There are several unfortunate factors, most of them self inflicted, which appear to be militating against our development. Two of these damaging factors are firstly corruption and secondly our apparent refusal to change the structure of the national economy.
If we are unable to deal with corruption in all its shades and sizes then we should as well forget about any dreams of achieving any appreciable level of economic breakthrough.
The fight against corruption should start with the government. A precondition for an honest government is that candidates must not need large sums of money to get elected, or it will trigger a cycle of corruption. In Thailand this is described as “commercial democracy, the purchased mandate”.
The structure of the Ghanaian economy has not changed for over 40 years. We still rely on the export of raw materials. We have not moved from the classical economic theory which was abandoned 300 years ago. The classical economic theory teaches that human labour added to land produced the final product. Our fore fathers had land and many children who helped them grow crops such as cocoa, coffee and cotton. The final product of the enterprise was cocoa, coffee or cotton wool which was sold to generate wealth.
This classical theory gave way to the neo-classical economic theory, which recognizes only two factors of production: labour and capital, where capital is the outfit of plant, equipment, and buildings used in the productive process.
In recent years the contribution of labour has been further divided into the contribution of labour, pure and simple (otherwise known as human muscle power) and the contribution of acquired human ingenuity and skill. The latter factor, termed human capital, is widely regarded as the most important factor in the process of production.
For us in the so-called third world this formulation has significance for a number of aspects of economic theory, notably for the theory of economic growth. It used to be thought that the accumulation of physical capital was the key to economic development.
Studies in the last quarter of the 20th Century suggested that the contribution of human capital is, at least, as significant as that of physical capital and that a considerable amount of growth rate could be explained as the yield on human capital. It followed, therefore, that if the accumulation of human capital could be accelerated, the rate of economic growth would be increased.
In addition, technological developments in the 20th and the present centuries have transformed the majority of wealth-creating work from physically-based to “knowledge-based.” Technology and knowledge are now the key factors of production. .
There is, therefore, the “New growth theory” which highlights the role of knowledge and technology in driving productivity and economic growth. In this view, productive capability is no longer completely dependent on capital and equipment.
Information and knowledge assets are increasingly important and investments in research and development, education and training and new managerial work structures are decisive.
Knowledge is the driver of productivity and economic growth, leading to a new focus on the role of information technology and learning in economic performance. The term “knowledge-based economy” stems from this recognition of the place of knowledge and technology in modern economies.
Employment in the knowledge-based economy is characterized by increasing demand for more highly-skilled workers.
In new growth theory, knowledge can raise the returns on investment, which can in turn contribute to the accumulation of knowledge. It does this by stimulating more efficient methods of production organization as well as new and improved products and services.
The implication of the knowledge-based economy is that borrowing physical capital for construction of so-called development projects cannot in itself lead to any significant economic growth if the human capital is neglected.
The development of the new concept of human capital and knowledge-based economic theory have helped to explain the residual gap between developed and developing nations that was left after the contributions of land, labour, and capital had been accounted for, a gap that had hitherto remained a mystery.
How do you explain the fact that a country such as Holland, whose land area is 17% that of Ghana, most of it below sea level, has virtually no natural resources and still has a GDP twice that of the African continent?
Knowledge drives development in the globalized Economy. Societies that use knowledge, that is, produce, select, adapt, commercialize knowledge have realized sustained economic growth and improved living standards.
Kenya, Ghana and South Korea had about the same per capita GDP in the late 50’s up to the time of independence of Kenya and Ghana. Today, South Korea has a per capita GDP that is more than 8 times that of Kenya or Ghana. More than half of the South Koreans’ per capita GDP is attributed to knowledge. Economists estimate that if Kenya and Ghana were to exploit all their physical and human capital, the contribution to their per capita GDP would be about $ 4,000.
The policy consequences of this change in economic theory are important because they point to additional expenditures on education, on-the-job training and on research and development, rather than on physical capital.
In the third quarter of 2004 the German Chancellor designated five German universities as centers of excellence to receive special funding which will make them elite universities to carry Germany to the forefront of scientific research and development.
Germany had to take this measure because it is widely believed in Germany that the country is lagging behind in research and development. Think of it! Germany believes the way to prosperity is through technology.
In Ghana serious scientific research is virtually non-existent, worse still we think the way to development is through accumulation of wealth through traditional and non-traditional exports.
It is not for nothing that the Organization for Economic Cooperation and Development (OECD) economies are increasingly based on knowledge and information.
