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Case of Chapter 2

1) Ghana experienced rapid economic growth over the past decade due to gold and cocoa exports as well as new oil production, achieving a 13.5% GDP growth rate in 2011. 2) However, for three decades after independence in 1957, Ghana suffered from constant military coups and a socialist system with state-owned enterprises, leading to high corruption and inflation. 3) In the early 1990s, President Jerry Rawlings changed policies due to democratic and economic liberalization influences, removing bans on political parties and press and privatizing state-owned companies, setting Ghana on its current path of democracy and market reforms.

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17 views2 pages

Case of Chapter 2

1) Ghana experienced rapid economic growth over the past decade due to gold and cocoa exports as well as new oil production, achieving a 13.5% GDP growth rate in 2011. 2) However, for three decades after independence in 1957, Ghana suffered from constant military coups and a socialist system with state-owned enterprises, leading to high corruption and inflation. 3) In the early 1990s, President Jerry Rawlings changed policies due to democratic and economic liberalization influences, removing bans on political parties and press and privatizing state-owned companies, setting Ghana on its current path of democracy and market reforms.

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huyencute1701
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INTERNATIONAL BUSINESS (INE 2028-E)

Chapter 2: Differences in political economy

Case study: Ghana – “Africa’s Generator”

The East African country - Ghana has been currently emerging as one of the fastest
growing nations in the Saharan region of Africa over the past decade. In 2011, Ghana
achieved a GDP growth rate of 13.5%, surpassing all countries globally, except Qatar,
following several years of steady GDP growth in the range of 6-8%. Its growth resulted
from two main exported commodities, namely gold, and cocoa - and the initiation of oil
production in 2010. In fact, upon the recent discovery of oil fields, it is potential that Ghana
will become one of the largest oil producers in the Saharan region, which could further
accelerate its economic growth in the coming years.

Things aren’t always that good. Formerly a British colony, Ghana gained its
independence in 1957. For the next three decades, the country suffered constant military
coups with the goal of killing any hope for a democratic government. Successive
governments advocated socialism, opposing their colonial past. As a result, the majority of
the economy was held by state-owned enterprises; Corruption and inflation were raging,
making the country become one of the failing countries in the world.

In 1981, Jerry Rawling, an air force soldier, led a government downfall to depose the
current president from his office and took Jerry to come into power. Rawlings launched an
extensive crackdown on corruption, making him extremely admired by Ghanaians. At first,
Rawlings followed the socialist policy and banned the establishment of political parties;
however, in the early 1990s, his policy was changed, possibly due to the strong influence of
the democratic wave and economic liberalization from Eastern European countries. In
addition, he was under pressure from Western governments and the IMF to take measures
for democratic reforms and economic liberalization.

A presidential election was held in 1992. Before the election, the ban on party
establishment and press control was removed, and all parties had equal access to the media.
Rawlings won the election, which was judged by outsiders as being “fair and free.” Ghana
has been operating the real democratic system since that time. Rawlings was re-elected in
1996 and retired in 2001. Since 1992, Rawlings has begun to liberalize the economy,
privatize state-owned enterprises, and implement market-oriented reforms which open to
outside investors. In the late 2000s, more than 300 state-owned companies were privatized,
and the economy consisted mainly of private institutions that were developing strongly.
When oil was discovered in 2007, Ghanaian politicians studied the oil-based income
laws of some countries like Norway and Trinidad. They enforced the law to limit the
corruption of officials from oil mining fees, which has become an issue in Nigeria. Part of
the income goes straight to the national treasury, and the rest is allocated to the
“stabilization fund” to support the budget at the oil price falls and the “savings funds” to be
used in case of the depletion of oil reserves.

The biggest challenge for Ghana’s political circles is how to upgrade the
infrastructure to catch up with the rapid growth of the economy. There were actions to
double the power supply between 2010 and 2015, to build a new road system, and to expand
the national airport. Once such actions are carried out in the right direction, Ghana can
maintain its position as one of the most dynamic economies of Saharan Africa.

Question: Give comments on the change in the political economy system


affecting Ghana’s development.

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