The foreign currency conundrum

 E. Ablorh-Odjidja

July 4, 2015 

In 1991, Bill Clinton, the soon-to-be president of the US, came to occupy the White House with the slogan, a true statement, "It's the economy, stupid."  

Need we say something in a similar style for Ghana? 

Well, sorry to disappoint.  But our statement should be more fundamental, such as "It's the philosophy, stupid."  

Remember, "Seek Ye First the political kingdom and all things shall be added"?  When Nkrumah offered it as a guideline it was grossly or deliberately misunderstood. In truth, his statement had validity as a unified theory on development.  And it was made right at the inception of our nation, at a time when we needed it most. 

What happened after that statement?  It was abjectly misinterpreted for something else - in a needless pursuit of political slander. 

Rather than paying attention and thinking about how Nkrumah's statement could have helped, fabulous brains in Ghana decided immediately to pooh-pooh the idea.   

They had the idea that the first step should be the economy without thinking that the "Seek ye first" was asking for the political will for the new nation to seize hold of everything else in the society, including the economy! 

Seizing or seeking the economy first could not have happened in a political vacuum or when you have no control over your destiny.   

In any case, we adopted the "the economy first" approach after Nkrumah was overthrown.  All we have to do now is to look at where this act has landed us. 

The "Seek Ye First," proposal was not just a slogan.  It had a philosophical grounding that defined the success or failure of the nation-state. 

It sought the highest ground in tackling developmental problems like Nkrumah did with the "Import substitution" theory in the 60s.  This could have worked for our economy as it did for South Korea, beginning in the 70s. 

Now we have arrived at a point in 2015 when the government of Ghana is seeking to inject $20mil daily into the economy to resuscitate the cedi without the "Import Substitution" theory of the 60s.  

Whether The Bank of Ghana (BOG) has enough on reserve to pull off this ploy on a long-term basis is not the point. The problem is whether the approach is right for a developing economy. 

Pumping $20 mil daily into the economy is not a creative or productive idea.  For, very little of the jolt can be guaranteed to trickle downward to local manufacturers.

Instead, it will only add to the purchasing power of traders and importers to purchase more non-essential goods from abroad. 

This indiscriminate usage of the hard currency reserve, with little view on developmental needs, got us into the mess we are in today. The cure for this sickness is the political will already expressed in the "Seek Ye First" first theory.

This "Seek Ye First" theory understood that the practice of trading in nonessential goods has exacerbated the woes within our economy, resulting in the constant downward push on the cedi.  It then sought to reduce the downward push on the cedi by promoting local industrial productions.  The attempt was aborted in 1966. 

In the wake of the abortion of such a critical theory, one ought to be able to see the consequence clearly today.  But rather than encouraging the manufacturing of local goods, cheaper foreign-made products are brought in to compete with the local manufacturing base of the same items  - toothpicks, cane chairs, ineffectual electrical appliances, factory rejects, and used items purchased from abroad.  

The BOG $20ml stimulus is not the solution needed.  As said, it would only go to increase the purchasing power for frivolous items from abroad.  These are items that the political will can make happen or manufactured locally.   

Again, economies do not operate in a vacuum. They take place in political incubators, which require the warmth of guiding principles - a worldview or philosophy.   

Just so we don't forget, "Seek Ye First" was one such worldview.  China, Japan, India, and even capitalist America, at their developmental stages, emphasized the attainment of home-grown industrial might.  To the last of them, each seized and exercised the political sovereignty (Seek Ye First) to take advantage of a trade by minimizing the importation of goods.   

It was under the "Seek Ye First" philosophy of Nkrumah that local industries began to grow muscle in Ghana.  

Products that could be manufactured at home never got the green light for importation.  This way, the country's foreign reserve was preserved for critical items.  

Some who understood the concept back then would come to call it the "Domestication" policy today.  

Naturally, the "Import Substitution" policy, during its practice, caused some pain which became the excuse for the want for "essential commodities," which was the slogan for the 1966 coup.

For sardines and milk, we upended a sound approach to our entire development plan for the era. With the lesson learned, shouldn't we be canning our sardines and milking our cows locally now, or do we request the BOG for more stimulus to purchase more of the same from abroad? 

With a simplistic misunderstanding of a deep ideology, we seem to have herewith crippled our entire growth for decades and more to come.  If this mistaken political posture is not corrected soon, we will be seeing more suffering ahead.. 

Instead of course correction, we have allowed ourselves to be bamboozled by the West, the very nations that knew that the policy of "Seek Ye First" could work, and brought on the destruction of the concept.  They never wanted us to try, much more to succeed.  And in 1966, we went along with the coup they plotted.  

And we took the bait.  Like our local drunk, we said, "to enjoy being mugged, we don't have to worry about what was on offer in the glass."  

So here we are some 50 years later, now stripped naked of almost all our ingenuities, we are left to import toothpicks; plasterboards, motorized tricycle trucks, and other unnecessary items from abroad; all items that could be manufactured at home.

In the process, we exposed our foreign reserves for plunder.  Our local "buy and sell" entrepreneurs, are allowing foreign manufacturers to profit at our expense.

Our negligence has turned our country into a market for surplus foreign labor. The unemployable Chinese is likely to find a job here first before a Ghanaian does. The result is continuous poverty, which we seem to have already accepted.  

So, like our shirtless friend, the drunk, we go back the world stage cup in hand, begging for foreign support for our national budgets.  

Meanwhile, as our foreign debt kept growing from the 60s, we needed a harbinger of change.  And had it in President Kufuor, who recognized and spoke out loud on the world stage in 2005 that Ghana was broke.   

President Kufuor openly said that to develop, we needed to come out clean from under our overburdening debt.  This confession brought us HIPC and bought us time for respite.   

Sadly, after Kufuor left office in 2009, the opportunity acquired under HIPC was quickly squandered.   

Our worldview returned to that of the immediate post-1966 coup.  Hard currencies from our reserves continued to flow outward without a policy like "Seek Ye First" to stem or guide the flow.   

South Korea in the 70s had a similar "Import Substitution" plan.  Suffice it to say we put ours into use before they did.  South Korea used this policy to buttress its economy.  Why is South Korea now a success story when ours is not?    

And now this $20 mil daily infusion from BOG. The joke is whether we do have this amount to spare.  Because if we did our cedi could have already done better against the dollar! 

 E. Ablorh-Odjidja, Publisher, www.ghanadot.com, Washington, DC, July 4, 2015

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