Some thoughts on economic development: what and how (Part 1)
Kodwo Mbir Bullard
Nobody has to suffer the indignity of seeing household refuse piling up in the street in front of his house into horrendous mounds full of stench, creating very serious health hazards.The term "development'' acquired prominence following the end of World War II when the colonised peoples of Africa, Asia and to some extent Latin America started ridding themselves of the shackles of colonialism. Since then, the term has been the subject of several conferences and seminars by the United Nations, the World Bank, the Food and Agriculture Organization and Universities.
There is no doubt that the term "development" means different things to different people. Furthermore ideas on how to attain higher levels of development also differ on a person's ideological position.
The purpose of this paper is two-old. The first is to offer some perspectives on the concept of development and what strategies or options are open to a country like Ghana in its efforts to improve the lot of the majority of the population.
The second objective is to open up the issue on strategies for debate. Ghana has reached that stage in its evolution when such a discussion is invaluable. Out of this discussion, some ideas may emerge which may help provide guidance to the government which is apparently still groping helplessly in the dark regarding what could be done to translate the noble ideals of development into concrete reality.
Development is a very broad concept. It may be narrowed down by describing it sectorally, i.e. social development, political development, cultural development, economic development, etc. Although there are strong correlations amongst these sectors, for want of space and time, I will limit myself to just economic development. The term 'economic development' is generally used to refer to material/technological advancement. A higher level of technological development makes possible and underscores a higher level of material prosperity. Countries are described as being at high, medium or low levels of economic development.
The commonest indicator of a country's level of economic development is per capita income. Countries like the United States, Canada, Denmark and Switzerland enjoy very high per capita incomes of over $9,000.00 per annum. Hong Kong, Venezuela and the Ivory Coast are considered medium income countries with per capita incomes of $3000.00, $3000.00 and $1,000.00 respectively, while countries such as Ghana, Senegal, Tanzania and Ethiopia are at the bottom of the continuum with annual per capita incomes of $400.00, $340.00, $230.00 and $120.00 respectively.
Taxes are the major source of State revenues and the State performs this tax collecting function very scrupulously through registration and licensing of all firms, businesses and operations.
Over the past decade, particularly since the formation of Organization of Petroleum Exporting Countries in the early 1970s, however, the per capita income indicator has come to be downplayed as a serious reflector of a country's well-being. This is because, in spite of the extremely high per capita incomes of the oil producing countries, especially those in the Middle East, the broad masses of the people of these countries continue to suffer from the worst forms of poverty. New concepts are being suggested but none has achieved the prominence and broad acceptability that per capita income enjoyed for nearly two decades following World War II.
By and large, the high per capita income countries of Europe and North America, which also happen to be highly industrialised, possess other characteristics which confirm their relatively well-off position vis-à-vis the rest of the world. The following will serve as illustration.
Energy consumption per capita, measured in kilograms of coal equivalent averaged 5,000 for the industrialised countries compared with less than a thousand for most Third World late-industrialising countries. Ghana's energy consumption level was less than 200. (The figures quoted here are taken from the World Bank World Development Report 1980). Daily caloric supply per capita averaged 3500 for the industrialised countries and around 2000 for the Third World countries.
Nearly 100 per cent of the population in the industrialised countries have access to safe drinking water compared with less than 50 per cent for the late-industrialising countries. 35 per cent of Ghana's population have access to safe drinking water. In the industrialised countries, there is one medical doctor for every 650 persons and one hospital nurse per every 250 persons. These contrast sharply with conditions in the Third World countries where there is one medical doctor for every 5,000 persons and one nurse for every 850 persons. Adult literacy rate averaged 99 per cent for the industrialised countries compared with less than 55 per cent for the late-industrialising countries. Ghana's literacy rate stood at 30 per cent. The development indices can be multiplied.
The above may sound technical jargon and may not be readily understood by the average layman. But what they mean, with random examples, in very practical day to day terms for the average person in the industrialised country is the following: That when a person is sick, he does not have to travel on a dusty and gaping pot-holed road for over two hours before he can see a medical doctor. That when a medical doctor prescribes medication to a sick person, the latter does not have to go to about four pharmacies to be told each time that there is none, and when he finally finds a pharmacy that stocks the medication, he does not have to spend a week's wages to obtain the one drug. That when a person leaves home for work in the morning, he does not have to waste an hour at the bus stop waiting for a bus which may never come because it broke down half a mile away and there was no replacement. That when a person wants to travel over a hundred mile journey, he does not have to go and spend the night at the lorry station, and in the morning, fight with over 200 passengers over 20 tickets being sold for a 60-seater bus because the remaining 40 tickets have been reserved for the cronies and relatives of the corporation's Director and the rest of the senior staff.
That a person does not have to suffer the indignity of seeing household refuse piling up in the street in front of his house into horrendous mounds full of stench, creating very serious health hazards. That when a person wants to use the telephone to call someone in another section of the town or city, he does not have to pass the call through a telephone operator, and after five minutes wait, to be told by a voice at the Post Office that the lines are busy. These examples can be multiplied. I have deliberately used these negative examples to highlight the differences that a higher level of economic development can make.
After having described in such detail what a higher level of economic development is, the next question is how this situation can be brought about.
Historically, there are three major strategies that have been adopted by countries in their quest for the better material life. There is first State control of the means of production, distribution and consumption. Second there is private enterprise under which private individuals and other corporate entities undertake most of the major production decisions and activities.
The third is Mixed enterprise under which the State and the private sector jointly undertake production decisions alongside activities that are undertaken by the private sector.
Experience has shown that in economies where the State takes most of the major production decisions, and where the State undertakes productive investment through state corporations, crass inefficiencies abound.
A note of caution has to be sounded here regarding the first two strategies. There are no pure forms of these two strategies in any country. We always have mixed forms but the combinations of state and private participation vary from country to country. In China for example, where the State takes almost all the production and distribution decisions, there are some areas that are left to private individuals. For example in the agricultural sector, the State allows private farmers, after the latter have satisfied their state quotas, to grow whatever they want, sell them wherever they want and pocket the proceeds. In Britain where the private sector is dominant, the State controls some major industries, especially those experiencing very serious problems which are beyond the control of the enterprise.
Experience has shown that in economies where the State takes most of the major production decisions, and where the State undertakes productive investment through state corporations, crass inefficiencies abound. Apart from these inefficiencies, investment in the consumer goods sector is not accorded as much priority as for example defence, in terms of annual budgetary allocations. The net effect is a very weak agricultural sector which compels the State to rely on imports to meet basic consumer (mainly food) needs; witness the massive imports of grains by the Soviet Union from the West over the past few years. The standard of living for the broad masses of the people in such economies is also generally low.
In the predominantly free enterprise economies where the State limits itself to defence, currency, foreign affairs, law and order etc. and leaves production mainly in the hands of the private sector, the United States being a good example, the productive sector is generally very efficient. In fact the sector becomes callously efficient to the point where profitability through cost reductions comes to be overriding concern. This concern is so paramount that management does not hesitate to replace humans with robots in the factories and workshops whenever profit levels begin to decline. Such decisions are taken even when it means large numbers of workers will have to be laid off work.
On the efficiency side, the private enterprise system is excellent. But the system lacks equity. This deficiency is usually mitigated by State intervention through welfare and other unemploy- ment benefit programmes. State underwrites these programmes through its fiscal policies. Taxes are the major source of State revenues and the State performs this tax collecting function very scrupulously through registration and licensing of all firms, businesses and operations.
Next week: The Ghana experience.
