Structural Adjustment and Mass Poverty in Ghana

Kwabena Donkor

• Publisher: Routledge
• Year: 2019
• Topic: Business
• eBook ISBN:
  9780429795312
• Subtopic: Business General
• Index: Business

First published in 1997, this volume looks at the rationale for, the implementation of, and the economic and social effect of the World Bank Structural Adjustment Policy (SAP) in Ghana from the early 1980s to the early 1990s. It shifts the focus from a primarily economic evaluation of these programmes and includes issues such as their impact on vulnerable groups within the Ghanaian society and on poverty in general. Therefore, it must be asked whether the 'ordinary Ghanaian' has gained anything from any wealth creation in Ghana. The book will be useful for both academic and policy purposes.

1 Introduction

Although the antecedents of the contemporary economy and polity of Ghana are largely indigenous, any analysis must be in the specificity of an evolving world system of economic, political and social relations beginning in the sixteenth century. This leads to the gradual involvement of both Ghana and Black Africa in world-wide exchange relations. By the middle of the nineteenth century, this had turned into a more direct incorporation. Finally by the mid twentieth century, the inter relationship deteriorates into subordination to the economic and political needs and objectives of major western powers (see Adu-Boahen, 1975).

Before the arrival of the Portuguese circa 1500 AD, the Gold Coast had no dealings with Europeans. The people traded with neighbouring states and others from across the Sahara. The Portuguese arrival was to change the traditional forms of trade known to the various kingdoms, tribes and, or, states who inhabited the land. Until then, economic activities had centred on the production and exchange of goods and services basic to the survival of the community. The national economy was, therefore, self sufficient, with barter being the acceptable mode of exchange. This should, however, be seen as different from what occurred in continental Europe at about the same time of ‘development’. The inability to differentiate between the two has often led to inaccurate analysis, especially by the Marxian school of the Ghanaian, or indeed, the African historical situation by transposing a schema of class relations characteristic of Western capitalism and its development from feudalism.

The interaction with Europe, beginning with the Portuguese, and before the incorporation of the Ghanaian economy into a world system, must be seen in its context. Both Ghana and her European colonisers were trading in each other’s external arena. Each trading partner was relatively self sufficient of the other, none being a periphery or a core at this point in time. By this very characterisation of trade, goods traded were classified as ‘luxuries’. Luxury hereby being defined as goods for which the demand originates from the part of profit which is consumed. Each economy was self - sufficient in its essentials and was not at this stage [in the sixteenth and seventeenth centuries] dependent on the outside world for either consumables or raw materials.

The colonial penetration

The advance of Euro colonialism in Ghana had two dimensions; an earlier phase of economic encroachment and a later phase of total incorporation. In each case, the stimuli lay outside Ghana, and must be sought therefore in Europe. The carving up of Africa was the product of strong economic and political forces operating in Europe. By the second half of the nineteenth century, international trade had become very competitive in Europe as a result of the spread of the industrial revolution to continental Europe and America. Industrialisation brought production levels beyond the consumption ability of the home markets for manufactures. This was seen to be best resolved by the acquisition of overseas territories, whose markets could be exclusively quarantined. Additionally, the same revolution in production engineering generated the need for more raw materials to feed the increased production capacity of factories in Europe, especially British plants. New territories, therefore, provided a source of raw materials such as cotton, rubber, and palm oil, to name just a few. Where such materials were not in existence, the tropical climate of Africa provided basis for the development of materials such as cocoa, coffee and tea.

The upsurge of nationalism in Europe at about the same time as the spread of the industrial revolution led to a new desire for colonies. These were sought not only for their economic value, but also for their prestige value. France probably more than most, rushed into colony acquisition shortly after her defeat by Germany in 1871 partly to demonstrate and assure friend and foe alike that she was still a great power. This consideration was to some extent, true of both Germany and Italy. The foregoing was made possible, from an economic panorama, by the rise of industrial capital as a means and imperative of colonial structures. Thus colonialism was intensified as industrialisation spread and accelerated. The process was completed with the internationalisation of individual and finance capital in Europe during the last decades of the nineteenth and early twentieth centuries.

