Aki @ 80 Day Two Lectures

The Crisis of Work, Wages and Wealth in Ghana

Charles Akelyira Abugre

l am highly honoured to be asked to give a keynote speech in celebration of Prof. Sawyerr. Unlike many, I did not have the good fortune of being his student, as I did not study Law. My encounter with lawyers on the dusty streets of Bolgatanga, fully suited in black, often sweating profusely, trudging along in the hot Harmattan with their black shoes, somehow was not exactly the most endearing attraction to me. In contrast, the headteacher of those days turned up in school in sparkling white shirt and white shorts. No mystery whom I would rather be, and so I ended up with a handful of subjects - Economics, Statistics and Geography.

But of course, I have encountered Prof. Sawyerr numerous times, sometimes with memorable takeaways. Two cases in point. (l) Advice on SADA. I had reconnected with Prof. while I was at UNDP, Nairobi. At the time, Prof was doing one of his many "national service" assignments, providing advice on possible renegotiation of mineral contracts (which as it turned out, the one who appointed him showed no real interest in listening to). I visited him in his office where he had been toiling with no budget. Shortly afterwards I was appointed to head the Savanah Accelerated Development Authority (SADA) - of the "akonfem" fame, perhaps one of the most maligned institutions at the time. At the same time, the law that established SADA was a noble one, which, if implemented well could help reverse the dangerous North-South inequality plaguing the country. What to do? Prof's advice remains indelible in my mind: "It's an honor to serve one's country. Why does anyone need to sacrifice if the problem to be solved is not great? So if you decide to take the SADA job, just note one thing: Be willing and able to walk away". I did take the job ready and able to walk away.

The second encounter was less edifying. This was a forum to discuss the privatisation of Ghana's urban water system. This was a conditionality under a World Bank Structural Adjustment loan. I think it was sometime in 2000 and the forum was organised by the National Campaign Against the Privatisation of Water (NCAP). I was a speaker alongside Dr. Yao Graham. Prof Aki was Chair. At the end of the affair, Prof Aki thanked me kindly for my "passionate delivery" but couldn't quite recall anything that I said. In contrast, he observed how "well· reasoned" Yao's delivery was and proceeded to draw headlines from it. I must have screamed so much the poor Prof. must have had a hard time paying attention. Hopefully, today, I will scream much less. In any case, having grown older and bureaucratised, I neither have the energy nor the same level of passion as I once had.

Now to my subject of the day. Yao Graham asked me to talk about structural transformation and inequalities in Ghana and to say something about my work at SADA that may have relevance to the challenge of transforming economies from near-ground zero. To be clear, we did not succeed in transforming the Savannah in less than three years. However, we did put some thought into finding some answers. I shall say a bit about that.

To make the subject of transformation more concrete, I chose the theme of"work, wages and wealth". As per Yao's request, let me first explain what I mean by these words.

I refer to "work" rather than "labour" in order to contrast "will" over "exertions". Work is associated with what the 19th century German Historical School of Economics called Geist· und Willens·Kapital (Nietzsche 2000:4722) - Man's wit and will, in otherwise new knowledge, innovations and entrepreneurship - as a factor of production by itself. Work is creativity, the application of mind and wit, not just brawn, to a task, to problem solving. Activities accomplished through "will" is the basis for human creativity and incorporates leisure as an essential part of social reproduction. I also contrast work with employment to emphasise the point that not all work is paid and not all paid work is valuable for social reproduction. By wages I mean what is often termed as social wage - what a citizen must command in money wages and in wage-goods combined, adequate for social reproduction. I use these terms deliberately because of their meaningfulness to the concept of structural transformation - a term which itself needs defining before we can proceed.

What about structural transformation? The termapplies to changes in the economy as well as to broader society. The economic dimension has two sets of dynamics: ·structural change in the economy (i.e. changes in the composition of the economy that are permanent and irreversible favoring sectors that command increasing returns) and economic transformation meaning higher levels of productivity, gained through the infusion of technology and modern, competitive management practices in the production and distribution of goods and services. Economic transformation tends to be a deliberate exercise driven largely by the need to deepen, accelerate and diversify economic growth in order to expand livelihoods opportunities including work and employment, and the capacity of the state to deliver public goods and otherwise, expand the social wage. The wider social dimension of structural transformation lies in the impact on society, through redistributive opportunities created by economic change powered by the growth in employment, increased tax revenues for public services and the rule of Jaw, and the liberative effects on women's rights and other backward social norms. Bringing about economic transformation is more a political than a technical fix. Bringing about transformation of the society in general, through economic change, is even more about politics than technical policy. I shall return to this point.

