Western governments always pursue Keynesian economics as developed countries. But through the International Monetary Fund, they impose neo-liberal economics on developing countries’ governments.
In other words, while they pursue expansionary, deficit-spending policies that focus on growing the real sector, creating jobs, and keeping infrastructure modern and upgraded, they continuously insist that developing countries including Ghana should pursue anti-growth and anti-job macroeconomic prudence, including balancing their books every year (and possibly having budget surplus) by keeping capital spending low without borrowing even to invest in infrastructure.
The goal is to keep developing economies in perpetual economic stagnation (if not perpetually underdeveloped), leading to economic devastation and social dislocations.
While the IMF forces developing countries’ finance ministers and central bank governors to pursue anti-investment, anti-growth and anti-jobs restrictive fiscal and monetary policies, developed countries’ finance ministers are never expected to follow this policy path. Neither should western fiscal policymakers cut deficit by keeping budgets balanced, nor do their central bank governors pursue tight monetary policy stance that should lead to both increasing interest rates and reducing system liquidity.
Nonetheless, why are western governments not practising what they preach to the developing countries? Understandably, practising what they preach should amount to putting their economies in the same reverse gear they insist for developing economies like ours. They know that that will not grow the economy, create jobs, and most important, generate desirable tax earnings for the government. In short, western governments do not need to be told that cutting interest rates and increasing government deficit spending are the twin boosters of the real sector economy by boosting demand.
Therefore, contrary to what the imperialist neoliberals and their local agents in developing countries like ours have falsely made us to believe, the macroeconomic system they operate in reality is pro-Keynesian for the west and anti-Keynesian for developing countries like Ghana.
In fact, for western governments, it is good for them to pursue pro-growth and pro-job capitalist socialism while through their IMF they insist on anti-growth and anti-job capitalism for us. That is why while running budget deficits on a permanent basis should be okay with them, especially as long as the resulting debt is productively channelled towards justifying growth, such growth decisions, the IMF always insists should not be tolerated in developing countries like ours.
Is it not naive for us to agree with these ladder-shifting IMF and the World Bank arguments? Are these not a kind of forcing us to accept that we too should not live beyond our present means, which remains the only way for us too to be able to build a more prosperous future than we are currently building? In other words, neoliberals are always insisting that developing countries should be saving not spending, not to mention not borrowing to invest in the development of their economies.
That their representatives in countries like ours are bold enough to agree that there are no justifications for us to borrow even when it is obvious that there’s no way we can ever generate enough money internally — especially given that to grow tax revenue, the economy has to grow first. The fact following their faulty advice is why no matter the immense future benefits to our economy, they are against our borrowing, including borrowing responsibly to invest productively.
However, without investing in strategic infrastructure, how could countries like Ghana be able to address their huge infrastructure deficits, or be expected to become as competitive as developed countries by reducing the current high cost of doing business? Without economic diversification and infrastructure borrowing, how else do we intend to begin to narrow the present gap that has kept us as the world’s number one dumping ground for foreign made goods, goods we should ordinarily be making ourselves?
We should also be bequeathing better and superior infrastructure including a more inclusive society. How else should Ghanaians expect their economy to be fast-tracked without having to inject trillions of naira in expanding and upgrading its critical infrastructure?
Is it not hypocritical for western neoliberals to be insisting that we should not be borrowing like western economies, given that our debt-to-GDP ratio, which at about 12 per cent is by far the lowest among our peers? In other words, how many times has the IMF advised the OECD countries like Japan to stop borrowing because debt-to-GDP ratio stands at 224 per cent, Italy’s which stands at 128.50 per cent, US’ at 107 per cent, France’s at 95 per cent, and the UK’s at 89.80 per cent? What about Ghana’s peer countries like South Africa with debt-to-GDP ratios of about 44 per cent, India’s 66.10 per cent, Brazil’s 60.80 per cent, Kenya’s 50 per cent, Ghana’s 67.50 per cent, and so it goes?
Of course, the IMF advisers are fully aware that there is no way Ghana should expect to become that economic powerhouse that attracts an army of domestic and foreign investors while having our kind of third-world infrastructure.
And that the Central Banks fight inflation blindly by both raising the cost of funds tightening system liquidity without preoccupying itself with how much damage such pro-recessionary monetary policy does to the real sector, growth and jobs makes one to wonder what exactly is the basis for such policy stance.
If not being narrowly conducted in the interests of banks and trying to please friends at the IMF, what else should the managers of our monetary policy say is their reason for thinking that they can solve the inflationary problem of the economy by taking measures that further increase the inflation?
Obviously, at this critical stage of our economic development, one should have expected the CBN to abandon its current pro-recessionary monetary policy if not for any reason at least for the very fact that such entrenched tight monetary policy regime has neither short-term nor long-term benefits to the of our economic diversification agenda.
How should these managers of our monetary policy ever care when they enjoy absolute independence; a sort of sovereign and non-representative powers in our representative democracy? That is not their fault. Even the US as the headquarters of western capitalism, the Federal Reserve System (central bank) does not enjoy the kind of absolute independence the Central Bank Governors enjoy.
The reason is because the Act establishing the Fed clearly states that it should “conduct the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment…by moderating long-term interest rates.” That is why to ensure the Fed does that, the Fed Chairman has to constantly face a pro-growth Congress.
Since it has become a common argument that to fight inflation they have to always raise interest rate and tighten liquidity, they should be informed that some countries in their effort to grow the economy in a way that eventually lowers inflation, have their inflation rates higher than their key interest rates (central bank rates).
Turkey and Japan are handy examples. With 7.500 per cent interest rate against 8.78 per cent inflation rate, Turkey’s interest rate is far lower than its inflation rate. The same is true with Japan, where in an effort to grow the economy by growing consumption too, interest rate at -0.100 per cent against inflation rate of 0.000 per cent, is far lower than inflation rate.
Even our so-called inflation figures produced by the Statistical Services are always so lacking in credibility that in most cases they are figures carefully doctored to always favour the banking and financial sector.
The only way government can free the economy from this perennial sabotage is to reform the Central Bank along with the entire banking and financial sector so that both its monetary policy stance and the banking and financial sector activities are in line with government’s overall economic growth and diversification agenda.
Since the foundation of every modern economy is its banking and financial sector, without reforming the current operation of our banking and financial sector, it will be difficult for our economy too to transit from its present non-industrial to the expected highly diversified industrial economy.
