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“the Rise of Neoliberalism and the Imposition of Structural Adjustment Policies (Saps) Has Been Less Destructive for Ghana’s Economy Than Its Critics Claim.” Discuss. [Your Essay Requires You to Discuss Competing


Submitted By KKNMAL003
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After gaining independence, Ghana’s economy had reached a state of crisis and therefore, certain International Financial Institutions (International Monetary Fund and World Bank) had intervened. The goal for Ghana was to pursue economic growth at all costs and seek to achieve through the increase of the Growth Domestic Product and the Growth National Product. Structural adjustment programs (SAP) (designed by the World Bank and IMF) had begun being implemented by the Provisional National Defense Council (PNDC) and National Democratic Congress (NDC). SAPs can be defined as “the process by which key institutions and policies are reconstructed with the intent on advancing economic growth”. This involves increasing economic dependency and diversifying economic resources. While looking at Peter Arthur’s opposing argument that the IFIs and their strategies were detrimental to Ghana’s economy - Kwadwo Kanadu-Agyemang and Darko Kwabena Opoku believe that these strategies and SAPs were beneficial to Ghana’s economy, only to a certain extent. This essay will aim to identify certain criticisms of Ghana undergoing the SAP as well as which sectors of the SAP were beneficial to Ghana. Furthermore, this essay will identify that the ‘imposition’ of the SAPs was indeed necessary and less destructive than its critics state.

Colonial rule ended for Ghana in 1957 and they became politically independent and they were “the first country in sub-Saharan Africa to do so”. Ghana had ebeen the world’s leading supplier of gold, cocoa and timber and this lead to Ghana possessing a thriving economy. Columnist Kimberly Louis describes Ghana’s social and economical situation at the time as “promising” and explains that Ghana had “high per capita income and low national debt”. The later years saw Ghana plummet economically and they failed to realize any development after gaining their independence. After taking a very serious decline from the past decade, Ghana’s economy in the early 1980s had decided to implement a SAP (after pressure from the World Bank and International Monetary Fund) in 1983. The fundamental strategies of the SAP (implemented by the PNDC) were; limiting state involvement in the economy, the retrenchment of the government workers, currency devaluation and in order to “promote economic efficiency”, state owned enterprises were divested. Furthermore, quotas, high tariff rates and import licenses were abolished and the improvement of manufacturing and import sector of the country was also ‘pursued’ The SAPs also allowed for mining operators to be exempt from “the payment of customs duties on plant machinery, equipment, and accessories”, and furthermore, allowed for no more sales tax to be charged on non-traditional products and processed and semi-processed products. ‘All national systems’ dealing with poverty would also plan on being strengthened by the SAP. Additional SAPs were introduced later by the new government (NDC) in the early 1990s as well as the continuation of those started by the PNDC. It had become easier for investors to set up business in Ghana and [foreign] investors were also protected by the state against nationalization and certain taxation.

Despite Peter Arthur explaining that the SAPs provided Ghana with increased economic growth rates, fall in inflation and increased level of investment; he claims that it was, in some ways, detrimental to Ghana and not without its “problems”. Firstly, Ghana’s SAP goal to increase foreign exchange earners and reduce reliance on gold and cocoa was not realised and there was hardly any change in Ghana’s export structure. He argues that the SAP provided relief in the first 5 years but had not sustained past that and between 1989 and 2001 the annual growth of the economy declined. The GDP, the manufacturing and industry had all declined in growth by 2001. Arthur argues that SAP was socially detrimental to Ghana as well. The government had undergone significant cuts in state expenditure on social and public services, which saw the introduction of hospital and educational user fees as well as a “cash and carry” system for “drugs in public health institutions. Through hospital and educational user fees, it became difficult for “ most people (especially the poor)” to access these services.

Kwado Konadu-Agyemang believes that Ghana benefitted from SAPs in contrasting ways to Arthur. Apart form a direct challenge to Arthur’s claim that the SAPs did little to diversify Ghana’s economic dependence on gold and cocoa, Konadu-Agyemang refers to the booming tourism sector as a product of the SAPs. Apart from other achievements such as “repairs to structural imbalances, growth in goods and services, generation of donor confidence”, Konadu-Agyemang believes that the policies on foreign investment implemented by the SAPs, opened a doorway to tourism, which has contributed a large amount of income towards the economy. Since 1985, tourism has experienced a massive 166.2 percentage increase. Foreign capital was responsible for the renovation and construction of several hotels around Ghana. These also opened the doorway for Ghana’s “Open Skies” policy which allowed many international airlines to fly to and from Ghana as well as Ghana Airways expanding “its routes and therefore increased the potential of bringing in tourists” . Along with tourism, there were other “notable achievements” by the SAP highlighted by Darko Kwabena Opoku, who goes as far to state that Ghana was Africa’s “most advanced country” based on the protection of free trade and low tariff bases. Furthermore, he argues that Ghana (by mid-1990s) had achieved a “massive depreciation in the exchange rate”, tariffs had been lowered to a “relatively uniform 10-25% range”, restrictions on import were removed, corporate and capital gains tax were reduced and the state-owned enterprises were privatized. Konadu-Agyemang provides us with similar achievements by the SAPs. Ghana’s GDP had experienced some growth (between 1984 and 1991) and “averaged 5%-6%” and the annual inflation rate had decreased in “early 1980s” to 1991 from an “average of 123%” to 32%. Most industries have continued to operate at a 35%-40% capacity as Agyemang explains that these industries would have “died out completely” had it not been for the SAPs.

In conclusion one must look at these positives presented by the SAPs and the impact of neoliberalism on Ghana. Firstly the neoliberal theory provided a very narrow prescriptive parameter for development in Ghana. Neoliberals believe that the state should not be involved in the economic development of a nation. Peter Arthur explains the neoliberal theory belief to us that the “state is imperfect in maximizing allocative efficiency”, that is creating increased output and income from given resources . This was problematic for Ghana, as it didn’t allow its industrial sector to realize its full potential with the help of the state. The ruling party at the time had welcomed the ideas of neoliberalism. Neoliberals also argue that their policies could be ineffective or even detrimental in the beginning but will “lead to a higher standard of living in the long run”. It is possible to state that the Structural Adjustment Programmes indeed provided relief for Ghana over a period of time. Ghana saw GDP increases, inflation decreases, rises in foreign investment and the tourism sector, as well as the survival of most industries. Given the downfall of Ghana many years after the implementation of the SAPs it is difficult for one to claim that the SAPs were ‘destructive’ to her economy, but rather as Arthur describes their input as they “did not improve the socio-economic condition of the country”. One should credit other factors to the downfall of the Ghanaian economy and it is possible for one to state that employing the IFIs were a necessary step in order to salvage and stabilize Ghana’s economy for a few years and provide immediate relief in its state of crisis. Britain, the World Bank and International Monetary Fund have all “hailed Ghana’s decision as the right one” It is worth mentioning that yes, the SAPs did not achieve the economic and industrial goals it had set out but based on its mild success in certain sectors, to label the SAPs as ‘destructive’ would be too harsh.

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