Even in China, economic reforms which began in the late 1970’s under Deng Xiaoping focused on opening up China to the outside world and stressed the development of science and technology.
In 1986, China launched the “863” Program, which concentrated on seven key areas consisting of biotechnology, information technology, space technology, laser technology, automation technology, energy technology and advanced materials technology.
The “863” Program was also responsible for monitoring emerging foreign technologies with widespread interest in commercializing high technologies and its utilization for education and within the labor force.
Results of outdated economic policies in Ghana
1. The structure of the economy has not changed for over 40 years. We still rely on the export of raw materials. All governments over the past 40 years have sung from the same hymn sheet as far as economic policy is concerned. The thrust of our economic policy has always been to put in measures to increase the production and export of primary produce, attract foreign investors, borrow and beg from so-called development partners.
2. Africa’s contribution to world’s trade is less than 2%. It follows that Ghana’s contribution is almost zero per cent.
3. We are unable to generate enough wealth to finance national development programmes and so depend on foreign capital for almost 100 per cent of our development budget. Building roads, construction of schools, hospitals and digging bore holes with borrowed money or grants does not constitute development. Development, to me, is the process of developing the capacity to do things for ourselves and to be less and less dependent on foreign capital and technology.
4. Despite efforts to alleviate poverty, Ghana still exhibits chronic inability to alleviate poverty. Poverty alleviation means for many people being able to afford nutritious food, access to clean water and sanitation, energy, safe shelter, education and a healthy environment. Since science and technology have a historical record in providing solutions to poverty problems any efforts to alleviate poverty will not succeed without innovations in food production, water, energy and health provision and in general economic growth.
5. Ghana is unable to attract any substantial Foreign Direct Investments (FDI). Any country that does not take the development of her human capital seriously finds is difficult to attract Foreign Direct Investments (FDI). The high-income developed countries with well developed human capital are not only the major source of direct investment, they are also the major recipients. According to data obtained from the United Nations Conference on Trade and Development, Foreign Direct Investment to the USA in 2000 was 314 billion dollars. This figure fell to 144 billion in 2001 and further down to 30 billion in 2002. Even at this relatively low level it was second only to China which attracted 52.7 billion dollars FDI in 2002. There is ample evidence that multinationals are more active primarily between similar, high-income countries and that outward direct investment in particular is associated with skilled-labor abundance. Even when a multinational decides to invest in a developing country with low human capital base the type of investment is the vertical one in which the production process is geographically fragmented by stages, the capital-intensive intermediates being produced in the home country of the multinational and the labour-intensive stage produced in the host country. This is in contrast to the horizontal investments in which the multinational carries on basically the same activity in the host country as at home, for example, German investors producing the same cars in the United States of America as they do in Germany. This type of investment is almost non-existent in Ghana. Presently there are about 95 German investors in Ghana and only 24 of these are in the production sector. Items produced are mostly in the agricultural sector, for example pawpaw, mango, vegetables, lobsters and pineapples. Certainly investment of this nature cannot propel Ghana into a middle-income earning country any time soon. It must be stressed once again that multinationals are firms that are intensive in the use of knowledge capital. Any country lacking knowledge and skill capital cannot attract multinationals.
6. We import everything from toothpick to aircraft.
7. Loss of self esteem.
8. Inability to stop “brain-drain”.
9. Inability to contribute to relief efforts, whether international or local.
10. We have a Stock Exchange which is out of tune with World economic trends. Without adequate human capital resource and serious manufacturing of industrial goods the banks, the discount houses, stockbrokers and all the other forms of financial transaction will be chasing after non-existent liquidity. The Ghana Stock Exchange was recently judged to be the fastest growing in the world but the growth is not matched by a corresponding increase in productivity or growth of the companies involved, not to mention the still very low dividends paid to investors. The question is what factors are responsible for this growth and is it growth that has the potential of changing the nature of the national economy? What are the companies that form the back bone of the Stock Exchange? Banks, insurance companies, paper, soap and ice cream manufacturers and a few other sectors are well represented at Stock Exchange. Engineering, whether metal or electronic or biological, is conspicuously absent. In other words the Ghana Stock Exchange does not operate in a knowledge-based economic structure.