Terminologies disposed of, let me now turn to Ghana's economic journey towards structural economic transformation. The first point to make is that Ghana' economy has undoubtedly grown and changed structurally. Maybe a good starting point to explore this point is ProfOlukoshi's concept of exceptionalisms when he referred to Ghana standing out relatively in relation to electoral politics, the rule of law and even status as a poster child of neoliberal structural adjustment programmes.

Ghana's historical economic growth has been exceptional in the African context, but far from the case when compared to economies of comparable size that have truly transformed over time. Ghana is only one of three countries on the African continent with uninterrupted positive per capita income growth (averaging 2.8%) for three decades, contributing to one of the fastest rates of decline in headline poverty at least till 2012.

Measured by wealth, Ghana is the seventh wealthiest country on the African continent, wealthier in terms of per capita than any West African country. Recorded wealth in 2017 ($63bn) was larger than the size of nominal GDP in 2018. This wealth is expected to grow by nearly 40% over the next 10 years. Ghana's urbanisation rate is such that there are now more people Jiving in towns and cities than in the rural areas and at this rate by 2035, the urban rural balance will be the exact opposite of what it was in 1960: 23% rural and 77% urban. This is supposed to be a driver of economic transformation. Indeed with about 60% of the urban population earning between $2 and $5 a day, there is a large emerging lower middle income group, fuelling a rising tide of demand including for food, a potential demand boost to producers.

Ghana also enjoys other favourable conditions for economic transformation: coastal cities and ports providing access to international shipping routes; inland water body penetrating deep into the interior that could be developed for navigation to break the remoteness trap; generous agricultural land and abundant water resources, especially in the dry Savannah that if harnessed, would turn the Savannah into lavish production, and rich minerals that could at least address the foreign exchange constraint. It will seem that Ghana has the basic underlying conditions for rapid economic growth and transformation. However, that's where the positive exceptionalisms end. Like the rest of the continent, Ghana's urbanisation is devoid of industrialisation; she has de-industrialised over time. For example, the share of manufacturing in GOP has actually declined since 2011. Labour productivity growth (75 percent) between 1984 and 2011 was attributable to within-sector labor productivity growth and only 25 percent to structural change, meaning labour productivity is largely a result of modest improvements within the sectors rather than labour resource re-allocation. Labour has largely moved from agriculture, not to increasing-returns activities but to the equally low productivity services sector. Like the rest of the continent, increasing demand for food has been satisfied not by local production, but by imports, which is more and more in processed form, further undermining the opportunity to manufacture.

In terms of income distribution, Ghana's income inequality levels are surpassed only by Guinea-Bissau (a war-torn country) and Sie rra Leone (a country still recovering from war and Ebola outbreak) in the ECOWAS region, even more unequal than Nigeria. Alarmingly, wealth and income distribution has been worsening since 1992. Whereas the bottom 60% of Ghanaians had a 35% share of total national income in 1988, this declined to 30% in 2012. The wealthiest 10% of Ghanaians command 32% of total consumption - more than is consumed by the bottom 60% of the population combined, while the very poorest 10% of the population consume only 2%. A recent Oxfam report also highlighted the fact that 1,000 more US$ millionaires were created between 2006 and 2016 and that one of the richest men in Ghana earns more in a month than one of the poorest women could earn in 1,000 years. The gender and spatial dimensions of the growing inequalities are even more stark. Although Ghana scores well in the equality of labour market participation between men and women - the best on the continent - it scores poorly in terms of the gender wage gap and the protection of women in the work place as sexual harassment is rampant according to an Oxfam study. The participation of women in the exercise of political power and decision-making is among the worst on the continent.

