The Politics of Reform in Ghana, 1982-1991

The Politics of Reform in Ghana, 1982-1991

by Jeffrey Herbst

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Economic reform was the most pressing question for African and other Third World countries during the 1980s. In this first full-length examination of the political economy of adjustment in Ghana, Jeffrey Herbst describes the causes of Ghana's dramatic economic decline and reviews the politics of reform that began in 1983. Since Ghana was one of the first African countries to adopt a comprehensive reform program and the one that has sustained adjustment longest, the Ghanaian experience has profound ramifications for debates regarding stabilization and structural change across the continent.
Herbst devotes special attention to the interaction between the type of government and the politics of adjustment, the reaction of interest groups such as urban labor and the peasantry, and the relationship between economic and political change. His extended field research and sophisticated knowledge of the issues involved, both from the economic and political science literature, make this study of importance not only to Africanists, political scientists, economists, and sociologists, but also to government and financial leaders wrestling with economic reform in developing countries.

This title is part of UC Press's Voices Revived program, which commemorates University of California Press’s mission to seek out and cultivate the brightest minds and give them voice, reach, and impact. Drawing on a backlist dating to 1893, Voices Revived makes high-quality, peer-reviewed scholarship accessible once again using print-on-demand technology. This title was originally published in 1993.

Product Details

ISBN-13: 9780520304758
Publisher: University of California Press
Publication date: 09/01/2020
Edition description: First Edition
Pages: 199
Product dimensions: 6.14(w) x 9.21(h) x 0.45(d)

About the Author

Jeffrey Herbst is President of American Jewish University and the author of States and Power in Africa: Comparative Lessons in Authority and Control.

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The Politics of Reform in Ghana, 1982-1991

By Jeffrey Herbst

University of California Press

Copyright © 1993 Jeffrey Herbst
All right reserved.

ISBN: 0-520-07752-0

Chapter One

The African State and the Politics of Reform

Africa is in the grips of an economic crisis that threatens to permanently impoverish the world's poorest continent. African per capita income equals only $340 compared to an average of $800 for the Third World generally; life expectancy at birth is 51 years compared to 63 years for all poor countries; and daily calorie consumption is 2,011 versus 2,468. Unless current trends change, by the next century Africa will be a continent immersed in poverty and squalor with deteriorating social conditions, less food, greater energy shortages, and more unemployment. Indeed, economic decline has continued for so long that the basic viability of some African countries may soon be challenged.

Africa's decline is especially poignant because it is occurring at a time when other parts of the developing world are experiencing rapid economic expansion. Taiwan and South Korea, which had per capita incomes comparable to African countries in the 1950s, have undergone unprecedented growth at the same time that countries south of the Sahara have experienced enormous declines. In the early 1990s Thailand, Malaysia, and Indonesia are also making dramatic economic strides even though these countries share many of the burdens that supposedly prevent African countries from growing. As countries worldwide race to reform their economies, other nations will no doubt begin to experience high economic growth rates. However, Africa, along with South Asia, seems to be stagnating. Indeed, while most people in the world look to the next century as a time when great advances in technology will result in a better and more enriching life, Africans have good reason to fear the future.

Given the profound economic crisis that Africa faces, attention has been focused for more than a decade on how African countries can reform their economies so that they might begin to grow again. Adjustment policies to reverse the economic decline and reform fundamental economic institutions have been championed by the World Bank, the International Monetary Fund (IMF), bilateral donors, and many Africans. As has long been recognized, these programs pose both economic and political problems for governments because the reforms require a significant redistribution of income and fundamental changes in the way the state operates. Indeed, the World Bank now argues, "underlying the litany of Africa's development problems is a crisis of governance." The ability of states to implement significant changes in their economy is receiving increasing attention because, especially in Africa, inadequate government commitment has been a significant barrier to reform. Understanding the politics of economic reform in Africa is crucial when analyzing the ability of African countries to address the severe economic problems they face. But while the economic aspects of reform rest on the powerful tenets of neoclassical theory, no comparable theory guides the political dynamics of reform. The first goal of this study, then, is to provide an analytically informed view of the politics of comprehensive economic reform.

