Mahama Must hires Economists, now

President Mahama Must hires Economists, now, right now and Urgent

There is no doubt in my mind that President Mahama really craves for Ghana’s education, economy, and everything Ghanaian to succeed. Because, a) he is Ghanaian and b) if Ghana rises, he raises to a second term president, and if we fall (providence forbids), he gets hurt triple. He loses his presidency, loses his country vibrancy and gains humiliation.

What I do have doubt in is whether he truly wants his administration, Ghana at large, to succeed. His recent statements and proposals are not far from my doubt. He has assuredly become a star denial. Indiscriminately cutting “the lavish” teacher trainee allowance to taxing “the huge income” from condoms sale. His reason: Ghana has no money; and badly needs it.

For the sake of argument and explanation: Let us agree with the proposition that Ghana cannot afford to pay for teacher trainee allowance, neither can we pay for University Professors Research Allowance nor can we lose tax revenue on condoms sale. Will that situation justify his actions? I will leave you to answer for yourself if you could please read further:

To illustrate my point succinctly, I am going to tell you a story.

There were these two separate bars, with similar budget woes at the same time in the same city but they both hired two separate consultants at the same time to solve their budget miseries. One hired an Economist, the other hired a PRO. In advising his client, the PRO, divided the budget in to essential and non-essential expenses; reduced the budget by halves by eliminating the non-essential expenses (lighting, and entertainments). The economist on the hand, in advising the other bar owner, did a comprehensive cost-benefit analysis, equally cut the budget into halve, appropriately. Few months later, the results were in. The bar owner, whom the PRO advised, filed for bankruptcy. Whereas, the other bar owner, whom the economist advised, opened another branch.

The point of the bar tale is that when a nation or firm is in financial difficulties; the question isn’t about how much you cut back on expenses, it’s about what you cut back on? Certain expenses are the backbone of profit for firms and prosperity for nations. If such expenses go down, they go down with profits or prosperity, the reverse is true. President Mahama administration has committed the sins of the PRO who turn a bar consultant, by simply dividing government expenses into essential and non-essential, with the intention of eliminating all the non-essential expenses. It’s out rightly wrong, Mr. President. It’s making us poorer, Mr. President. It’s a prerequisite to join the bankruptcy queue, Mr. President. What must the president do to prevent this down ward spiral? Answer; Hire economists -a good source is from the same Universities he is busying himself to deny them their allowance- to do a comprehensive cost-benefit analysis on every government program before he abandons it.

To emphasis my point, I did a quick, easy and simple cost benefit analysis with an incomplete data of the teacher trainee allowance. The results are stunning. Yes, Mr. President, you can save some money, increase enrollment, and please all the stake holders of teacher training colleges all with one decision. Don’t take my words for: let’s do the numbers to prove my point: ** Allowance cost per student per year: 340*12=GH C4080

Collected Revenue per student per year: 1035*2= GH C 2070

*data from two independent friends in Ghana.

Indeed, government gives 50% more than it takes from these students. But the laws of economics tell us that people respond to incentives. Therefore taking away the allowance will most certainly reduce enrollment, reduce government savings, and make all the stakeholders worse off. In the sense that less benefits will mean less enrollment, less enrollment will mean higher average cost (unit cost per teacher trainee) , and unhappy teachers will spill over to more challenges to poor parents and poor students. This is not imagination, this is Econ 101.

Readers must note that teacher training colleges’ professors and administrators salaries are fixed cost (legal binding expenses or expenses that is not relative to number of students) and must not be factored in the decision of abolishing or maintaining the allowance. Therefore, government can abandoned the allowance, without crushing incentives, by replacing the allowance with absolute free teacher training schools. That is indeed an economics decision. That would have, indeed, made everybody better off. Government would save at least GHC 2010 (Cost of 4080 minus revenue of 2070).Teacher trainees wouldn’t have to worry about the cost of their education neither would stake holders worry about unhappy teachers. Maximizing utility and making everybody better off is what economists do best. Mr. President what are you waiting for? As if the proposed denial of teacher trainee students their allowance was not enough blow to Ghanaian education system, Mahama doubles down by proposing a good bye to Research Allowance for government Universities Professors. In truth, Ghanaian professors don’t do much (if any) research in Ghana. But ending that allowance is certainly not the smartest or the economically wise decision. Getting rid of it is like tearing off weekends in your calendar because its unproductiveness. It doesn’t make weekends disappear in your life, aha, duh! Other things being equal, if government doesn’t pay for research allowance, the students will. The cost will somehow pass on directly to the students. This isn’t rocket science; this is logic (and economics). The full ramifications of eliminating the research allowance will be anemic to the quality of tertiary education in Ghana. The consensus among economists and scientifically proven economic literature has it that people respond to incentives. Indeed, reducing workers salary with the same amount of work ruins moral, productivity and loyalty. As a matter of fact, nations around the world are spending billions to do research while Ghana is proposing the opposite. China, South Korea, and you name them are in the business of increasing their research and developments spending expenditure to grow their economies. I guess, Ghana is far advanced in developments and is only fair to give those nations the opportunity to catch up with Ghana. Otherwise, I can’t think of any logical or moral reason why we must not spend on research. Yes, I agree that we ought to find means of aiding our professors do actual research but scrapping research allowance is not part of the solution. We don’t tear off weekends in our calendar because it’s unproductive; we live it; make it productive. This isn’t quantum mechanics, its common sense. The most intriguing of all the President’s proposals is to tax condoms. Who the heck! is advising the President? Even in purely revenue terms it fails woefully. There is no such a thing as free lunch. We must give up something, maybe our dignity or our time or something. Econ 101 teaches us that, other things being equal, when prices increases consumption decreases. It’s cheap and zombie economics to say that, our government will make so and so dollar amount of revenue per annum if condoms were taxed. Because the uninvited truth, Mr. Opportunity cost, “no free lunch” will come. The opportunity cost of that revenue are unwanted and unprepared pregnancies, STDs, increased maternity leave expenditure and many more. Until government is able to come out with a neat study (if there is any) that proves a net gain after paying for all the opportunity cost of taxing condoms. I will not sign up for that revenue. This isn’t dark energy, its market place ideas (and economics). Again, the Presidents can and must avoid all these productivity stifling and moral bashing policies that will sow the demise of his government (and more importantly our beloved Ghana) for years to come. There is no shred of doubt in my mind that all his proposals are (and ought to be) to be good faith. But the results are definitely more cancerous that he thought. Mr. President, you can’t cut your way to prosperity. Mr. President, some non-essential expenses have net positive multiplier effect. Mr. President, ask for refund from your advisers, you have been doped, misguided and misdirected.

PS The author, Umar Najeeb Mohammed, is a student at Columbia University. He doesn’t see himself to be NPP nor NDC nor any party member but a Ghana man.