Padraig Colman

Rambling ruminations of an Irishman in Sri Lanka

Tag: World Bank

Economic Growth

This article appeared in the November 2008 edition of LMD (Lanka Monthly Digest).The strapline was: “To grow or not to grow? Michael O’Leary goes in search of an answer to this conundrum”. I think that what I was trying to get across to a business audience was that I was not a fan of growth but I would like to see established in Sri Lanka some of the measures of good governance that growth proponents recommended.

Seventeenth-century Spanish Conquistadors in America destroyed all the settlements in their path and returned from their wanderings to starve, because there was nothing left to loot. Are we, 2lst century conquistadors, destroying our planet in the never- ending quest for economic growth?

As long ago as the 1960s, Robert Kennedy warned that GDP “is indifferent to the decency of our factories and the safety of streets alike”. He added: “It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning. Neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile.”

There are four basic arguments against pursuing growth:

  • Growth has negative effects on the quality of life. ‘Pleonexia’ means pathological greed that can cause stress, addictions and compulsions, ‘affluenza’ and loss of moral grounding.
  • Artificial needs are created. Zygmunt Bauman wrote that capitalism has made consumers immune to satisfaction. Desire no longer desires satisfaction. ‘Desire desires desire’, which is the basis for our new ‘constant greed’.
  • Growth depletes natural resources and is ultimately unsustainable. If everyone consumed at the US rate, we would require nearly five more planet Earths! According to the Red Cross’s World Disasters Report, the frequency and cost of natural disasters will increase due to a combination of environmental degradation, climate change, urban population growth and economic globalisation.
  • The gap between the richest and poorest is widening. Although there was never enough income at the peak of the pyramid to allow an egalitarian distribution to raise the bottom very high, the magic process of growth would – or so it was thought in the 60s – bring the bottom near to the top during a period of only a generation or two.

According to Social Limits to Growth, Fred Hirsch, as a society becomes wealthier and more engaged in a positional contest for consumption, it becomes more difficult – not easier – to arrange for the redistribution of income by government. “The flaw in the affluent society lies not in the false values of affluence, but in its false promise,” Hirsch theorised.

Even when Sri Lanka was boasting an official growth rate of 7.5 per cent, this growth was not converted into poverty reduction. The income of the poorest in this country fell from 18.9 per cent of the income of the richest in 1963 to 13.4 per cent in 2002.

In the US, the wealth gap is currently at its widest since 1929. ln 1968, the CEO of General Motors (GM) took home 66 times the amount earned by the typical GM worker. In 2005, the CEO of Wal-Mart earned 900 times the pay of his average employee. There are more than 600,000 millionaires in the UK and35 billionaires. More than 2.5 million children – around a quarter of the total – are living below the official poverty line.

The Growth Report recently published by The World Bank (WB) is in no doubt that growth is the answer to the world’s problems, particularly poverty in the developing world: “In short, we take the view that growth is a necessary, if not sufficient, condition for broader development, enlarging the scope for individuals to be productive and creative.”

Since 1950, 13 economies have grown at an average rate of seven per cent a year or more for 25 years or longer. Nine of them are in Asia: China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Singapore, Taiwan and Thailand. They share common characteristics: engagement with the global economy, macroeconomic stability, high rates of savings and investment, the market allocation of resources, and credible and capable governments.

The Growth Report provides a handy checklist of bad ideas:

  • Subsidies, except for those targeted at highly vulnerable groups.
  • Dealing with unemployment by creating false state-sector jobs.
  • Cutting infrastructure investment for short-term gains.
  • Providing open-ended protection of specific sectors.
  • Dealing with inflation through price controls.
  • Treating environmental concerns as an unaffordable luxury.
  • Underpaying civil servants, including teachers.
  • Excessive interference in the banking system, which prevents the development of an efficient system of financial intermediation and reduces productivity.

Whichever side one takes in the debate about whether the pursuit of growth is good or bad, The Growth Report offers some sound advice about good governance and economic management. It stresses the importance of an effective and accountable civil service free of any taint of corruption: “Government leaders send powerful signals about values and the limits of acceptable behaviour when they decide on how to respond to cases of misbehaviour. Mild responses send the clear signal that while the misbehaviour is not right, it is not all that serious.”

According to the WB report: “The historical record shows that growth requires broadly stable prices, a currency that is not debauched by hyperinflation. Growth is about more than economics. It also requires committed, credible and capable governments …The country’s policy-makers must communicate a credible vision of the future and a strategy for getting there. They must be trusted as stewards”.


Reconciliation in Ghana

This article appeared in The Nation on Sunday March 10 2013


On Wednesday March 6, 2013, President Mahama of Ghana paid tribute on the 56th Anniversary of Independence “to the late President Kwame Nkrumah and other leaders who led the struggle for independence for their courage, perseverance and self-determination”.

