Development Economics in Action

A Study of Economic Policies in Ghana

Tony Killick

• Publisher: Routledge
• Year: 2010
• ISBN:
  9781136973529
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

First published in 1978, Development Economics in Action is a renowned study of policies in Ghana, one of Africa's most closely watched economies. In this new edition three additional chapters provide a detailed account of 1978-2008.

PART I:
1960–72

1
Introduction

The relevance of a study of Ghana

Among the newly independent states of Africa, Ghana has attracted much international interest. The first colonized black African state to achieve political independence,¹ in March 1957, she was led at that time by a Prime Minister who won attention and influence far beyond his country’s boundaries. Kwame Nkrumah represented a new brand of African nationalism; radical, modernizing and socialist in orientation. His successes and failures were carefully watched abroad, as a test of the experiment (as it was then) of political independence in Africa and of his type of ideology. Nkrumah had a vision of the nation-state he wished to create in Ghana and made no bones about wishing to extend it throughout the African continent.

Because he was a nationalist, most African leaders shared many of his views and what was done in Ghana was repeated in other African states as they won their independence. Reduced ‘economic dependence,’ accelerated industrialization, an expanding role for the state – these were on the agendas of virtually all ex-British colonies and, to a lesser extent (because the French maintained a stronger ‘neo-colonial’ presence), of the French-speaking states as well. Nationalism, rather than a more outward-looking ideology, was the unifying force, for although it became fashionable in the early sixties for heads of state to talk of ‘African socialism’, few of them fully shared Nkrumah’s ideological commitments. Guinea under Touré, Mali under Keita, Zambia under Kaunda, and Uganda under Obote were the countries where policies most closely resembled those in Nkrumah’s Ghana.² But Ghana came first and generally led the field, and thus she came to be seen by many as a test case, where Africa’s ‘readiness for independence’ could be assessed but also where an important body of ideas could be put to the test of implementation.

So far as economic policy is concerned, however, the interest of the Ghana case is a wider one. Until the fall of Nkrumah early in 1966,³ economic strategy in Ghana was inspired by a vision of economic modernization similar to, and influenced by, that of many professional economists who were concerning themselves with the problems of under-developed countries: a ‘big push’ primarily involving a major investment effort, a strategy centred around an industrialization drive, emphasizing import-substitution, structural change and a less open economy, to be achieved largely through the instrumentalities of the state. A study of the dominant ideas of development economics thus illuminates much of what happened in Ghana in the sixties and, by the same token, what happened there constitutes a case study of development economics in action. After 1966, the country’s new rulers began to turn to policies which in some measure reflected the changing concerns of development economists, but which also maintained a strong continuity with those inherited from Nkrumah. The second half of the decade is therefore of considerable interest for the illustrations it provides of the political and economic problems of effecting a transition to a more market-oriented set of policies. Such, at least, is the thesis of this book.

An outline of the study

The two chapters which follow are largely an elaboration of the theme of Ghana as a case study in applied development economics. Chapter 2 surveys the leading ideas in the literature on economic development which had come to the fore by the early nineteen-sixties, and the changes which have occurred more recently. Chapter 3 relates these ideas to the economic strategies followed in Ghana during and after the Nkrumah period, and discusses the political and ideological contexts in which they were formulated.

The next step is to record the performance of Ghana’s economy during the sixties. Chapters 4 and 5 survey the domestic performance and the balance of payments. The latter chapter also concerns itself with defences of Ghana’s performance which attribute failings to factors beyond the control of her governments: adverse terms of trade in the Nkrumah years, and the debt problem inherited by his successors. It is argued that neither was decisive. Chapters 6–10 examine in detail the results of Nkrumah’s economic strategy. Development planning, fiscal performance and short-term economic management concern chapter 6, while chapters 7 and 8 study the modernization and industrialization which occurred, and reasons for their failure to generate more rapid economic growth. Chapters 9 and 10 assess the performance of state enterprises established under Nkrumah, and the effects of import and price controls.

The performance and problems of the governments which followed Nkrumah are considered in chapter 11. These governments made little progress in re-establishing an economy depending more upon the operation of market forces, and this chapter explores the difficulties encountered in effecting a transition from a distorted economy. The concluding chapter 12 draws some general lessons from Ghana’s experiences and suggests elements of a future development strategy.

Before proceeding to the next chapter, however, it may help the reader to have a brief description of Ghana’s economy as it was at the beginning of the sixties and, especially, to survey the resources available for Nkrumah’s modernization drive.

Ghana’s economy at the beginning of the sixties⁴

In the late fifties Ghana’s economy still bore the hallmark of colonization. Physically and as an economy the country was a small one. It had an area of 92,000 square miles, about the same size as the United Kingdom, but in 1960 its population was little more than a tenth and its GDP little more than a fiftieth of the UK’s. It was still essentially a rural economy, with more than half its GDP originating in agricultural and related activities. It was a classic case of an open economy, heavily dependent on international commerce. Trade and payments were largely unregulated and tariff levels generally low. Most capital goods and many kinds of consumer goods had to be imported, and exports were dominated by cocoa which was highly volatile but generally provided about three-fifths of total foreign exchange earnings. The ratio of foreign trade to GDP was about 30 per cent.⁵

Most obviously characteristic of its colonial past was the pervasively dualistic structure of the economy. The co-existence of traditional, labour-intensive production techniques with modern, capital-intensive ones occurred not only in the obvious case of manufacturing, but in agriculture, fishing, mining, construction, and trade. At the beginning of the sixties the economy still largely retained a structural framework which emerged at the beginning of the century⁶ and, while the cocoa industry was an entirely indigenous one, many of its modern industries remained enclaves, making little use of domestic resources and adding minimally to the national product. In many respects, then, the economy typified most of the African states which were to follow Ghana in achieving political independence.

In other respects, though, it was different, and the differences were generally to Ghana’s advantage. For one thing, average incomes, at about $200, were higher than in most other black African countries⁷ and, since a basic principle of economics is to every one that hath shall be given, this promised that development might be won more easily than in countries still preoccupied by the provision of a basic subsistence. For all its structural defects, it was also an economy in transition, one in which economic modernization was already under way. A substantial number of industries producing goods which formerly had to be imported were already in operation, the financial system was well established and expanding, and there was virtually no part of the country where money was not in common use. The writ of the government extended throughout the state and tribal divisions were less serious than elsewhere on the continent.

Thus, ‘the Ghana experiment’ started with advantages. Nkrumah had at his disposal a richer accumulation of economic assets than most of his fellow African statesmen, and this chapter concludes by surveying the stock of human, natural and man-made resources with which he commenced his modernization drive.

Human resources

It has often been said that Ghana became independent with a more favourable endowment of human resources than practically any other country of tropical Africa, and there is evidence that such was indeed the case. Comparative enrolment ratios in primary and secondary education for thirteen West African states, relating to the late fifties, showed Ghana’s primary school rates to be double those of the next highest-ranking country and three times the unweighted mean for the other countries. The secondary school ratio was also the highest, even after correcting an erroneously high figure for Ghana.⁸ The educational system, the supply of skilled labour and the efficiency of the public service were all believed to be relatively well developed by the late fifties. Expansion of state intervention and participation in the economy thus stood a better chance of success in Ghana than in most other African states. However, this tells us more about the iniquities of colonialism than i...

Table of contents

• Routledge Studies in Development Economics
• Contents
• Figures
• Tables
• Preface to second edition
• Preface to first edition
• PART I: 1960–72
• PART II: 1972–2008
• Bibliography of works cited
• Additional works cited for the second edition
• Index