Nkrumahism, The Can Of Worms I Opened – Mixed Economy II

Mon, 15 Jun 2015 Source: Baidoo, Philip Kobina

In the first part of the series, I recounted some of the reasons why I can never reconcile myself with socialism. I have to stress again that even if I see gold dust raining in the land of socialism I will surely have my doubts. It will be like the devil presenting his head on a silver platter for me; I might have to snatch it with a huge dose of caution. There are certain societal functions that the government can undertake with better efficiency than any private company, for example, law and order and military defence, which is their veritable raison d’être. Even with the last two examples, it’s not due to the stellar management skills of governments, but as a result of the practicalities involved. There are some fanatics of capitalism who espouse the idea of the privatisation of law and order and even the military, though you can have some form of it for the latter. Let's assume, for instance, two citizens employ the services of two private law and order firms. Then citizen B accuses A of stealing his property, which then induces the arrival of the swat cars of their individual law and order providers to the supposed crime scene. At the worse scenario, each of these companies claims the illegitimacy of the other. You can just help yourself regarding what happens next. With the military, it is much efficient to pull resources rather than having individual providers deciding how much tanks or fighter jets it requires.

On the contrary, government management of enterprises meant for the creation of wealth, besides providing vital services, has been abysmal to say the least. Before the era of Margaret Thatcher, all vital state utility companies were all state owned across the board in Western Europe, and their services were nothing to write home about. By the time she came to power in 1979, the new Jerusalem Labour proclaimed in 1945 had collapsed. The Iron Lady had the thankless job of shovelling the rubbles away, and cleaned it up to make it the strong economy the British are accustomed to now. When the British realised the stupidity of this ideology, the Labour Party, which was committed to the nationalisation of all industries in Britain, they had to ditch their famous 1918 clause 4 – the god of the pre-Blair Labour Party. This happened, because Thatcher came to show them a better option. That was when they were able to gain foothold in 10 Downing Street after 18 years in the political wilderness. And when they came to power they had to succumb to Thatcher’s ideas. Of course, they saw the virtue of that option; so they sold off Air Traffic control, which they had promised not to.

Jeff Rendall, who used to host Jeff Randall Live, a current affairs business and politics show on Sky News, paid a warm tribute on Sky News on the day Thatcher gave up the ghost. Recounting his experience of socialism in Britain as against American capitalism, he reiterated his profound experience when Thatcher came to power. He had just come out of college, and he’s been offered a job as a correspondent in the United States. After taken up his post and securing a flat, he went to the local telephone company to get a phone connected. As they took him through all the formalities he was ultimately asked courteously when he would like the phone. Then came the unexpected denouement. According to him he replied, ‘November!’ in a question like demeanour. He said, the person who was serving him and his colleague looked at him as if he was nuts, because he had given a period of three month, which was how long it took to get a phone in England at the time. Per Jeff’s account, by the time he got to his flat that afternoon the phone had been delivered. If you don’t like this type of service then what do you want? I wrote about similar experiences in the Ghana Telecom Industry prior to its privatisation, and some ignorant person labelled me a liar. It is very strange that people don’t want to hear the truth, but prefer their cloud cuckoo land.

The occasional brilliance of a state owned company like EDF should not bamboozle anyone. For a better run economy, we need consistency with all companies firing on all cylinders. If you are a patient suffering from congenital heart disease and anxiously looking for a heart surgeon would go for a surgeon with 10% success rate or someone with 90% success rate. Regarding the Nordic model he kept hammering in his two articles I doubt whether he has really sat down to check how even services that are the preserve of the state are gravitating towards private delivery instead of the inefficient government services. The population of Norway is just above 5 million, relatively homogenous, which has been transformed slightly quite recently by immigration. They are the most socialist of the all the five Nordic countries. Norway is a classic case of Platonic utopia – small population blessed with massive indispensable natural resources. Their biggest company – Statoil, is 67% government owned. I wonder why it is not 100% if socialism is so wonderful. All the decisions are taken in a private boardroom. The chief executive, Eldar Sætre, takes home $1million, while the average income in Norway is $33,492. Is this what they call socialism that Mr Kwarteng can’t have enough of it? It is even ridiculous to comment further. But this is what I will say about a people who, according to Mr Kwarteng, practice socialism or Nordic model which is supposed to be superior to capitalism. Strangely, their sovereign funds are invested in capitalist countries around the world. In Sweden, the creation of wealth is almost in the private hands. It is their social services that make all the difference. By their social services I don’t mean the delivery, because they are mainly in private hands. It is just a matter of redistribution of income and not anything close to the state creation of wealth. And even that they had to scale it down when they realised the unsustainable burden it was piling on businesses. Besides, there are other horrible social problems that do not appear on the cost sheet. For example, more than half of all Swedish children are born out of wedlock, and the same trend goes for all the Nordic countries.

