Uneven Impact of Structural Adjustment Programs
Saturday, 20 August 2011 09:24
The accomplishments of Rawlings during the 1980s and early 1990s reflect a period officially referred to as the "period of rebirth" in Ghana. Rawlings espoused a multi-dimensional concept of leadership in reforming the economy that embodied power, discretion and legitimacy, and his success as a leader was predicated on a two-way relationship that he had with the Ghanaian people. As a leader, he exerted influence, but he was also influenced by and accountable to the people. He attempted to be effective and legitimate, continually looking for ways to balance the competing needs and wants of the people in order to build on shared values. The political tools of Rawlings included: the establishment of National and Local Defense Committees; emphasis on economic revival; exposure of corrupt practices; enforcement of price controls and curbing of smuggling; entrenchment of ERP in Ghana; and eventually, encouraging participatory democracy and raising level of political awareness in Ghana.
While many of the above-mentioned accomplishments by the Rawlings government helped to alleviate the economic and social conditions in Ghana during this period, there were instances where some citizens experienced negative or mixed effects. Some Ghanaians saw the structural adjustment as causing hardship, especially in urban Ghana. The new macro-economic policies in Ghana also led to a retrenchment in the mainly urban and public sector but it did shift resources and productivity toward the rural areas. For instance, many urban groups bore much of the cost of the reform program while internal trade terms between rural and urban now favored rural producers.
Devaluation hindered wage-earning urbanites, simply because the wage increases were not enough to offset the price increases for imported goods. Conversely, the increase in producer prices for cocoa, other cash crop commodities and major infrastructure improvement activities by the government in rural areas, produced higher incomes for farmers. Callaghy (1990) states that the ratio of the price of a metric ton of cocoa to the urban minimum wage rose steadily at this time, thus indicating that the relative income of Ghana's rural producers became better than that of urban workers.12
While this might be true, not all the people in rural areas benefited from the Structural Adjustment Program (SAP); economic conditions of food crop farmers did not change much with higher export crop prices. Sawyer (1988) observes that economic liberalization favored especially landowners and commercial farmers who employed sharecroppers or wageworkers to maintain and harvest cocoa and other export crop trees. They benefited from higher producer prices but pursued a low-wage policy.13
During the SAP in Ghana, cocoa policies and devaluation also benefited small farmers who were engaged in cocoa production, as there were opportunities for wage laborers who were employed to undertake various agricultural activities such as planting cocoa trees, harvesting cocoa beans, weeding, and so forth. Unfortunately the SAP's emphasis on the production of export crops for market did not help many small farmers (especially women and landless wage earners) who operated at subsistence level. As elsewhere, price liberalization measures in Ghana helped small producers, traders, and craftsmen by lifting state controls on producer prices; it provided an incentive to produce for the market, but underdeveloped marketing structures limited increased market production.14
In these countries, as in Ghana, the rising cost of imported primary products, shrinking domestic demand, and restrictions on domestic credit, all converged during SAP and remained as obstacles to increased production that was needed to benefit small producers.
Another dimension to the SAP were the cuts in food subsidies, devaluation, and massive dismissal of workers in uncompetitive firms. According to Harvey (1991), urban consumers suffered from higher prices via devaluations, an end to key subsidies, introduction of user fees for medical services and education, and the imposition of neo-liberal package on state sector wage earners, such as reduction in civil service employment.15
On the other hand, the SAP was very favorable to the "comprador class," which embraced a wide variety of occupations - from local agents of foreign businesses, partners and consultants to such businesses as hotel management and tourism. The emphasis on technocratic solutions to economic problems during the SAP increased the influence of people in the higher echelons of the public service. Trade liberalization, says Harvey (1991), generates more profit for import and export merchants and higher salaries for top executives in private businesses, especially in the areas of foreign capital investment. In Ghana, the privatization measures benefited those who were able to "buy up" or "buy into" state-owned enterprises (SOEs), often at concessional prices.16
Killick (1989) states that the major gainers of such adjustment measures as devaluation were also big local and foreign capitalists who invested in export-oriented sectors, including gold mining, timber industry, and other capital-intensive raw material producing industries.17
In the views of Jonah (1989), the PNDC regime's economic programs promoted the interests of the country's external creditors and foreign companies that previously were not able to repatriate profits and dividends. Under IMF programs, the government kept up with payments of dividends and other commitments despite facing enormous debt restructuring and cuts in domestic spending.18
Overall, structural adjustment programs in Ghana favored cash crop farmers and export-oriented industries; the policy was also beneficial to rural areas where both devaluations and producer price increases helped to stimulate higher production. Conversely, the same policies brought down living standards for majority of urban dwellers, such as workers, students, civil servants and so on, who were hit hard by IMF stabilization measures, and they responded as economic interest groups with all the vigor they could muster.