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Thursday, April 07, 2005

The Failure of Socialism in Ghana

Occassionally I reprint old essays of mine. Here is another one. The bibliography can be found in the comments.

For President Kwame Nkrumah, the move to state socialism in the early 1960's was a pragmatic one, born of a desire to modernize Ghana as quickly as possible. This is not to deny any ideological motive, but simply to emphasise that pure ideology did not drive this change in policy. Nkrumah saw socialism as a better vehicle than liberal capitalism for the rapid modernization of Ghana. Socialism also held the advantage, he believed, that it could offer Ghana true independence, avoiding the possibility of becoming beholden to foreign business interests. On a more cynical note, Nkrumah was a bit wary that following the traditional methods of industrial capitalism could create an indigenous entrepneurial class that would act as a counterbalance to his personal power within Ghana.

The history of socialism in Ghana under Nkrumah is a complicated one, of great successes and disheartening setbacks. There was a huge expansion in the provision of public services, such as healthcare and education. At the same time the incomes of the average Ghanaian stagnated, even though the cost of living was rising rapidly. The old national inferiority complex, that Ghanaians could not survive on their own without the help of the old colonial masters, was laid to rest, yet the national desire for self-determination led to protracted economic problems arising from government overspending. Many of the difficulties faced by Ghana can be traced to their inheritance of an economy so dependant on a single product, cocoa. Above all else, looming like a malevolent shadow, was the spectre of corruption and political infighting. Due to the collapse of the Convention Peoples Party as a disciplined political force socialism was, by the middle of the decade, inextricably bound up with the personality of Nkrumah himself. As the party fell apart the president was left to attempt to micromanage Ghana's transformation. His increasing self-reliance meant that he became ever more isolated from the people, which in turn reduced his ability to flexibly respond to changing events. As his outlook became increasingly dogmatic, so the fate of socialism as a viable force for economic and social change in Ghana was sealed.

Under the British the Gold Coast was a classic example of colonial economics, being (1) a source of valuable raw materials, (2) a plentiful supply of cheap labour, and (3) a dumping ground for British manufactured goods. Education was a marginal concern for the British administration, and as a result the vast majority of the population had little formal education, if any at all. Cocoa exports made up around four fifths of export earnings, which was not a problem for the British, who had no need for economic diversification in the Gold Coast. The British left Nkrumah with an infrastructure based around extracting raw materials from the colony as efficiently as possible. Again, this made perfect sense for the British, who had no real stake in promoting internal trade, let alone fostering trade within west Africa, but it had serious repercussions for independant Ghana.

For Nkrumah, the move to socialism was a large gamble to make, but he felt it was worth it if socialism could deliver the growth that Ghana needed. This would be Nkrumah's way of repaying the masses who had supported him through the independence process, and who had become increasingly frustrated during the latter part of the 1950's by slow improvements in living standards, despite huge investments in improving Ghana's infrastructure. It was always going to be difficult to convert the momentum of independence into lasting economic prosperity. At independence the CPP was, out of necessity, a broad church, encompassing an enormous range of viewpoints. Large sections of the party were connected only by their desire for an end to colonial administration. In the period immediately following independence, Nkrumah and his inner circle placed great emphasis on maintaining this fragile coalition, as they were faced with several reasonably popular separatist movements in the eastern Volta region, in the northern plains, and in the Ashanti region. The consolidation of power was the main emphasis for the new government, with a move to economic self-sufficiency put on the back burner.

By the late 1950's this consolidation had been more or less achieved. With little real chance of taking power, the opposition collapsed, retreating to the sidelines to mount verbal attacks on the Nkrumah regime. Their political irrelevance meant that Nkrumah now had the power to institute his planned economic and social reforms. The CPP was also careful to neutralise the traditional leaders, bribing the chiefs or intimidating them into towing the party line, and "those who would not cooperate, and were not amenable to bribery, were simply banished into the political and economic wilderness." (Bretton, p.74) With this, Nkrumah, impressed by how the Soviet Union had pulled itself from backwardness to one of the world's foremost industrial nations within a generation, began to court the Soviets. For Nkrumah, this was a practical liason, as he was hoping to benefit from their technical expertise by bringing in Soviet technicians and lecturers. Despite the fears of the West, Nkrumah never had any serious intentions to turn Ghana into a Marxist-Leninist state, partly for ideological reasons, but also because he doubted that the Soviet Union was prepared to offer the same degree of economic and technological assistance that it had lavished on Cuba. By choosing neither side in the Cold War he felt that he could get help from both sides without having to sacrifice the political freedom that he, and his nation, had spent so long struggling for.

