Middle Income And Atia Mframa Economics In Ghana

I read with interest a speech given by Professor Agyeman Badu Akosa at the 60th anniversary of the Kwame Nkrumah University of Science and Technology on the middle income status of Ghana. He referred to our middle income status based on what he calls “meaningless figures” as voodoo economics that does not reflect the true situation of the average Ghanaian (Ghanaweb, Oct 31st 2011). In order words, the status is a conjecture of Atia Mframa from some irrelevant data. In other words as a Fulani herds man will describe a useless cow; “it is all fur but no meat”. If a professor like Dr. Akosa, who was also a presidential candidate can get disillusioned with this, how about me whose highest economic education was in secondary school and at Makola and Kantamanto? Unfortunately for me, my O-level certificate expired more than three decades ago and I have not been to Makola for months because of traffic.

I love Ghana deeply, but we can be too known at times. The moment we heard we have discovered oil we started plans to join the organization of oil producing countries (OPEC) even before we knew how large our oil reserves were. Now we hear we produce twenty-something thousand barrels against the over a million barrels Nigeria produces a day. Then just when some meager oil money started coming in over 95% of which goes to the foreign oil companies, we have all of sudden started bragging about our middle income status. Meanwhile, we had to go for loans from the Chinese to move classes from under trees and the President himself is inaugurating classroom blocks. We still sell iced water in plastic bags in the streets and throw these plastic bags and any disposable items onto our environment to the extent that our gutters are so choked with them such that every rainfall results in flooding and death. So getting the measurement of progress right is essential if we are to deal with perhaps the biggest challenge facing us in the twenty-first century – improving people’s lives in a way that is sustainable, equitable and socially just.

Since 1993, the World Bank has changed the term Gross National Product (GNP) to Gross National Income (GNI) for operational and analytical purposes for classifying economies. GNI comprises the value of all products and services generated within a country in one year (that is, its Gross Domestic Product - GDP), together with its net income received from other countries (notably interest and dividends). In the case of Ghana, income from assets from abroad may be mainly remittance from Ghanaians, unless we receive income on some assets abroad. So our GNI is heavily reliant on our GDP.

Based on its GNI per capita, economies are divided according to 2010 GNI per capita into four groups: low income, $1,005 or less; lower middle income, $1,006 - $3,975; upper middle income, $3,976 - $12,275; and high income, $12,276 or more. According to Dr. Grace Bediako, government statistician, Ghana’s GDP estimate for 2010 was 44 billion new Ghana cedis or the equivalent of 30 billion dollars. With Ghana’s current population at 24 million, this works out to a GNI per capita of around 1,225 dollars (approximately $ 219 above low income) and therefore, a middle income category. Since then, we have been singing our songs of praise everywhere we go.

Since 1948, the world has allowed a single indicator, Gross Domestic Product (GDP), to assume dominance in the public mind as the critical measure of a nation’s progress. This has led to a bias; with GDP as their prime focus, policy-makers have found it difficult to implement policies that do anything other than support its growth. The social and environmental costs of such policies have often been underestimated, whereas alternatives that might increase well-being or reduce pollution yet decrease GDP have received relatively little consideration. This is not to say that GDP is irrelevant. But what GDP measures – economic exchange – can only be properly understood as a means to an end. This ‘end’ is achieving a high level of well-being for all, both in the present and in the future.

Since its introduction during World War II as a measure of wartime production capacity, the Gross National Product (now routinely measured as Gross Domestic Product—GDP) has become every nation's foremost indicator of economic progress. It is now widely used by policymakers, economists, international agencies and the media as the primary scorecard of a nation's economic health and well-being. This is important because GDP was never intended to be the foremost indicator of economic progress. It is merely a gross tally of products and services bought and sold, with no distinctions between transactions that add to well-being, and those that diminish it. Instead of separating costs from benefits, and productive activities from destructive ones, the GDP assumes that every monetary transaction adds to well-being by definition (Cobb and Cobb, 2004).

For instance, according to the New Economic Foundation’s 2010 report;

1. GDP treats crime, divorce and natural disasters as economic gain. Since the GDP records every monetary transaction as positive, the costs of repair of social decay and natural disasters are tallied as economic advance - So in Ghana we may need more flooding and bush fires to help us move to upper income status. Crime raises GDP due to the need for locks and other security measures, increased police protection, property damage, and medical costs. It means all the pay increase we gave the police force in the single spine is good for us because it will increase our GDP and moved us to middle income status. We may have to as well give them more and encourage more armed robbery. Divorce adds thousands of dollars more through lawyer’s fees, the need to establish a new and second households and so forth. I think polygamy may be good for our economic status after all

2. GDP increases with polluting activities and then gain with clean-ups. So desilting of the mess we have created in our drainage systems and Sakumo gets added to the GDP. Since the GDP first added the economic activity that generated that mess, it creates the illusion that pollution is a double benefit for the economy.

