In 1957, Ghana was the richest nation in sub-Saharan Africa with a per capita income of $490. That was nearly the same as South Korea which had a per capita income of $491. By the early 1980’s Ghana’s per capita income had been reduced to $400 while South Korea’s per capita income had grown to a whopping $2,000. By 1990 South Korea’s per capita income was ten times larger than Ghana - $4,832 versus $481.
1957 is an important year as Ghana received its independence and became a self -governing nation. Kwame Nkrumah became the first democratically elected leader. It was economically viable with more exported cocoa than any other nation in the world. It possessed ten percent of the world’s gold. It also exported significant amounts of diamonds, bauxite, manganese, and mahogany. Its reserves were more than $532 million. Its liquid assets were seven times larger than its long-term debt.
Under Nkrumah, Ghana squandered its riches. Tribalism, patronage, heavy regulations, and tariffs were bad enough. However, the unabated corruption from top to bottom of government institutions encouraged the well - educated and talented workforce to migrate to England, the Caribbean, and the United States. It was a first class “Brain Drain”.
By the time, Nkrumah was overthrown in 1986, Ghana was over $1 billion in debt and had terrible credit. After the Nkrumah tenure, there were great challenges. The nation went through five military coups and two weak civilian administrations. It was in shambles and had not seen much improvement until the mid-1990’s. The times have stabled but it will take serious and long-term improvement to be considered on the right path to economic empowerment.
The Republic of South Korea (established after the Korean War) was first led by President Syngman Rhee. The economy was floundering until newly elected President Park Chung He. When President Park took office, the nation was very dependent on U.S. foreign aid. His plan was to build South Korean’s economy through robust exporting.
President Park realized that capitalism was the path South Korea should take. Capitalism with some benevolence of the national treasury.
According to the World Bank archives: “It was President Park’s enthusiastic and persistent encouragement of exports which primarily accounted for South Korea’s extraordinarily high GNP growth rate, averaging 10 per cent annually during much of his 18-year rule, despite the drastic reduction of US foreign aid, the oil shocks of the 1970’s various world recessions, and droughts affecting agricultural production. In doing so, President Park defied his country’s historical tradition and orthodox economic thinking. He also undermined dependency theory accepted by many scholars in the 1960s, that because less developed countries (LDCs) were dependent on the export of primary products and the import of manufactured products, they were doomed to deteriorating terms of trade, low standards of living, and educational underdevelopment.”
Park also revolutionized the educational standards of South Korea. Illiteracy fell from 80% to less than 10%. By the end of the 1980s, 37% of South Korean students had some form of higher education.
The big problem with Ghana’s past management has been trying to make socialism a success. They have never concentrated on making a hefty manufacturing segment within its economy which would turn around its trade imbalance with so many other nations. Free enterprise, a gigantic “dose” of it will solve many of Ghana’s economic problems.
Ghana needs serious infrastructure improvement. They need to create a construction industry that could provide the hundreds of thousands of jobs needed to address the infrastructure challenges that exist. Under President George W. Bush, Ghana received a $800 million grant from the United States under the Millennium Challenge Program. They used the money to build a national highway, the “George W. Bush Highway”. We tried to encourage them during a trade mission to employ American construction firms who would train their civil engineers, architects and provide new on-the-job training programs for new construction workers. Instead, they hired China state owned construction firms. What a wasted opportunity.
Another example of Ghana’s trying to make socialism a success is the former Ghana Airways. It obtained flying lanes to various nations (including the United States) around the world. They never made a profit and eventually failed. What one Ghanaian entrepreneur confided in me was “A government cannot run a business. When will my country learn?”
The problems with third world nations are clear. To achieve success they need capitalistic business models, progressive educational systems, a rule of law preventing corruption within the government sectors and a robust export strategy that fuels a growing economy. Oh yes, one last thing: Democratically elected officials who must be accountable from election to election.
DATED: April 10, 2017