By 1900, a global imperial system was in place (MacKenzie, 1983). This significantly coincided with the British conquest of Ashanti, the major challenge to British hegemony in the Gold Coast in 1901. The consolidation of British rule in Ghana began as early as 1844, when the then British lieutenant Governor of the ‘colony’¹ got some coastal chiefs to sign a declaration with a view to regularising the de facto jurisdiction British merchants had appropriated to themselves over the estate of the said Chiefs. Thus, what later became known as the Bond of 1844 was signed on 6th March. Some historians, particularly of European persuasion, have regarded this as the Magna Carter of Ghana and basis of British Colonial Rule. This view is, however, erroneous. As the noted Ghanaian historian, Adu Boahen (1975, p.41) argues, the Bond was not even a Treaty, but a mere declaration and could, therefore, not have the force of law to subjugate a sovereign people.

The need for British control arose mainly from the burgeoning trade of the early eighteenth century. In 1840 for example, Ghanaian exports to Britain had reached £325,508 while imports rose to £422,170. This expanding market stood to be even more lucrative for the British establishment, as well as for the merchants who were administering the colony, if the larger Ashanti and the Northern Territories were brought into the fold. Worthy of note is the influence of mercantilism on the colonial penetration, mirrored by the attitude of the British government. Merchants operating in the colony appointed the president of the committee of merchants, who was the de facto Governor to run the colony with a grant from the Colonial Office. Here, as elsewhere in West Africa, the intent of ‘a civilising mission’ did not arise until questions of the morality of colonial rule were raised decades later. At the center of the penetration was the economic. No wonder, when even in later years, around 1930, official opinion favoured the withdrawal of the British presence , the committee of merchants went to all lengths to counter the official thinking and indeed prevailed.

The strength of the merchants and other economic agents in colonial policy was deep seated and underpinned most major British policies affecting colonies in Africa. A case in point is the abolition of slavery. Contrary to popular belief, the abolition had more to do with economic trade - offs. Williams and Dyke² emphasised the role of British industrialists in ending the slave trade. Needing raw materials and markets, they advocated a policy of encouraging the African to produce more raw materials and consume manufactured goods at home, rather than enslaving and exporting the African. The future role of the colony was thus set in stone, that is, the Gold Coast best served the interest of the empire and later western powers by being encouraged to produce raw materials for Euro based factories while learning to consume the ‘superior’ goods and services produced in Britain. The later manifestation of this change in emphasis is the present situation where Africa produces what she does not consume, and consumes what she does not produce!

The collective lobbying of Parliament by industrialists, commercial interests and humanists that finally pushed for the passing of the Abolition Bill in Britain was, therefore, made possible because a new role had been found for the African continent which was seen not just as more ‘humane’ but equally, if not more so, of greater benefit to British interests than slavery.

Colonial penetration, from the foregoing, should be seen in its historic context. It indicates some form of ‘direct’ political and economic control by a metropolitan power.³ In some cases, foreign occupation was accompanied by settlements of significant colonists population, such as Kenya, Zimbabwe and South Africa from the metropolitan power. The establishment of formal colonial structures are not necessarily synonymous to colonialism. In almost every case, especially so Ghana’s, formal structures⁴ came decades after the penetration and were short lived. Indeed as Chris Dixon put it, “the establishment of formal colonial structures is therefore only one peculiar and comparatively short lived element of the imperial global system” (Dixon & Heffernan 1991, p.2).

Production relations in the colonial economy

The structure of the present Ghanaian economy as established during the period of colonial domination has changed very little. By 1954, minerals brought in £21.5m out of the total export earnings of £113.25m. The changes in the character of mining was to be found not in the receipts or position of mining in the economy, but in the ownership structure of the industry during colonial rule. Prior to the formalisation of colonial administrative structures mining was not only undertaken, but was owned by Ghanaian merchants and investors. The development of ‘formal’ colonialism shifted the ownership base of the industry which had been indigenously owned until now. By 1945, Ghanaians had been completely eliminated from the ownership elite of the mining industry. This, coupled with the low rents paid for concessions, minimised the multiplier effect of the mining sector as a component of the local economy.

What was the nature of the dynamics of the Ghanaian economy? The economy was basically fashioned to maximise the gains of extraction and other forms of primary production to meet the needs of the metropolitan political arrangement. To this end, natural products which were growing wild such as products of the palm tree, attracted the attention of both missionaries and government officials. By 1840, palm oil had become a major exporter, beaten only by gold and ivory and by 1880, topped the list of export earners. It remained so, together with palm kernel until 1911 when cocoa took over. Until then, the two palm products accounted for 48% of the country’s earnings from exports. Timber exports came in for equal encouragement from the colonial administration. By 1891, over a million cubic feet of timber valued at £22,000 was being exported per annum. This had hit six million cubic feet by 1901, fetching £55,000. Rubber, another tree product growing wild in the vast forests of Ghana, attracted the sponsorship of the colonial administration and by 1891, the country had become the largest rubber exporter in the world at a volume of 2.9m lb (Adu Boahen 1975, p.92). Gold and other mineral products equally caught the attention of the colonial state and by 1911, 280,000 ounces were exported at a value of one million pounds. Manganese was also being mined at Nsuta by 1910, with output consistently increasing until by 1951, Ghana had become the second largest producer of the commodity in the world [ibid.].