In Ghana, the National Commission for Civic Education (NCCE) proposed a National Reconciliation Forum in 1999. A National Reconciliation Act was passed in 2002. Professor Gyimah-Boadi, Director of the Centre for Democratic Development, believes that: “By design or default, the process of developing a framework and legislation for national reconciliation in Ghana has been fairly open, consultative, and participatory”.

The territory of modern Ghana was known as the Gold Coast. The ancient kingdom of Ghana controlled the gold trade between the mining areas to the south and the Saharan trade routes to the north. Ancient Ghana was also the focus for the export trade in Saharan copper and salt. Forts and castles were built by Portuguese, Dutch, British and Spanish merchants to repel competitors and store gunpowder, ivory and gold. Slaves replaced gold as the most lucrative trade along the coast, and the forts were used for keeping newly acquired slaves pending the arrival of the ships sent to collect them. Whole regions were destroyed and depopulated.

After the Dutch withdrew in 1874, Britain made the Gold Coast a protectorate and ruled, exploiting ethnic conflict and sapping the regions natural resources, until post-war downsizing forced it to abandon its empire.

Kwame Nkrumah

The colonised people had never passively accepted the imperial yoke. After rioting increased in 1948, members of the United Gold Coast Convention were arrested, including Kwame Nkrumah. Nkrumah formed his own party, the CPP (Convention People’s Party. After his party gained 34 out of 38 seats in the Legislative Assembly in 1952, Nkrumah was released. After further negotiations with Britain, on March 6, 1957 Nkrumah declared Ghana “free forever”.

Like Hugo Chavez, Nkrumah had ambitions, which displeased the USA, beyond his own nation. His espousal of Pan-Africanism had roots in his experiences as a colonial subject. Living in exile in the USA he absorbed the ideas of thinkers like WEB DuBois and Marcus Garvey as well as experiencing at first hand white racism. Nkrumah maintained his contacts with Africans everywhere in the world. He spoke out for the civil rights movement in the USA, met Malcolm X and gave inspiration to the Black Panther movement.

In his book Africa Must Unite, Nkrumah wrote that total African liberation was essential: “We need it to carry forward our construction of a socio-economic system that will support the great mass of our steadily rising population at levels of life which will compare with those in the most advanced countries”.

Aluminium ore

Nkrumah did seek help from the USA in the sense of trying to get a decent return on his country’s resources. Aluminium ore was abundant in Ghana. Having access to a cheap source of electricity with which to process aluminium would have greatly increased profit margins and reduced processing costs for the manufacture of the metal. Nkrumah’s plan was that America would mine Ghana’s minerals and use the Volta Dam’s electricity.
Eisenhower was interested and contacted Kaiser, the world’s largest aluminium manufacturer. Kaiser’s plan was to use Ghana’s cheap electricity – importing aluminium ore from other places in the world, and then exporting the aluminium back to America. Nkrumah had to agree to America’s terms if he wanted the dam to be built, but had to raise $30 million. The infant nation immediately became indebted to the World Bank.

The Volta Dam was completed on January 22, 1966. One month later, Nkrumah was overthrown. Former CIA officer John Stockwell wrote: “The Accra station was encouraged by CIA headquarters to maintain contact with dissidents of the Ghanaian army for the purpose of gathering intelligence on their activities. It was given a generous budget, and maintained intimate contact with the plotters as a coup was hatched.”

A series of coups ended with the ascension to power of Flight Lieutenant Jerry Rawlings in 1981. The constitution was suspended and political parties banned. The economy declined soon after and many Ghanaians migrated.

Stable democracy

The economy began to recover when a structural adjustment plan was negotiated with the IMF. A new constitution was promulgated in 1992. In recent years, power has been peacefully transferred from one legitimately elected leader to another; Ghana seems to have recovered its status as a stable democracy.

Professor Gyimah-Boadi has warned: “Though the prospects for Ghana’s reconciliation are promising, the country’s program still faces daunting challenges.” Acrimony dogged the debate on the national reconciliation program with erstwhile supporters of the military regimes anxious that they might be targeted and harmed. A practical obstacle to reconciliation is that there has been silence on the question of how restoration, restitution and compensation and institutional reforms would be funded.

Optimists note that Ghana enjoyed a high rate of economic development in 2012. Pessimists call for a new approach in times of austerity. Ernest Opoku-Boateng writes on Ghana Web: “There is no light. There is no water. There is no petrol. There is no LPG. Prices are on the rise. … Mobilizing additional revenue is important but we should also cut our coat according to our size, beginning with the President, his office and his Cabinet”.

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