3. GDP ignores the drawbacks of living on foreign assets. Government borrowing from abroad raises the GDP temporarily, but the need to repay this debt becomes a growing burden on our national economy. Excessive borrowing means that Ghanaians are living beyond our means and incurring a debt that eventually must be repaid. This downside of borrowing from abroad is completely ignored in the GDP. 4. I am, therefore, calling on the government of Ghana to come out with the means to directly measure people’s subjective well-being: their experiences, feelings and perceptions of how their lives are going. We need indicators that can be used to make a real difference to people’s lives. There is the need for these measures to be collected on a regular, systematic basis and published. These measures are needed because the economic indicators which governments currently rely on tell us little about the relative success or failure of the country in supporting a good life for our citizens. The national accounts have failed to capture such things as poverty of households, the distribution of income and the depletion of resources.

We need measurement of well-being that can show the true purpose of national accounts and shift towards more meaningful measures of progress and policy effectiveness that capture the real wealth of people’s life experience. As Robert Kennedy said in 1964 “Gross national product does not allow for the health of our children, the quality of their education. It measures everything except that which makes life worthwhile” That means measuring progress solely in economic terms misses the key fact that the economy is a means to an end, not an end in itself. A strong and healthy economy may be desirable, but it is desirable because it allows us to get on with doing the things that are really important: living happy, fulfilling lives.

A successful society is one in which people have high levels of well-being which is sustained over time. Accordingly, progress should be measured by achieving the goal of a universally appreciable level of well-being amongst Ghanaians. The primary consideration should, first, be on how efficient are we at achieving the goal we seek given the resources we have and a higher level of national income such as a middle income status should, therefore, add more in-puts into higher level of well-being. And second, on how efficient are our human systems at using resources sustainably to achieve our goals. Our human systems should be all activities that achieve a stable and productive economy with high employment capabilities, a cohesive society, good housing, good and efficient healthcare systems as against the sick-care system we have, and good infrastructure such as good road and communication systems, just to mention a few.

Policy-makers can use well-being data for useful purposes, this is because people’s well-being is already influenced by the decisions of policy-makers, and measuring well-being directly will provide new evidence to enable them to improve those decisions. The data will allow policy-makers to: reconsider existing policy priorities; introduce new policy priorities; provide better evidence of the likely impact of new policies; evaluate after-the-event impacts and more accurately estimate value and identify inequalities in well-being of the Ghanaian population. For instance, whilst unemployment is already a concern for governments, well-being analysis suggests that it has an even greater impact on people’s lives than standard economic analysis implies, and that dealing with it should be an even higher priority.

Common sense should tell us that whilst we encourage importation of private cars, a middle income country like ours should aim at constructing improved roads including more duel carriage roads linking, our major cities to make those of us who use commercial mass transport systems to be able to go about our business effectively and with increased safety. This means that if ministers, parliamentarians and high level personnel such as doctors need cars to be efficient, the general populations also need good roads and efficient transportation systems to take us to the hospitals to see the doctors when we are sick and to be able to go about our business including our farming to earn the money to pay for the cars, pay their salaries, earn the resources that make Ghana the middle income country and to be happy enough to forget the corruption and vote for politicians again. In a democracy, it is not too much, to expect our governments to support all citizens to live the best lives they can in a fair and sustainable way.

I am also calling on all the many think-tanks in Ghana who only serve as political action committees for presidential candidates to come out with measurable indicators that measure the well-being of Ghanaians and command public confidence in the neutrality of the data instead of the abstract political theories they heap on us every day. Indicators already rule our politics: the growth rate, the unemployment rate and the inflation rate are things that matter deeply to the public and thus to the politicians trying to win votes. If well-being data are to be taken seriously by policy-makers, they need to have this kind of public and political resonance. This means we should have headline measure of well-being that: capture something that matters to people; produce results for which it is possible to blame or praise politicians; reflect individual and, ideally, a shared, public experience and most importantly allow comparisons to be made over time or between governments and parties to see if we are making progress.

So government statistics office, shove your middle income nonsense somewhere and give me something I can use to put meals on my family table. We the practitioners of voodoo are not impress with your MIDDLE INCOME STATUS.

Kwame Yeboah

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