Democracy, a hindrance to Ghana’s development

Economy File The author, Fadil Iddi is an economist

Fri, 10 Dec 2021 Source: Fadil Iddi

Ghana is a country endowed with a lot of natural resources. Unfortunately, none of these available natural resources seems to be working out to our advantage as a country.

In my opinion, the biggest destruction to national development is democracy. Democracy is the reason people come around with deceitful messages only to bulldoze their way through to power, and after getting to power, it is the thing of getting the average Ghanaian to work to take care of the profligate expenditure of political leaders.

Before 2016, a certain ruling party in Ghana was criticized seriously over the management of the Ghanaian economy. It was said that their management of the economy indicated how incompetent that ruling party was, even though the focus of that party was on increasing social overhead capital.

According to Rostow’s Stages of Development of a country which was adopted by the United Nations and the World Bank, to attain the stage of self-sustaining economic growth, major investments must be made purposely to expand the social overhead capital, which includes schools, hospitals, airports, roads, and all infrastructure.

As a result, Ghanaians saw the critics as better managers of the economy. However, many years down the line, we face a worse economic situation that forces us to consider taxing all citizens putting the average or poor Ghanaian in a vulnerable position.

As much as governments look forward to raising revenue through taxation, regressive taxes are always not the way to go. Fixed-rate taxation is also not the way to go, for it creates a larger gap between the privileged and the less privileged; fixed-rate taxes are always regressive unless they are taxed on luxury goods and services.

Taxes must be introduced for all to pay but must be introduced such that all pay according to their means so that the tax paid by a citizen does not become a burden on the taxpayer.

The very question anybody will ask is, “How did we get here? “. Excessive borrowing for consumption is the only reason we are where we are today. When a government borrows to pay salaries and take care of all consumption expenditures, you can be sure that we are heading for doom as a country.

Just like our private lives, if you borrow money to take care of your household, you can only be sure that you are postponing a current problem, but when borrowing is done for investment purposes, you can be very sure it’s a security against your future because you will be able to pay back these loans on time at the same time you’ll have an investment capable of generating more returns for you as a person that you might no longer need loans unless to expand your investment.

The same principles work for the case of management of a national economy. Instead of borrowing to invest in our social overhead capital, what do we see? Less social capital investment and more consumption even when there is a problem of high GDP to debt ratio.

This simply means the borrowers do not intend to write off their loans any time soon though 84.87% of our GDP is being used for the servicing of loans, leaving 15.13% of our GDP for national development; payment of salaries all of the government’s expenditure.

With these conditions, you can be very sure jobs will be a problem because the resources available are limited and not even enough to pay existing workers on the government payroll. There have been no intentional efforts by the government to increase jobs or investments that will lead to the creation of jobs.

If we want to achieve the status of self-sustaining economic growth, we must be intentional about it, and this must show in decisions about governing the country, not slogans. It cannot be by chance.

If Asia could rise to be a global economic power, I don’t see what stops Ghana from achieving the same if not for the fiscal indiscipline in our economic management. It does not matter how much is raised from the implementation of the E-levy, an upward adjustment in prices for government services, and the introduction of the Development Bank of Ghana.

If the same spending levels are maintained, it will be a waste of taxpayers’ resources because all the taxes will be channelled into expenditure as usual instead of investment. It is my dream and the dream of many Ghanaians to see Ghana develop beyond aid and also a Ghana open to competitive Foreign Direct Investments without being scared of collapsing local businesses.

Thank you.

Columnist: Fadil Iddi