Interest Groups Responses to ERP

Saturday, 20 August 2011 09:27

Written by ghanapolitics.net

As expected, when the ERP was introduced in 1983, there were protests against it, particularly from trade unions represented by the Trade Union Congress (TUC) and student organizations represented by the National Union of Ghanaian Students (NUGS). Ironically, these groups had formed the initial base of support for the Rawlings regime in the early days of the revolution. More benignly, the business class, despite its previous hostile stance (based on the perceived government's unwillingness to protect indigenous business interest against foreign economic hegemony), exhibited caution in responding to the ERP even as they stood to gain from the results of such policies as privatization and wage increases.

As for farmers, their lack of organization worked against them and they became politically expendable; but in terms of cocoa producing regions, the government was hard pressed not to pay them more attention, especially as they formed a new source of support and legitimacy for the authoritarian regime. In this regard, there were five distinct responses to the ERP that warrants analysis: (1) labor opposition, (2) business concerns, (3) student protests, (4) criticisms by intellectuals, and (5) interests of the middle class.19

Labor Opposition: For the urban working class in Ghana, the government's pursuit of economic adjustment marked the beginning of the transition from the period of alliance to one of confrontation with the Rawlings regime. Government's actions, such as anti-labor wage increases, price hikes, and employment policies, completely alienated labor groups. Ninsin (1989) observes that in a statement on October 24, 1984, the executive board of TUC lamented "the grave and critical economic and social situation in the country" and warned against "the continued implementation of the IMF and World Bank-inspired SAP" which was having deleterious effects on workers' incomes and living conditions.20 Labor leaders were also upset at the government for not consulting with them on policy formulation. In fact, the working class was vociferous in criticizing the regime for neglecting the existing mechanisms of policy dialogue, followed by their complaints about the government's reluctance to consult with either employers or workers about the direction of the economy.

The spillover effect of this suspicion by labor leaders related to the government's relations with the IMF and the World Bank; indeed, the biggest union in Ghana, the Industrial and Commercial Workers Union (ICWU), not only accused the PNDC of not publishing its agreements with international financial institutions and concealing the cost of maintaining foreign advisors, it also demanded restricting debt service to 10 percent of foreign exchange earnings. This was a bitter pill for the PNDC to swallow. Although privatization of state-owned enterprises (SOEs) and subsequent cuts in civil service jobs angered labor unions, they were even more opposed to government's attempts to intervene in the collective bargaining with employers. To the unions, the government was overstepping its bounds in getting involved in the bargaining on wage restraints, suspension of benefits, and widespread retrenchment of workers, which they saw as significantly weakening their power.

Krause (1987) states that the workers' strongly believed, during this time, that "under the guise of economic crisis" the government was trying to eliminate the trade union movement and its class representation. Krause also observes that although Rawlings had reformed the economy since 1983 he abandoned many of his original goals and alienated major segments of the population.21 Before he took over, the national economy had been wrecked by oil price increases, low import revenues, world recession, drought, and unwise economic policies, which served as a raison d'etre for overthrowing the civilian regime of President Hilla Limann to establish an anti-bourgeois, anti-imperialist regime drawing support from radical leftists, organized labor, students, junior military officers, and ordinary citizens.

Objections to the authoritarianism of Rawlings government, which lacked structure for grassroots participation, were widespread despite rhetoric to the contrary by the PNDC. To Graham (1989), the workers during this time showed they were frustrated with the "non-recognition of the crucial role of the masses in revolutionary social transformation and therefore the absence of any proper and consistent channels of participation in the decision-making by the mass of the people through their organizations."22 The people were bitter about human rights abuses, such as harassment and false detention, and then demanded protection of civil rights while criticizing the regime for loss of revolutionary ideals that initially brought it to power, Graham concludes.

Business Concerns: The business community, in its reaction to the ERP, expressed concern about the government's lack of management of industrial-labor relations. At the 28th annual meeting of the Ghana's Employer's Association (GEA), the major concern was that "steep price increases and other social costs had driven the trade unions to exert pressure on our members to pay much higher salaries that are bound to fuel the inflationary spiral and undermine that national wages and incomes policy … We would like an assurance (that) we shall not be left alone to face the brunt of workers' wrath," according to the Economic Intelligent Unit (1988). Major complaints, concludes the report, were about the lack of input by key social groups in economic policy-making; the GEA pointed out the absence of a forum for employers, trade unions, universities and other groups to exchange views on the economy.23

In terms of harnessing local private capital, Tangri (1992) states that there were worries in the private sector about the adverse effect of some adjustment measures, including severe liquidity problems, rising interest rates, and high import costs, all caused by continued depreciation of the cedi. During the mid-1980s, massive devaluation of the currency, from 2.75 to the U.S. dollar to over 390 in 1991, generated a severe liquidity crisis; companies that depended on imported machinery and raw materials thus suffered from higher prices of imported goods. The problem was exacerbated by a tight credit policy that resulted from high interest rates designed to curb inflation.24 In observing that trade liberalization measures was not favorably accepted by the business community, Callaghy (1990) says that the owners of existing enterprises continued to call for protection from import competition.25

The president of the Association of Ghanaian Industries (AGI) stressed that the business groups want to secure some form of protection to redress "the near collapse of local industries." The EIU reported that the GEA also called upon the government to impose import quotas on foreign goods to save local industries from extinction. During the implementation of ERP, the businesses facing more severe foreign competition seemed to be unhappy with the regime's cavalier attitude that SAP generates a favorable business environment, and that trade liberalization, in its myopic view, would facilitate competitiveness of indigenous business.