The increased production of primary products was the outcome of two major influences. Firstly, the deliberate policy of the colonial government to expand the productive base of the economy along colonial lines. Thus the peripherisation of production was geared towards reinforcing the metropolis’ position in the global economy by transferring surplus and materials to the ⁴ home economy’ whilst assigning it a functional specificity. Thus a division of superior and inferior functions was introduced along lines akin to unequal division of labour. Secondly, the suppression and abolition of slavery created an economic vacuum⁵ that needed to be filled. The development of legitimate trade was, therefore, seen by the colonial administration as both justifying the abolition and as a preferred void filling activity.

The abolition created favourable conditions for a fundamental re-structuring of the Ghanaian economy through what became known at that time as legitimate trade between Ghana and Europe mediated by Britain. This trade in primary products created the impetus for the construction of roads, railways and the introduction of currency and banking services.

The context of the preceding activities is very important. After a period of contraction in the world capitalist economy from 1873 - 1897 (Schumpeter 1939, pp.321-325), the subsequent period of expansion around 1900 - 1913 saw an alteration in the world terms of trade that favoured agricultural exports as a result of perceived shortages in supply of raw materials (Lewis, 1952). From this position, it was arguably profitable to initiate new or expand production of export crops in Africa.⁶ Being under colonial rule however, the significant part of profits were diverted into European hands and economy either by direct ownership of the production infrastructure, monopsonistic control of transportation and, or, purchasing for exports or by direct taxation. For Britain, the colonial control enabled her to determine to a large extent, the choice of foods and raw materials developed and exported from any colonial territory. It goes without saying that, in the absence of Ghanaian and other new colonies, the gains from invisible trade and her security as an economic power and her position in the ‘core’ would have been compromised.

The favourable agricultural terms of trade mentioned earlier did not last forever. By 1911, the bubble had burst and the process of structural change had lost its momentum. Indeed as Szereszewski aptly puts it, “ ... the pattern between 1891 and 1911 almost froze for half a century” (Szereszewski 1965, p. 112). The economic structure had undergone a fundamental change. The most noticeable characteristics were the neglect of industrialisation, over dependence on the cocoa crop, and the total domination of mining, banking and foreign trade sectors by expatriate firms. The economy was a classical colonial economy marked by the exploitation of natural resources by the colonising power through officialdom and trading firms with little benefit or relevance to the Ghanaian economy. Development, although prevalent, was therefore, limited to sectors producing for export, in import trade and in structures and services required to collect raw materials and to distribute imports.

The Ghanaian economy was thus from the very colonial onset, consolidated into an imperial economic system, whose distinctive feature, according to Fieldhouse, lay in Britain’s⁷ ability to create the formal framework for economic activity and in some degree determine the character of development (Fieldhouse, 1971).

The state machinery in the colonial political economy

The role of the ‘state’ in shaping Ghana’s political economy under imperial domination was vefy pro active. The seizure of state power and its utilisation to promote class, ideological and economic interest has its roots in the central position of the state in the shaping and nurturing of the Ghanaian political entity.

The Gold Coast was regarded by the British establishment as its model colony for Africa.⁸ By this status, the entrenchment of British interests, both in the economic and political spheres was of utmost importance to the colonial administration. The chains linking the colony to the mother country were, therefore, tighter than would have been the case in a ‘non model’ situation. The inculcation of British values was very pronounced in the psychological domain, first through a British - type educational elitism and also by the nature of the economic system es...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of Tables
• Acknowledgments
• Foreword
• 1 Introduction
• 2 Self Government to the Second Republic
• 3 Accelerated Decline 1972 - 1983
• 4 A Theory of Structural Adjustment
• 5 Stages in the Management of Ghana’s Economic Reform
• 6 Agriculture and Other Sectoral Problems
• 7 A General Critique of Adjustment in Ghana, 1983 - 1995
• 8 Poverty in Ghana
• 9 Conclusion
• Bibliography