In a study ranking the level of effort made by African governments to address inequalities through progressive taxation, public expenditure and labour market policies, Ghana fell compared to all West African countries in terms of upholding labour rights in both law and practice except Togo, Guinea, cape Verde and Cote d'Ivoire. Ghana's minimum wages are among the worst in the sub-region in terms of a living wage. Increments of formal sector wages have not matched with the cost of living. The Living Wage Alliance estimated that a real living wage in Ghana would need to be four times the current minimum wage. At the same time, the gap between the highest and lowest paid workers is among the widest on the continent.

Why has Ghana failed to translate its positive "exceptionalisms" into a transformed economy that lifts all boats? There are of course complex reasons, much of it historical, especially Ghana's historical insertion into a global division of labor as a raw materials exporter, a role that was consolidated in the period of colonial rule and entrenched by the post 1980s neoliberal structural adjustment programmes, that have continued to date. However, the decision to adopt them and to sustain an anti-industrial policy stance for several decades is largely political. Even after the global financial crisis of the mid 1990s that subsequently opened up space for industrial policy, successive governments have continued to believe that industrial development will naturally flow from macroeconomic stability and competitiveness. True, recent initiatives like the Rural Enterprise Development Programme (REOP) and Presidential Special Initiatives of the early 2000s and the recent lOlF, are elements of industrial policy. But the impacts of these initiatives tend to be cancelled out by contradictory and opportunistic policies, e.g. radical reduction in import tariffs, to satisfy the urban middle class or party financiers who dominate the import market.

We know that even when structural economic transformation occurs; the social impacts are not ordained. A programme of social transformation must be deliberately crafted to accompany it and be consistent with the economic transformation strategies. We are yet to see a government after Nkrumah articulate a coherent conceptual framework that links macroeconomic policies to industrial policy with distributional impact, or articulate how a particular path to economic development necessarily leads to democratic development. In other words, how participatory is the economy and how developmental is the democratic process. Policies continue to be ad hoc and short-termist, exacerbated by a phobia for economic and spatial planning. Policy inconsistency has been the reality for decades, and getting worst with growing irrational, extremist partisanship. As a country, we have failed to promote industrialisation in a consistent way not because there is no theoretical understanding of industrial policy, but the domination of economic policy by neoliberal ideologues and economic training, which continues to churn out neoliberal macroeconomists, with other canons of economics ignored and other disciplines of economics, e.g. technology economics, non-existent.

I will also argue that the large gap between economic policy and outcomes result from:

1: Character and the moral code in economic management:

Character and morality matter in economic progress. Neoliberal economist love to propound the Adam Smith line in the Wealth of Nations, which says: "It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner but for their regard for their own interest. We address ourselves not to their humanity but their self-love". This is taken to mean that the principle of law of economics is self-interest. But, in the "Moral Sentiments" and much of his later writings, Smith argues for the need for "sympathy" and order-regarding conduct and explored extensively the role of moral sentiments in making the world better. In any case Economics is not simply about exchange, it is about also much more so about production, and in production, cooperation and collaboration are crucial to efficiency.

Amartya Sen in 1993, writing on moral codes and economic success, argues passionately that to see 601AKl@80 capitalism as a system of pure profit maximisation based on individual ownership of capital, is to leave out much that has made the system a success in raising output, productivity and incomes. Moreover, much of the literature on the foundations of Japanese and other East Asian economic successes point to the importance of "character", the so-called "Japanese ethos" or the "Confucian ethos". He quotes a January 1989 Wallstreet journal article that declared, "japan is the only communist country that works". Same is often said about Singapore which I did not understand until I started visiting there.

I was struck by how planned the society is and heavy the state is in the economy. 80% of housing is state provided. Schools and hospitals are state dominated. Industrial planning and industrial policy are state driven. The sovereign wealth funds have their tentacles in most successful investments - ports, airlines, technology firms, real estate, zoos etc. I was struck by how "communist" Singapore is amidst the veneer of capitalism. Those who are quick to quote Singapore's success story often fail to mention this simple fact that capitalism works upon a social system that lifts all boats and that social system is heavily state driven and financed by taxes and profits from profitable investments of state resources. It is a similar story in Scandinavia and in large part, Germany.

