavily, increasing tariffs and protracted levies to soar the internal revenue purse to service foreign loans at the expense of the poor, is the best economic planning.

Foreign Loans and National Development:

Today, the NDC government is telling Ghanaians that $1.2-billion has been sourced for the nation from the World Bank payable within 40 years with a grace period of 10years. Two issues are probable here: one, strings attached - called loan conditionalities - and two, focused investment projects proposed. The Minister of Finance, Dr. Kwabena Duffuor has told Citi FM, an Accra based radio station that the $535-million loan that has been approved for Ghana by the World Bank has no conditionalities attached to it, because of the prudent financial policies that the Atta Mills administration is pursuing.

There are even reports that IMF has also planned to lend to Ghana a whopping $1-billion, beginning from this month (July). The claims by Dr. Duffuor that the loans have no conditionalities attached are deceptive. Seemingly, the NDC world renowned economist has forgotten his basic economics tutorials on opportunity cost that openly stares both parties - Ghana and World Bank (or IMF). What is Ghana’s best foregone opportunity to secure the loan? Of course we will have to remove subsidies on electricity tariffs and implement full recovery measures in the petroleum sector, and possibly give more in the incoming drilling that will pay the initial servicing interest rates for the first ten years. The remaining thirty years will bite very deep into the welfare of generations to come.

The World Bank loan recovery actions will force fiscal discipline that include structural measures, comprising the boards of energy related regulatory utilities and authorities, adopting an electricity sector financial recovery plan, adopting draft legislation on the Ghana petroleum regulatory body, oil and gas fiscal regime, creating ombudsman for public sector reforms, and possibly, doing the hardest thing by removing ghost names from the health and education services registers. Have we seen any of my analyses here happening in the country lately?

I have a problem with this loan facility, because majority of Ghanaians are poor, and therefore implementing such a policy would make their lives very unbearable. Already, there has been recent 30% irresponsible NDC adjustment in the prices of petrol prices. Therefore, a full cost recovery policy would be murderous. The deceptive NDC loan policies are anti-poor and faulty on social services that would cushion the vampires against the people. The NPP labour-friendly policies laid to handsomely benefit the Ghanaian worker have been deliberately deleted by this NDC political ba-sa-shee-ade-fuor.

Turning to the role of international financial institutions, the World Bank and the IMF….TO BE CONTINUED