In economics 101, there is a widely-known assumption that “All things being equal,” this or that economic model should or must have turned out this way.
But, world-acclaimed economists will be the first to concede that the world and human behavior are not only imperfect but more so humans can behave irrationally and unpredictably so in that sense “all things cannot be equal,” at least speaking from rudimentary economics perspective.
The fact is we live in an unpredictable world with scarce resources where human wants/needs are unlimited. It happens all the time in human life, too. One may plan this way and yet the plans may turn out another way. World governments are also made up of human beings.
Often governments, and here one is talking about well-developed economies such as the United States, may come up with annual budget and quickly realizes the budgetary expenditures or forecasts may not be sufficient to meet all the urgent needs of the people.
This scenario lives governments to look elsewhere to seek for funds to help finance their deficits. After exhausting all its available domestic financial avenues, the next likely option is to contract loans or borrow money from private entities both internal and external, including from other friendly nations.
For instance, based on the US Council on Foreign Relations’ (a reputable nonprofit think tank) account, as of 2018, the US debt stands at almost $22 trillion. Out of this staggering amount, the biggest lenders or holders of the United States’ debt are China and Japan. Each of these nations holds nearly over $1.2 trillion apiece of the total debt of the U.S.
Added to the above statistics is the revelation that the United States “debt-to-GDP ratio is among the highest in the developed world, behind only Belgium, Portugal, Italy, Greece, and Japan” (see: Council on Foreign Relations website). More so, one of the leading American business TV outlets, the CNBC, reports that about 48% or nearly $13 trillion of the U.S. debt is held by the public; and again, the largest lenders are China and Japan, followed by countries like Ireland, Brazil, South Korea, Germany, and many others.
On the basis of the preceding, President Akufo-Addo cannot be faulted in saying that “The United States of America [of all contemporary nation-states] is one the biggest debtors in the world. So borrowing money is not necessarily a betrayal of the concept of independence.” The United States gained its self-autonomy from Britain in 1776.
By ex-president Mahama and his followers’ skewed logic, if borrowing money from other countries is seceding one’s national independence to another, then the most powerful and largest economy on earth (U.S.) is subservient to its biggest debt holders—China and Japan.
Even in opposition, it is crystal clear former president Mahama and his bunch of desperate power seekers are incompetent because almost all their criticisms are not grounded in realistic assessment of the prevailing socioeconomic conditions in Ghana. Instead, their critiques are anchored in the fallacy of false equivalence, as well as bitterness mostly emanating from the fact that the NDC led by Mr. Mahama lost miserably to Nana Akufo-Addo-led NPP in 2016.
This is to say merely making a case that then-presidential candidate Nana Akufo-Addo strongly criticized NDC government of Mr. Mahama for borrowing does not make the current opposition’s argument compelling.
Interstates or intergovernmental borrowing, especially in the modern world, has become acceptable norm and many governments across the globe use it to fund their yearly budget shortfalls. As President Addo correctly implied, the question is not about the borrowing per se; rather, the most significant aspect of contracting a loan is the management regime or how the money borrowed is prudently used for its intended purpose.
Most likely, if the then NDC regime under Mr. Mahama had shrewdly used all the money borrowed, there would not be the need for the opposition led by NPP to unleash criticisms on the government at the time.
In fact, available information indicates ex-President Mahama-led administration borrowed excessively from foreign sources; and, in each case, the money appropriated was not used judiciously. The result of the NDC’s mismanagement of the nation’s economy and its resources, including external loans, is the hardship that has drained into the country now under the government of Nana Akufo-Addo.
At this point, Ghana desperately needs money to embark on economic infrastructures and other social programs but the money to bankroll all these much-needed intervention initiatives is not readily available. Yet, the nation of Ghana, like all contemporary states, must be run at all cost and it takes money.
Here, if Mr. Mahama and his hosanna fellows are competent enough, they should be focusing on how this government manages the borrowed money, and not waste time engaging in immaterial semantics of “betrayal of independence” and other unproductive abstract concepts, such as the “loss of Ghana’s sovereignty” because of foreign loans? Give me a break!
Bernard Asubonteng is a US-based writer