2. Leadership and the bureaucracy.

These successful countries have one other thing in common - their leadership demonstrate frugality, modesty, and honesty in their public lives and the bureaucracy is sacrosanct. The bureaucracy, which is the source of policy consistency, must be meritocratic and largely, protected from the corruption of partisan politics. This is why in Singapore the public sector is paid more than the private sector and to be a senior politician you must have demonstrated competence as a public servant. It is important to note that equitable development is impossible to achieve without high quality public service and a "communist ethos" (i.e. devotion to service to all). What we see today in Ghana where the public service is gradually taken over by contending political parties, if not rapidly reversed, will be the biggest nail on the coffin of structural transformation.

3. To be transformational, policies must prioritise production, not exchange.

Production is where the domain of technology and innovation lie. The domain of production is where the task of transforming rural economies lies. Production and adding value to the output of primary production is how primary and secondary jobs come about and where surplus labour from the rural economy moving to the urban, can be absorbed. Disposing of the output of production can be transformational as it calls for innovative solutions to storage, transportation and exchange within and across borders. When infrastructure supports production, it also supports trade, but trade in goods or services produced in Ghana or exchanged with others across borders, not just moving other countries' production around. In the field of Economics, production-oriented economists - agricultural economists, transport economists, urban economists, technology economists, industrial economists, industrial policy expertise - are solely needed which unfortunately, our faculties of economics do not train.

4. Taking planning seriously:

Economic and social transformation is a necessarily long-term result. We cannot stumble into the long term and expect coherence of outcomes to be achieved. Even matured economies plan for their infrastructure, urban development and technology, long into the future. The lack of respect by successive governments for planning and the view that planning is communist is strange against the rhetoric of "transforming Ghana's economy". Ghana's economy may well stumble into transformation but certainly not equitable development. The chaos in our towns and cities, the flooding of farms and the littering of our streets and gutters by plastics and other pollutants, is an indication of what the lack of planning does. We cannot solve urban gridlock by politically expedient, knee-jerk, fly-overs. There will not be enough of them to keep traffic flowing in the phase of accelerating urbanisation.

There is a lot more that goes into structural transformation but one thing is clear to me; policies driven by planning phobia, are distributionally blind, and have no respect for meritocratic public service which cannot create the type of structural transformation that lifts all boats.

Now a few words about what SADA had tried to do in the three years that I was involved in it. First, we took the position that the relative under-development of the northern Savannah is caused by structural factors - geographic isolation (landlocked), sever environmental stress, historical deficits in all economic and social capital (cumulative causation) and image. We set about therefore to understand these factors by pulling together several studies on what it might take to transform the area. We also took the view that, there are also structural advantages that the area possesses - most of the water that comes through the Volta River basin and its sub-basins, large unused arable lands, and potentially locational advantages such as being a gateway to the Sahel. It also has the advantage that the urban centres are relatively small and not yet as messed up as those in the south, providing an opportunity for better planning to create a comparative advantage.

Putting these two together - disadvantages and advantages, opportunities and costs, we first worked with the Town and Country Planning Department to develop a Northern Savannah Spatial Development Framework. We built on this by seeking external support to (I) plan agricultural transformation including water resources development (2) to create a Masterplan for Tamale, the largest and most dynamic urban centre (3) a longterm regional development plan, including infrastructure and logistics networks that can unlock production and services competitiveness. This work has resulted in a number of masterplans, including a digital urban masterplan for Tamale and the Buipe Area and a long-term infrastructure plan for the northern Savannah, in addition to specific sectoral plans. We were also advanced in the creation of a development bank of the northern Savannah.

We also set about re-imaging the area, changing the narrative from the area being hot, violent and poor, to an area of intriguing possibilities. Part of this image rebuilding included an international trade we organised successfully in Tamale, tourism and culture fairs, a joint conference with the Ghana Institution of Engineers on infrastructure, investment conferences, farmers' annual fairs etc. We were planning a festival and carnival of the Savannah/Sahel involving our neighbours to use culture to promote better integration. We of course did not transform the northern Savannah but we believed we were beginning to lay the right grounds. Maybe one day a discerning government will take it from there. I must also say to Prof. Aki that I believe I executed my mandate in such a way that I have been able and willing to walk away with my head held high.

I thank you for the advice and the opportunity to address this gathering. May we gather again to celebrate an additional ten years soon.