Precisely because these economic reform programs represent a fundamental threat to the way African governments conduct politics, studying the process of change also opens an important window on the actual workings of the African state. Indeed, there is arguably no better time to dissect the African state than when leaders and citizens are consciously debating how much they can afford to change the political system to achieve better economic performance. In addition, if African countries do adopt comprehensive reform programs, fundamental aspects of their political systems may change. Biersteker claims that World Bank and IMF programs to shrink the state's role in the economy have important political implications both for domestic relations of production (between capital and labor, as well as between foreign, local and state sectors) and ultimately for the position of countries in the international division of labor.... What initially began as a series of short- to medium-term measures for stabilization and economic adjustment turns out to have significant long-term implications for the choice of development strategy. Therefore, the second objective of this study is to construct a better theoretical vision of how the African state functions.

Third, this monograph seeks to contribute to the general literature in economics and politics on long-term institutional change. There is now widespread agreement that fundamental reform of institutions is necessary for sustained patterns of long-term growth. Part of this consensus has emerged from studies of the newly industrializing countries, which make clear that the shift to export-led growth was accompanied by "economic, legal, and institutional reforms that the neoclassical interpretation has generally ignored." Also, economists, especially under the rubric of the "new institutional economics," and political scientists now have come to recognize that the nature of institutions has a fundamental effect on a nation's long-term economic prospects. However, since so much of the basic theorizing in the "new institutionalism" stems from broad surveys of economic history or abstract analysis, a close examination of a contemporary example of institutional change may be particularly appropriate. As Robert H. Bates notes, "One implication is that those studying developing areas face a subject that stands at the very frontier of the field of political economy: the problem of institutional origins." To understand the prospects for economic reform and the current workings of the African state, this book examines Ghana, the paradigmatic "soft" state in Africa given the comprehensiveness of its interference in the economy, and its resultant decline as it has attempted to reform fundamental economic institutions since 1983. Ghana is a good case study because, under the government of Flt. Lt. Jerry Rawlings, the reforms it has implemented go beyond simply changing relative prices. Rather, the government has begun to alter fundamental economic and political institutions in a program nothing short of revolutionary. Thus, Ghana has confronted many of the crucial issues in the politics of economic reform.

As the longest sustained reformer in Africa, Ghana also plays a central role in the debate over the future of African political economies. Indeed, given the Rawlings government's success and its ability to continue to implement reforms over time, Ghana has become, as Donald Rothchild has noted, the test case for structural adjustment south of the Sahara. Some other countries, such as Senegal, have not developed the political commitment to sustain reform programs, especially in the face of poor commodity prices. Not surprising given the difficulty of reforms, countries such as Malawi, which did have a relatively strong political commitment to reform, have had their reform programs derailed in part by unfavorable external events. Other countries, like Nigeria, have achieved temporary success in stabilizing their economies but have shown little evidence of making sustained progress on structural reforms. Therefore, how one interprets the Ghanaian case determines to a considerable degree positions on a host of complicated issues concerning the efficacy of structural adjustment, the ability of African governments to reform institutions, and the future of African economies. Thus, a nuanced appreciation of the Ghanaian experience is particularly important.

Finally, in the early 1990s, Ghana began to experience many of the same political pressures for a return to democracy that are affecting other African countries. In August 1991, the government announced a program that projected a return to complete civilian rule in the last quarter of 1992. Given that Ghana has sustained a reform program for so long, this book will be able to explore the relationship between political liberalization and economic reform that is a critical question in so many African countries. Indeed, this book will argue that the Rawlings government decided to begin the transition to democracy partially in response to the problems it encountered in its attempt to reform fundamental economic institutions.