Student Protests: The basic disagreement of students with the government was in education user fees and low food allowances, in other words, the removal of tuition, boarding and food subsidies. The students' argument was primarily that education reform programs sponsored by the World Bank limits this social welfare program to the children of the rich, and secondly, that the government's withdrawal of these subsidies brought extreme hardship to most students whose parents were either retrenched or simply too poor to afford college education for their children.

NUGS, the umbrella student organization in Ghana, galvanized support during its 23rd annual congress and issued complaints to the regime that "… the various aspects of the planned changes in the education system would force students in boarding schools to pay higher fees as well as other charges; and these additional charges in some cases make the boarding fee three times the minimum civil service wages." In an alliance with the students, the EIU reported that the TUC showed public support for the students' demands in its message to the NUGS Congress, by saying "as parents, we are opposed to the proposed increase in school fees and the threat to remove feeding subsidies as contained in the universities." This general discontent was reflected in a letter written by the Student Resistance Committee (SRC) at the University of Ghana and published in the West Africa magazine of August 17, 1987, which referred to the IMF "poison," that read in part:

"A massive retrenchment of workers is being carried out in both state and private enterprises without a thought for the human beings affected. The removal of government subsidies and the dramatic devaluation of the cedi have resulted in unfavorable hospital fees and rates for utilities and transport. We would continue to struggle till all the remnants of the obnoxious anti-worker and anti-student policies imposed by the IMF and World Bank puppets have been dismantled."26

Criticisms from Intellectuals: The intellectuals in Ghana also expressed their resentment of the economic policies of the regime. The University Teachers' Association of Ghana (UTAG) called upon the PNDC to develop programs that can protect mothers and children as well as promote the indigenous manufacturing sector, and that the government should actively recognize the rights of all classes of Ghanaians. When adjustment programs are criticized in developing countries, it is usually through the linkage between the negative assessment of the role of international financial institutions and their failure to deal with the ever-changing commodity prices that makes the role of the IMF and World Bank all the more suspect.

As Tsikata (1998) observes "… that role cannot be satisfactorily fulfilled unless the operational paradigm of these institutions is specifically oriented to human crisis that Africa confronts and the urgencies of achieving real transformations, not mere improvements in monetary aggregates and global macro-economic numbers."27 Stopping short of questioning the legitimacy of the government, many intellectuals had doubts about its sincerity in carrying out the necessary efforts to implement the ERP. According to Kwasi Anyemadu, an economics professor at the University of Ghana, "the economic situation in the country was not really healthy despite some improvement brought about through structural adjustment. Overall, there was a mistrust between the government and the intellectuals, who believed that the PNDC did not represent the interests of the general population, but only of those who are well connected."28

Interests of the Middle Class: Three distinct characteristics shape the middle class in Ghana. First, they have traditionally backed liberal economic policies; second, they distrust populist governments; and lastly, they are consistently opposed to oppressive political rule. During the 1980s, the majority of the Western-educated elite were frustrated with the PNDC's closed style of governance, intolerance of criticism, and the resulting inaccessibility due in part to the lack of real public debate and a perceived arrogance on the part of the authoritarian leaders. Jeffries and Thomas (1993) said the lawyers' group, which stood out among the professionals, was able not only to highlight the flaws of the PNDC, but it exposed the regime's practice of detention and other human rights abuses, such as the case of the judges who were allegedly killed by agents of the government.29 Suffice is to say that this incident and the regime's strong-arm practices bothered the middle class immensely.

When the ERP was proposed, its supporters were convinced that the middle class should be able to take advantage of the adjustment program and then engage in investment activities. Their premise was that the middle class has the capacity to understand the positive changes of economic liberalization, in part due to its resources and ability, i.e., its wealth and education. But nothing could be farther from the truth. In the views of Callaghy (1990), the Ghanaian urban middle class, who is considered the oldest and most sophisticated in Africa, was still ambivalent about the Rawlings regime, even up to the late 1980s. Because of the PNDC's previous policies that antagonized them, the middle class was not willing to show visible support for the regime. Furthermore, the middle class remembered the frontal attack by the Rawlings government on the wealthy before the adoption of the ERP and this caused hesitation on their part, at least to the extent of investing their scarce capital for an uncertain economic future.30

Bentsi-Enchill (1988) observes that the ERP was supposed to strengthen those sections of society that would benefit mostly from the capitalist development; but the indigenous private sector, which was once relatively vibrant, became moribund.31 As a result, both external donors and the government became worried about the lack of strong private sector response to the free market economic reform; Ghanaians, most regrettably, felt that the ERP benefited only foreign resident business groups such as Lebanese, Indians, Syrians, and Taiwanese. Some Europeans, who were aware of the economic liberalization program, had good management skills, resources to invest, an understanding of the free market system, and access to technology and information, also benefited immensely from the ERP. Ordinarily, these attributes are impressive to possess in a changing economic environment, but unfortunately, this group of businessmen were despised and became targets of resentment by the indigenes. Such resentments were expressed in a government newspaper reflecting growing frustration of Ghanaians with foreign businessmen: "… who flout Ghanaian laws and vaunt their conspicuous affluence … are warned that unless they take firm steps to curb the excesses of their countrymen, the anger of Ghanaians may spill over to those who exploit their countrymen."32