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The Institutional and Political Framework of Macro-Economic Management
Hutchful, Ebeo
Hutchful, Ebeo
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DP82.pdf
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Abstract
"In the 1980s, Ghana was held up by the international financial institutions as a model of successful adjustment in Africa. Against the background of a severe and persistent deterioration in the country’s gross domestic product, hyper-inflation, mounting debt and extensive shortages of consumer goods during the 1970s, the economic turn-around of the 1980s was indeed remarkable: the budget deficit was eliminated, government revenue as a share of GDP almost tripled, savings and investment as proportions of GDP rose four and five times respectively (albeit from very low levels), the currency was stabilized and allowed to reflect its market value, inflation was brought under control, and GDP itself grew by about 5.2 per cent per annum. Much of this record has been put down to the consistent and rigorous way in which the military government of the Provisional National Defence Council implemented the adjustment programme, as well as the enormous financial and technical assistance it received from the World Bank and the IMF. Indeed, the World Bank has estimated that it committed twice as much staff time to the Ghanaian programme than to any other adjustment programme in Africa during the 1980s. This Discussion Paper, which is a condensed version of a book manuscript that has been prepared for the Institute, surveys the institutional and political factors that were responsible for the programme’s success and raises questions about its long-term sustainability. It challenges a widely held view in the recent literature that successful adjustment requires institutionalization, accountability and participation. In Ghana, adjustment was underpinned by very unorthodox institutional arrangements and politics. Highly centralized and personalistic structures were crafted by the political leadership to support the programme; well-motivated and capable technocratic managers enjoyed significant autonomy in defining and implementing their work; and the international financial institutions provided technical support without facing serious resistance from bureaucrats and vested interests — as would have been the case in more settled institutional settings. In short, economic restructuring was carried out in a context of de-institutionalization. The structural adjustment team was drawn from three disparate groups: professional economists and planners in the civil service; political appointees, with varied professional backgrounds, who supervised the work of the civil servants, and took the crucial technical decisions for approval by the political leadership; and the adjustment management group, which was responsible for the political direction of the programme. Despite the heterogeneous character of the team (consisting of Marxists, liberal academics, politicians and bureaucrats), the key actors were able to produce coherent working agendas that were based on pragmatism, personal trust, and respect for the rules as defined by a charismatic and forceful political leader, Jerry Rawlings. However, de-institutionalization had its costs: the private sector, like other organized interests, was never a partner in adjustment, and thus failed to respond positively to the reforms; and the democratization of the 1990s exposed the deep-seated divisions that had built up over the direction of the adjustment programme and forced a continuation of the personalistic style of UNRISD Discussion Paper No. 82 ii presidential rule. The paper contends that the most noticeable effect of adjustment has been the restoration of the fiscal health of the state rather than the transformation of the real economy. And even this has proved fragile. The régime has been forced to dispense patronage in order to ward off increasing protests from organized interests as well as to retain political support. The effect has been a slackening of the reforms, with high fiscal deficits and substantial government borrowing from the central bank becoming major problems in the 1990s."(pg i-ii)
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1997-04
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With permission of the license/copyright holder