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Murder of Patriotism- Ghana Political Actors’ Stance on Economy

Thu, 31 Jul 2014 Source: Unknown

There are causes to booms and slumps in GDP which invariably may affect the aggregate demand of a nation. The aggregate demand by citizens, fiscal discipline and the political Will of the governing team may culminate in acts of high current account deficits and sovereign debt crisis by nations. Ghana is no exception for such cyclical GDP fluctuations leading to sovereign debt crisis. However, the lackadaisical management of sovereign debt crisis will trigger vicious cycle of austerity-induced recessing and recession-induced fiscal derailment if patriotism is murdered by the political system and actors.

The recent past precisely, from 2008 till today have seen the crisis-stricken Euro zone countries taken drastic steps to reduce their budget deficits in order to achieve fiscal consolidation. The prudent management of the respective nations’ governments has seen some achieving fiscal consolidation by recovering from the recessing faster whilst others have had prolonged debt crisis predicament. Two of such contrasting countries are Greece and Ireland. Ghana and its citizens can learn a great deal of lessons from Greece and Ireland to avert political instability in order to consolidate our democracy.

IRELAND Austerity Options

Ireland is known as the most successful of countries that have been required to implement tough austerity budgets in Europe since 2008. The time magazine noted in october 2012 about the prudent management by its Prime Minister, the political system and actors under the title ‘The Celtic Comeback’.

The Irish economy has the peculiarity, whereby the exporting sector is largely controlled by foreign-owned investment, which is mostly resistant to cyclical inclinations but which repatriates most of its profits to home based countries like Ghana.

The government cut public sector pay by a total of 15% in 2009 and 2010. In addition to cuts in public sector pay and social security payments, the government adjustment strategy has relied heavily upon downsizing the public sector through voluntary redundancies.

Irish corporate tax of 12.5% remains unchanged, though it is the lowest in the Eurozone. This commitment to a low-tax regime is part of an overall policy preference to maintain Ireland's business-friendly labour market.

The above key strategic austerity options among others took place in mid 2010 through a centralised political process (with opposition eschewing political tactics for patriotism) negotiation at Croke Park, in which there was public sector agreement between the state (represented by Finance Ministry) and the public executive committee of the Irish Congress of Trade Unions.

The Croke Park Agreement (CPA) is not a tripartite social pact involving private sector employers but an agreement between government as employer and public sector trade unions. The CPA breaks significantly with the Irish industrial relations tradition developed from the 1990s of comprehensive productivity and social partnership agreements aimed at employment growth.

The core features of the Croke Park agreement include a government commitment not to impose further pay cuts until 2014 in return for industrial peace and productivity increases, an embargo in recruitment in public sector, reform bonus payment reform system, and a significant reduction in payment and conditions for new entrants to the public sector.

The strategic options taken by the government as well the political system and actors gave life to patriotism above parochial political interest.

GREECE Austerity Options

The handling of Greece crisis revealed some important collective failures by the Greek political system and citizens prolonging the turnaround of the debt crisis. Key among the failures are;

1. Failure of communication to the citizen of the need for austerity and the criticality of the situation. The government in constant denial of the economy reality.

2. Failure of co-ordination among and within political parties, which appeared uninterested in abandoning party tactics even when the country was at the brink of collapse,

3. Failure of implementation of the various reforms which were announced time and again - resulting in a huge accumulation of political costs - but which were often not implemented.

The underlying structural problems that persisted in the Greek’s economy, politics and society had to do mainly with problems of policy making and governance, problems of clientelism and corruption, and problems of competitiveness due to weak industrial base, strong product market rigidities and a mounting current account deficit.

Greece embarked on austerity programmes which saw various untoward hardships on the citizens. Greece ended 2009 fiscal year with a budget deficit of 15.8%. Borrowing rates climbed towards 10%, the country asked its eurozone and IMF partners for an emergency bailout package - and in May 2010 it was granted a loan worth aa astounding €110bn.

After some initial hesitation in the wake of the crisis, some first measures were announced in February and March 2010 - before the first bailout. These included a 10% cut in salaried bonuses and a recruitment freeze in the "narrow public sector" (central government); increases in VAT rates from 19% to 23% and in taxes on petrol, cigarettes and alcohol along with some parametric changes in income taxes; and some moderate cuts in expenditures (including in public investment) and central government operating costs. The government in May 2010 introduced a much more pervasive set of measures. Wages in public utilities were cut initially by 3%; and other extra taxes on luxury consumption (Cars) and inelastic expenditures (alcohol, cigarettes).

Greece perhaps has implemented the most extensive fiscal consolidation programme seen in Europe. However, in doing so it has gotten itself into a deep and prolonged recession and, for many, a vicious circle of austerity-induced recession and recession-induced fiscal derailment.

These measures and others invariably generated huge public discontent and led to prolonged political instability, which started with a major cabinet reshuffling in July 2011, continued with the forced resignation of Prime Minister George Papandreou in November 2011 and subsequently the current three-party coalition government under the premiership of centre-right leader Antonis Samaras.

The Greek strategic option and political system and actors murdered patriotism by the government, Trade Unions and citizens.

Ireland and Greece lessons for Ghana

The irony of the contrasting attitude is a great lesson to Ghanaians and the government. Unless we resolve to give life to patriotism with rather the current cyclical debt crisis and recession, political instability is inevitable and our democracy cannot be consolidated.

The Irish example is more meaningful for Ghanaians to emulate by the government, opposition political parties, Trade unions and the citizens. This call for all-inclusive governance with government marshalling the political will to do the obvious under this circumstance.

The government must seriously negotiate with organised labour for similar CPA for Ghana. Two sectors that affect our economy are public sector wage bill and the energy sector. The government must have the political will to slash the public sector employment starting with voluntary redundancies through achieving employment levels comparable with expected productivity levels. The government must invest in the energy sector especially, power conservations oriented investment for short-to-medium-term benefit to release more power to our ailing industries or sell to neighbouring countries for more revenue.

The government must employ systems thinking approach in dealing with the various sectors of our economy, especially, Gold and Oil industries, Telecos, Spare Parts, Cocoa and strategic agric produce.

The investor community has lost confidence in our economy and the government needs cogent processes of restoring faith by dealing in clear eyed-terms the policies from Bank of Ghana. Political parties must renege their respective tactics for patriotism and any further labour unrest will further deepens our economic woes. The public sector employees should also understand how their well-being is affecting those in the private sector.

We all need to give life to patriotism but not to murder it in order not to destabilize the country.

Columnist: Unknown