The flipside to his involvement with the Soviet Union was his continued support for the Volta River Dam project. Originally it had been a British plan to dam the Volta River as a source of cheap hydroelectric power. It was still on the drawing board when independence came, and so the CPP took it on, seeing it as the launch pad for their grand plans for modernisation. In order to get it built they went to the United States and made an agreement with the enormous Kaiser Corporation, who agreed to help finance the construction of the dam. For Kaiser the opportunity was clear: for their money and their willingness to build a steel mill in Ghana they received guarantees of huge amounts of electricity at one of the lowest prices in the world. For Nkrumah, the decision to involve 'neo-imperialist' capitalist forces was a difficult one, but such was his belief in the crucial nature of the project that he felt he had no choice but to agree to Kaiser's conditions. To pay for the dam Nkrumah received a thirty million dollar loan from the World Bank, the largest loan they had ever given out to that point.

One of the main priorities of the new economic approach was to process raw materials, such as sugar and cocoa, in Ghana before exporting them. This would raise export revenues and help to pay for improvements in other sectors, such as the establishment of small industrial concerns producing items like shoes, textiles, and furniture. Nkrumah planned to fund modernisation mostly through internal resources, with international aid providing about a quarter of the budget for modernisation. Interestingly, unlike in more genuinely ideologically driven socialist societies, Nkrumah did not nationalise pre-existing private industrial concerns. He simply established new state-run companies to act as competition, on the premise that the superior funding and technology of state-run concerns would lead them to a dominant place in the market, and the private sector would simply wither away.

In addition to industrial expansion, there was also a concerted effort to improve collective consuption services, such as healthcare and education. In 1961 primary education was made universal, free, and compulsory. Heavy investment in education that had begun in the pre-independence period was beginning to pay off, as Ghana was beginning to produce its own engineers, scientists and technicians. This was crucial because "a truly independent country, unlike a colony or a 'neo-colony,' must be able to ensure its cultural and social progress from its own reserves of human energy and talent." (Davidson, p. 159) University education was expanded, and large numbers of new teacher training colleges were established. New hospitals were built, and old ones expanded. This flurry of activity served a dual purpose by providing a healthier, better educated population, as well as serving to soak up popular disenchantment at the lack of improvement in personal standards of living through the provision of better-quality public services.

The move to socialism came at a time when two very serious problems were beginning to impact on Ghana's push for modernisation. By the early 1960's the state coffers, which had been full to bursting at independence, were beginning to run dry. Attempts to pay for economic diversification through maximizing profits in the crucial gold and cocoa sectors had begun to go badly wrong. A glut of product on the international market saw steady price drops and, despite rising output, decreasing revenues. Increased productive intensity in these areas saw increasing industrial tensions, with strikes breaking out in the gold mines in reaction to management cutting corners on safety. For the workers this was a doubly difficult action, as strikes had been banned when the Trades Union Council was incorporated into the state apparatus in 1961 at the same time as the mines in the Tarkwa-Prestea-Dunkwa-Bibiani complex were nationalised. The strikes were sparked off by the government dipping directly into the pay packets of mine workers. "In the eyes of the workers, all governments were corrupt; all managements were corrupt; all supervisors were corrupt; union officials were especially corrupt." (Robotham, p.56)

This was just one facet of perhaps the most serious problem facing Nkrumah in his bid to create a socialist state: corruption. Apart from a few tribalist conspiracies (like the Ga Shifimo Kpee, who were dealt with via the introduction of Nehru-style preventive detention) there was little organised political opposition left in Ghana. And with the end of political accountability a culture of corruption began to grow in the CPP. Many of the people who had been loyal party members all through the independence struggle now felt it was time for them to get their rewards for their years of activism. Corruption became an accepted part of the process of government, a problem that was worsened by the incoherent legislation that was passed in an attempt to assist in the move to socialism. Legislative controls were introduced on imports, capital transfers, industrial licenses, minimum wages, unions, commodity prices, rents, and interest rates during the early 1960's, which meant that any businessman trying to operate honestly was faced with enormous delays in attempting to cut through the red tape. For many, it was simply easier to pay off the right official to obtain the necessary license. Thus, it became an understood part of doing business in Ghana that any foreign investor included a ten percent 'tax' that was paid directly to the CPP in any business dealings. The awarding of state contracts became largely a matter of knowing or paying the right person, and little to do with the actual merits of the proposal.