Their lies about China beggar the imagination. Like they did deny the existence of the iron rice bowl, they stubbornly deny that the Chinese miracle is fuelled by capitalism and they come up with fanciful monikers like Beijing consensus. The Chinese communist party keep a tight grip on political power, but the creation of wealth is purely in private hands. They honestly believe that the success of the Chinese economy fires on mixed economy cylinders. The Chinese sensation started with the liberalisation of certain sectors of the economy after the death of Mao, and when it proved successful they extended it to other sectors piecemeal. Unfortunately, the Russians waited for the whole system to blow up in their faces before scrambling for cover. Of course, the sad story of Russia is like treating cancer. Quite a substantial number of healthy cells will be attacked by the cancer drug, which transforms the patient’s body into a temporal wasteland.

Ghana’s problem is akin to that of Russia. By 1979 when that serial coup adventurer burst onto the Ghanaian scene all the pillars that held the Ghanaian economy had been pulverised. Besides, there was something else – a much sinister and dangerous adversary when building a vibrant economy – corruption. Corruption had taken over every sector of the economy – radioactive fallout from the Nkrumah era had taken over every cell in the country. And when a society acquires a bad habit like corruption, it is like turning around a super tanker on the high seas; it takes a while. And sometimes it can be dangerous when there are storms.

According to Stewart H Holbrook, the government involvement of the American railroad industry was disastrous. In his book: The Story of American Railroads (pp. 8 – 9), he wrote, ‘In a little more than two decades, three transcontinental railroads were built with government help. All three wound up in bankruptcy courts. And thus, when James Jerome Hill said he was going to build a line from the Great Lakes to Puget Sound, without government cash or land grant, even his close friends thought him mad. But his Great Northern arrived at Puget Sound without a penny of federal help, nor did it fail. It was an achievement to shame the much-touted construction of the Erie Canal.’

Holbrook was not a fan of capitalism, however, he differentiate the facts. He outlined what happens when government gets involved in the economy even in the citadel of capitalism. This is their command and control mixed economy they trumpet, and when things go wrong they blame capitalism as the culprit. The mixed economy ideology has been tried in Ghana, Nigeria, Kenya, Britain, India just to name a few and it didn’t work. If things were so wonderful at the latter end of his reign do you think people will care if the legs of some agitators were broken or tossed into jail? The economy had tanked. The police and the army couldn’t even get money for new uniforms and equipments. This is not a figment of my imagination; they happened before he was booted out.

One of their main arguments is that private companies also collapse, which is true. But the difference is private companies don’t collapse and leave a vacuum. When Woolworths Group ceased trading on 6th January 2009 it didn’t leave its British consumers high and dry. Its place was taken over by the likes of Tesco, ASDA, J. Sainsbury etc. On the other hand, just reflect on Abosso glass factory, it was the only glass factory in the country without any competition and nothing replaced it. Ghana Airways was a sad story if you analyse the potential it had. TOR, the only refinery in the country could be shut down completely for almost two years while the country was in dire need of petroleum products. How could a company that literally enjoys absolute monopoly have problems with its cash flow? The frightening turbulent period when its operation was what appeared to be a permanent shut down, we were told that a catalytic converter needed to be replaced. Now, this enterprise has been in operation since 1960 and it employs permanent resident engineers. Were they trying to suggest that they couldn’t estimate the lifespan of a catalytic converter and waited for it to breakdown completely before looking for replacement? This childish story can only be told to a fool. It was liquidity problem, which was caused by government meddling in that vital enterprise. Their bungling was costing the national economy about $1.2 billion in extra foreign reserves to purchase finished petroleum products a year. That is what triggered the depreciation of the national currency. However, ignorant members of the government, or the sinister ones who know how to use classic magician stage trick to divert attention from their incompetence, blame it on the importation of products like rice and sugar. To say the least, when the depreciation of the currency leads to the lowering of standard of living capitalism takes the blame for those who don’t have any understanding of economics.

Can you imagine the fleecing of the tax payer by the NSS executives happening in a private business? A private business, at least, will know the number of employees. Definitely, an estimated wage bill will be available for the management accountant to work out the health of the business every month. And if anything goes amiss it will be nipped in the bud within a short time, because their bottom line is important to them. But how long has this NSS scam been going on, and nobody is able to put a stop to it? The noble notion behind the idea is to get graduates, for example, to teach in deprived areas. It doesn’t make sense when there is high unemployment in the country. The simple way to solve it is to provide incentives like pay discrimination and good accommodation, which will solve it in a short order rather than using national service personnel. Of course, in a scheme like this, it is only going to be a piggy bank for some unscrupulous members of the society. And I suspect some politicians are involved. This is a scalable problem. I doubt if anyone can tell me that it is a difficult nut to crack.

Quite recently, the management of the biggest retailer in Britain Tesco overstated their half year profit by £250 million, which in reality is meant to prop up the value of the company stock. The new chief executive who brought this into the open knew that one way or the other the reality will catch up on him so he had to bite the bullet now than later. And, of course, it’s all about the bottom line, and Dave Lewis knows that his future depends on it.

In the case of TOR it was a sad story because it was in private hands and that pugilist socialist – Acheampong, brought it under government control. Yet, in his rebuttal Mr Kwarteng claimed that Acheampong was a capitalist. If he was why will he buy a privately owned company into government management? This is a question that I will leave him to answer, though I hardly ask open questions. Thank you again for your time.

Philip Kobina Baidoo Jnr



Columnist: Baidoo, Philip Kobina