A senior economist with the Institute of Economic Affairs (IEA), Dr. John Kwakye, has urged African countries not to wholly accept development policies from the Bretton Woods Institutions (BWIs) – the World Bank and the International Monetary Fund (IMF).
He argues that conditions attached to policies of BWIs come with cost and do not expand the economies of developing countries.
He indicated that these policies are based on a neoliberal model labeled the “Washington Consensus [WC]” which proffers the superiority of free market and private enterprise over economic controls by states. So far, no major emerging developing economy has adopted the WC policies wholly during the course of their development.
Against this backdrop, Dr Kwakye says African countries should be selective in the implementation of policies proposed by BWIs, ensuring that states take control of their industries which are strategic for national development.
Dr. Kwakye was speaking at a roundtable discussion organized in Accra last week by IEA on the theme “Mitigating the costs of Washington Consensus Policies: Titbits for Ghana and other African counties”.
Dr. Kwakye noted that these policies have not helped African nations. Many of them have failed, inhibiting economic expansion and rendering many poorer than they were. Thus, leaving everything to allow the market to take control has not helped.
The WC inspired policies include; promotion of specialization in production and trade, promotion of enterprise, elimination of state subsidies, external trade liberalization, liberalization of financial markets, etc.
Since these market policies do not always work perfectly, it is necessary for states to intervene to correct the associated market failures and to mitigate the socio-economic costs involved.
“The push for African states to concentrate on the production of its traditional primary products has left the continent unindustrialized, producing only raw materials to feed industries in the developed countries and earning so little. Leaving Africa out of international production and trading systems has stifled its development. African countries must break out of this orchestrated plan to retard Africa’s growth,” he stressed.
The economist indicated that privatization of state owned enterprises has not been managed well as local capacity to manage such enterprises are not strong and foreign owners are only motivated by profit and may take costly measures and therefore deploy the labour force. Thus, he suggested that government should undertake selective measures to mitigate such policies.
He also suggested selective and targeted elimination of subsidies, regulation of product liberalization; regulation of liberation of the financial market for African countries, among others. As African markets compete with cheap imports from the industrialized nation, African governments need to support the continent’s farmers and producers, promote access to banking, and encourage financial institutions to give credit to Small and Medium Scale Enterprises (SMEs) to facilitate growth.
“The WC approach of fiscal and monetary retrenchment in the name of stabilization leads to painful cuts in development and social spending, tax hikes, credit restriction and high interest rates, all of which are inimical to growth. A different approach is needed to mitigate these costs. ‘Macroeconomic restructuring’, rather than ‘universal retrenchment’ should be adopted,” Dr. Kwakye recommended.
Contributing to the discussion, Madam Frances Essiam, a participant, recounted Africa’s problem as purely attitudinal. She said every country has an interest and the interest of the developed countries is to keep Africa down; hence it behoves on Africans to prove them wrong.
“Because of poor management, corruption and our attitude towards work we are not able to free ourselves and until we have been able to do away with corruption and change our attitudes, we will continue to suffer at the hands of the developed world,” she stated.
“No one would have to dictate to us. We need to set our priorities right and do away with the corrupt practices”, Madam Essiam asserted.
She asked the government to take a second look at its policies, especially the educational sector, and put the right measures in place to harness the nation’s resources.
Nii Okaidja II, Gbese Mantse, noted that the WC was made for developing nations to test untried policies and these are meant to keep Africa down. “We should not allow any nation to dictate to us.”
In his opinion, the WC did not mention anything about global warming since they (developed cuontries) are the main perpetrators of global warming. He said the WC is an economic order “we cannot run away from. The best way forward is for us to wean ourselves off World Bank and IMF support.”
Chairing the discussions, Hon. Seth Terkper, Deputy Minister of Finance, said the best thing is for Africa to have the ability to manage its own economy. “Managing our economy is more important and necessary; thereby we can expand our economy and compete with the industrialized countries like China and other Asian countries and not rely on the BWIs.”