This is not to say that Ghana's corruption problems were somehow unique. Many developed nations have similar problems where bribery is used to bypass red-tape laden bureaucracy. What made Ghana's situation different from industrialised nations like Italy is that it it was a small nation, with a relatively fragile and underdeveloped economy. By taking out of circulation funds that could ill-afford to be wasted corrupt practices made it much more difficult for Ghana's economy to blossom. It slowed the economy at the wrong point, before it could diversify to the point that it was no longer so reliant on the earnings from gold and cocoa. Indeed, by the 1960's other nations such as Brazil, the Ivory Coast, and Malaysia, were beginning to produce cocoa in vast quantities, forcing a dramatic price crash.
When the price of cocoa started to freefall, the corruption got worse, as those involved with the state grabbed what they could while they could. Having said this, if the prices for cocoa and gold had remained at their mid-1950's levels and Ghana had achieved continued economic progress through the 1960's then corruption, while an undoubtedly negative factor in Ghanaian public life, would not have been an issue of such importance.

Favoritism also played a role in destroying the CPP as a capable political force. Many of the most capable and honest people in the party were frozen out of administrative positions for their lack of personal connections and for their unwillingness to condone bad practices, which meant that in all sectors of the state apparatus the incompetent and the corrupt became dominant. The problem was particularly bad at local level, where party discipline had totally failed. In the 1950's CPP local activists had been highly organised in spreading the party message within an enviable network that spanned the nation. This was gone by the 1960's. The CPP had by then become a career option, and little effort was made to involve the local population in party matters. Most local party officials were more concerned with lining their own pockets and rubber-stamping proposals than with issues of social justice. Increasingly the lines of communication broke down, to the point where party headquarters were dealing with all kinds of issues that would previously have been resolved at the local level. As the party collapsed around him, Nkrumah failed to act decisively, increasingly coming to see himself as the sole force pushing Ghana forward and manipulating the various factions as need determined. Unfortunately, he never took drastic steps to purge government of corrupt individuals, partly out of loyalty to his old comrades, and also partly out of fear that his personal reputation might be tainted by the fallout from corruption scandals being dragged into the public domain, despite his personal standards of fiscal rectitude being mostly unblemished. He made a few rousing speeches on the subject on the radio, but that was about the extent of it.

There was never the political will to effectively deal with corruption and, even when there was, it backfired. Andrew Yaw Djin, an honest man, the Minister for Trade in the early 1960's, tried to sort out one of the main focal points for corruption by canceling all import-export licenses to give his officials a chance to scrutinise them more closely. Even though the issuing of these licenses had become a major racket for the less ethical elements of the CPP, the cancellation of them set off an economic shockwave just at the point when the economy was already starting to slide into neutral. Suddenly, essential raw materials for industry were failing to make it into the country, and there were massive holdups in industrial production.

Despite these problems, there were many successes along the way for Ghana. In 1951 there were only 1,700 primary schools providing education for about 220,000 children in the Gold Coast. By 1965, this had risen to 11,000 schools serving around one and a hald million children. Ghana was producing its own scientists, engineers, and teachers in large numbers. By the mid-1960's it had the highest standard of living in Africa, as well as the highest literacy rate and the best public services. The government had established over sixty different state enterprises, with varying success, that provided employment for hundreds of thousands of people. By the middle of the 1960's Ghana's chief economist E.N. Omaboe was moved to declare that Ghana had achieved "levels of social and welfare services which are in advance of most under-developed countries, and in some urban centres not far behind those of some developed countries." (Davidson, p.164)

In a way it seems like Ghana was almost destined to fail in its attempts to drag itself into industrialisation through socialism. The fact that the British had left Ghana with such a simplistic economic structure was crucial. Unlike a product such as oil there is only a finite market for cocoa products, and so levels of supply do have an enormous effect on prices. By having their hopes pinned so tightly on cocoa maintaining a decent price for long enough to pay for the diversification needed to provide some economic breathing space it was almost inevitable that something would go wrong. The other problem was the level to which the CPP dominated the political landscape. While it provided Nkrumah with the sort of mandate that he needed to enact such enormous changes, the lack of a credible opposition meant that the interests of the CPP became synonymous with those of the state. Without the incentive to stay shipship for the sake of impressing the voters, the CPP descended into disorganisation and corruption. As said before, the corruption was not at a level that would distinguish Ghana from many other nations, and nor would it have been perceived to have been as much of a problem if Nkrumah could have kept the show on the road. The real problem was that, with its heavy reliance on cocoa and gold to bring in revenue, Ghana was walking an economic tightrope. Corruption and financial profligacy simply tripped it up and sent it crashing down.

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