1. Considering the present state of Ghana’s socio-economic development there is no disguising the phenomenal scale of work, commitment and seriousness that need to be inputted before Ghana can lay claim to being knowledge driven. It demands a complete change of work culture and attitude. Our leaders should radiate to us a sense of hope
2. Leadership should commit itself to a clean government. When the government of Lee Kuan Yew took office in 1959 it set out to have a clean administration. The Prime Minister said that “we were sickened by the greed, corruption, and decadence of many Asian leaders” and “We had the deep sense of mission to establish a clean and effective government”. With determination and a credible programme committed to scientific and technological development, Lee Kuan Yew and his team were able to live up to their good intentions and Singapore, which in 1819 was a village with 120 fishermen without any natural resources and hinterland, propelled itself from third world squalor to first world affluence in just 35 years.
3. Leadership should recognize that if a sparrow will not fall to the ground without the knowledge of the Almighty God then no nation can have long term prosperity without His help.
4. Ghana needs united and focused leadership. When the 56 signatories of the Declaration of American Independence met in the State House of Pennsylvania in Philadelphia on the 4th of July 1776 to append their signatures to the famous document on declaration of America’s Independence this is what they said: “And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor”. Ghana has not yet seen the type of closed, united, committed, focused, and dedicated leadership that is ready to sacrifice for future generations of Ghanaians.
5. Leaders should learn to see beyond the next elections and plan for future generations, including generations yet to be born.
What to do in technology knowledge-based economy
1. It should be recognized that the poverty gap is a technological gap
2. The categorization of nations into advanced and developing is based on their scientific advancement. Low income levels go with low scientific/technological status, while high income levels match with high scientific/technological programme.
3. We have to change our national economic policy from capital accumulation to that, which uses inputs in a more productive way by adopting knowledge-based economy. In other words we need an industrial policy for Ghana.
4. Technological advancement does not occur automatically. It can only be achieved through a deliberate well thought out programme backed by action supported by ingenuity and uncompromising determination.
5. The state should put in place an enabling framework to encourage education at all levels but more especially, tertiary institutions should be more innovative and responsive to the needs of a globalized competitive knowledge economy and to the changing labour market requirements for human capital.
6. In the knowledge-based economy public research laboratories and institutes of higher education, carry out key functions, including knowledge production, transmission and transfer. Technical education should therefore be taken more seriously. Our technical schools should be equipped so that they can produce the manpower required in the manufacturing sectors. Other research bodies and institutions such as The Council for Scientific and Industrial Research (CSIR), the University of Science and Technology, the Ghana Academy of Arts and Sciences (GAAS) should receive the due attention for them to play their expected role in society. The new universities, most of them private should be encouraged to offer science and technology courses. We need to constantly remind ourselves that the Poverty Gap is a Technology Gap.
7. We should develop the capacity to manufacture machines, develop processes and materials for national development. This among others things involves the establishment of machine tools centres in Ghana. If we do not develop the capacity to manufacture machines we should as well forget about any dream of developing the Nation. No country ever developed without the capacity to manufacture machines. If we characterize Ghana as an agricultural nation, we do so by default because we cannot do anything else. We are like Adam and Eve, Cain and Abel and Methuselah. Even Noah could build a ship, but we in the 21st Century have closed our minds to technology.
8. The various “Presidential Initiatives” designed to reduce poverty especially in the rural areas are well intended and commendable but I strongly believe that one of the initiatives should have been the establishment of machine tool centres which would have provided us with the capacity to produce machines, spare parts and supplies for our industrial development. Every other initiative depends on the use of machines. Many projects cannot be sustained in Ghana because of lack of spare parts. The mass transport system being established in our cities and towns are running into difficulties because all spare parts have to be imported and this does not bode well for the system.
Our poverty is self-inflicted. It is absolutely unnecessary. The overall development of the nation, including the economic, social, cultural and technological development is the responsibility of the Ghanaian. I have said time and again that any biological population that cannot feed, shelter clothe, heal and defend itself with its own means cannot survive.
God will not group a people together and not provide them with the material and human resources necessary to lead a fruitful and enjoyable life. Ghanaian men and women capable of solving the myriads of problems facing us are here in our midst and around the world. They have to be found and encouraged to perform. The task of political leadership is to unearth the actors needed to transform the nation.
We need to recognize that we are in a fight for survival and there is the need for us to be determined, aggressive, ambitious and passionate about our affairs. As a people we should not be afraid of breaking new ground. The world may want to intimidate us; that we are so far behind that we cannot catch up. No! We don’t have to run after them. However, we can learn from the achievements and mistakes of others whilst charting our own path and preserving our cultural heritage and our time tested value systems.
Authored by: Prof. K. Frimpong-Boateng