Colin Barry

Ghana at Independence (MOC, Tuesday, Week 13)


Ghana gains independence in 1957. It has a lot going for it.
Endowments: abundant natural resources, favorable geography.
Macro: solid healthcare, good education system, stable/prudent macro policy, low debt, good political institutions
Firms: Lots of MNCs, healthy proto-clusters
Micro: good roads, English-speaking, sound banking system, open to trade/FDI

And then it goes off a cliff. What went wrong?
Strategy: "African socialism," populist bent
Macro: inefficient gov't spending, becomes tied to a few commodities
Political: huge government employment, "President for Life," instability/corruption
Micro: massive and inefficient SOEs, infrastructure spend on trophy projects, price controls

Why did this happen? Lots of reasons.
=> "Unearned" income funds bad policies that don't work. Confluence of aid donation, remittances, and natural resource wealth lets Ghana keep struggling along with terrible development policy long past the point when people should demand a change.
=> Colonial legacy? Backlash to colonial legacy (let's do everything different)? Unlikely; British were not especially oppressive, and they left Ghana on fairly decent terms.
=> Bad neighbors.
=> Politics/welfare populism.

Kufuor elected in 2000; eight years of progress. Leaves office after two terms; successor starts turning back the clock.
Challenges: How hard to push for change? How fast? Where do you start?

And then, in 2007, something new in Ghana:
"What's the worst thing that could ever happen?" -- Michael Porter
They discover oil! Three billion barrels of it!