The African State and the Politics of Reform

There is now a widespread consensus on many aspects of the development of the African state since independence. African countries were poorly prepared for independence with exceptionally weak private sectors and with populations that had an uncertain allegiance to the newly created political authorities. These weaknesses, combined with the statist bias of the colonial structures, meant that "the tasks of expanding production, allocating and distributing resources, and building social and economic infrastructures fell, by default at times, to the state." At the same time, politically insecure African leaders attempted to expand the physical limits of the state to secure their own political power. As Thomas M. Callaghy notes, "To a large extent, authoritarian forms of rule result not from high levels of power and legitimacy, but from the tenuousness of authority and the search for it." The state in Africa, although obviously weak in performing any given function because of financial and administrative scarcities, continued to expand, "developing in and upon society, multiplying its specialist apparatuses, subjecting populations to its control, criss-crossing the territory it occupies and finally subjecting the activities of society to its control." A central problem of the African state has been the poor and often antagonistic relationship between government and the private sector. At independence, Kwame Nkrumah and other nationalists such as Julius Nyerere, Kenneth Kaunda, Leopold Senghor, Jomo Kenyatta, and Kamuzu Banda all came to power because they controlled the strongest party to emerge out of colonial rule. Subsequent military leaders as well as the Afro-Marxist parties (e.g., FRELIMO in Mozambique and the MPLA in Angola) gained power through their control of the gun. Very few African leaders have emerged out of the private sector or because their expertise was in economics. As a result, many African leaders have seen the private sector, especially foreign capital, as a threat to their political project of gaining control of the economy and their personal prerogative of enriching themselves and their clients through the apparatus of the state. In contrast, a substantial portion of state intervention in East Asia has been in support of the private sector, and government bureaucracies saw promoting development as one of their primary missions. The Korean experience, for instance, is replete with examples of government's subsidizing companies and their exports. Indeed, the expansionist and anti-private sector nature of the African state has had an important impact on economic development. For instance, in the face of balance of payment problems, many African countries have consistently chosen to regulate imports administratively, in large part because this type of import regime offers them more political benefits. Under a market-determined import regime, no importer can be discriminated for or against because all face the same prices. In a system of tariffs and quotas, however, a government is able to reward clients by selectively allocating import licenses and applying different levels of protection. Indeed, in impoverished African countries, allocation of an import permit is almost a license to print money because those few who are able to bring in foreign goods will be assured of making a large profit. As I explain in chapter 3, administrative control of the exchange rate regime often leads to an overvalued currency and disastrous economic consequences.

Debate continues about exactly how much of Africa's poor economic performance has been caused by these interventionist state policies because most African countries have also been buffeted by significant decreases in commodity prices over the last few years. However, as noted below, there is substantial agreement that certain economic practices common in Africa (e.g., overvalued exchange rates, inefficient state enterprises, and policies that discriminate against agriculture) will have to be changed if African countries are to adjust their economies and begin to grow again. At the least, the policies African countries have adopted have left them much less flexible than other nations in adjusting to exogenous shocks, with the result that they eventually suffer real income losses. Ghana is a particularly good case in this regard because, while it has been buffeted by the international environment, its decline was so spectacular as to leave little doubt that domestic policies and institutions had to be reformed if the country was going to advance economically. As Flt. Lt. Rawlings noted one year after his second coup, "We have created a whole lot of mess for ourselves but have failed to take responsibility."

While in many cases economically disastrous, however, the policies of African countries did provide many political benefits for leaders. Often, the existing political and economic systems allowed African leaders to shift failure to the politically silent rural populations and continue to rule no matter how their economies fared. Also, whatever its economic faults, the vague African socialism that many countries adopted after independence provided rituals, icons, and a political vocabulary for governments to rally their populations around. What is striking about Africa is that in at least one way it is far too stable: governments can stay in power despite years of economic decline. Leaders such as Nyerere in Tanzania, Kaunda in Zambia, or Mobutu Sese Seko in Zaire managed to stay in power for decades despite their countries' economic decline.

Can the "Soft" State Reform?

Any enactment of effective economic reforms in the African states will inevitably challenge the political strategies that have evolved over the last twenty-five years. Joshua B. Forrest argues that it is not possible to predict whether or not African states will overcome the societal impediments that cause them to remain "soft." Similarly, Deepak Lal argues, in an extreme example of how difficult it is to conceptualize the mutability of the "soft" state, "I have recently found it useful to think of two polar types: the benevolent (platonic guardian) and the self-serving (predatory) state." Lal recognizes that most states fall between these two ideal types but seems unable to describe gradations in the predatory state or how reversible its condition is. The inability to conceptualize the African state in a manner useful to understanding reform has had a profound effect on efforts to analyze the politics of economic reform.


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