Western Michigan University ScholarWorks at WMU Master's Theses Graduate College 6-1999 The Study of Political and Economic Reforms in Ghana John L. Adedeji Follow this and additional works at: https://scholarworks.wmich.edu/masters_theses Part of the Political Science Commons Recommended Citation Adedeji, John L., "The Study of Political and Economic Reforms in Ghana" (1999). Master's Theses. 3833. https://scholarworks.wmich.edu/masters_theses/3833 This Masters Thesis-Open Access is brought to you for free and open access by the Graduate College at ScholarWorks at WMU. It has been accepted for inclusion in Master's Theses by an authorized administrator of ScholarWorks at WMU. For more information, please contact [email protected]. THESTUDY OF POLITICAL AND ECONOMIC REFORMS IN GHANA by John L. Adedeji A Thesis Submitted to the Faculty of The Graduate College in partial fulfillment of the requirements for the Degree of Master of Arts Department of Political Science WesternMichigan University Kalamazoo, Michigan June 1999 Copyright by John L. Adedeji 1999 ACKNOWLEDGMENTS The idea forthe formatand methodology forthis Master's thesis was conceived aftermy firstmeeting with Dr. Lawrence Ziring, when I signed up fora Comparative Politics course taught by him in the 1998 Summer Semester. I had taken several political science courses beforein the Master of Arts program, but none was as informativeand compelling as this one. Dr. Ziring encouraged the class to proceed on a comparative exercise by comparing a developed with a developing country in order to analyze the similarities and dissimilarities of these two countries, also choosing froma range of areas of study. My area of study was political economy, and the countries I chose were the United States of America and the Republic of Ghana. Consequent to this exercise, my thesis topic is "The Study of Political and Economic Reforms in Ghana," and I have had an interesting experience completing this research. I wish to acknowledge the assistance of Dr. Ziring, not only in agreeing to chair my Thesis Committee, but also for suggesting the two other members: Dr. Peter Kobrak, Professor of Public Administration, School of Public Affairs and Administration; and Dr. Sisay Asefa, Professor of Economics, Department of Economics. They have been very helpfulin their comments and advice on my research proposals and thesis drafts over the past few months, despite their very busy schedules. I owe them a great deal of gratitude. It is my hope that the educational pursuit I have embarked upon and the assistance of the committee will yield good results. Once again I take this 11 Aclrnowledgments-Continued opportunity to thank these very nice individuals fortheir assistance. My thanks also goes to the staffof the Political Science Department, especially Dr. Chet Rogers, Ms. Doty Barr, and the chair of the department, Dr. Dave Houghton. Their warm and cordial attention to students' needs is much appreciated. John L. Adedeji 111 THESTUDY OF POLITICAL AND ECONOMIC REFORMS IN GHANA John L. Adedeji, M.A. Western Michigan University, 1999 The dual transition program of Ghanaian political economy was put in place as a result of Ghana's huge external debts, its balance of payments problems, and the critical shortage of foreignexchange resulting from years of financial managementby seven regimes (civilian and military) that ruled the West African nation since its independence in 1957. Taken together, these problems tilted the balance of power in favorof external actors, including the International Monetary Fund and World Bank. The study focuseson the dual strategy of macroeconomic measures and structural adjustments. The study then evaluates: (a) the policy components of the political and economic reforms; (b) the response of the Ghanaian state and society to market-oriented as opposed to state-led development; ( c) the relationship between the state and its creditors, including the International Financial Institutions; and ( d) the effect of the relationships on the interaction between the state and society in the domestic politics of Ghana. The study also analyzes the power dynamics in Ghana relating to the nature of economic and political change, how the structural adjustment program stimulated economic growth under a liberal (albeit military) regime, and how the change integrated the Ghanaian state into the capitalist world economy. Finally, the study shows how the adoption of economic and political reformshelped Ghana on the road to the nation-state status. TABLE OF CONTENTS ACKNOWLEDGMENTS. 11 LIST OF TABLES . Vlll LIST OF FIGURES . 1x CHAPTER I. INTRODUCTION: THESISMETHODOLOGY AND THE CASE STUDY APPROACH . 1 Effectivenessof AdjustmentPrograms . 3 Use of Aggregate Data to Measure the Effect of SAPs . 4 The Hypotheses of the Study. 6 The Thesis Methodology . 7 The Study Format . 8 II. GHANA'S POLITICAL AND ECONOMIC DEVELOPMENT: A IDSTORICAL PERSPECTIVE . 11 Underdevelopment and the African Society . 11 Africa in the Pre-Colonial Era . 13 Africa's Pre-Colonial Economy and Slave Trading . 14 Colonial Rule and Its Impact on Africa'sPolitical Economy . 15 The Corningof Europeans to Cape Coast . 1 7 The Institutional Structure of Indirect Rule . 18 Relationship Between the Central Governmentand the Native Authority System . 22 The Decline oflndirect Rule and the Native Authority System . 23 Effectsof Colonialism on Traditional African Societies . 26 IV Table of Contents-Continued CHAPTER Development as a Legitimizing Tool 30 Did Colonialism Transform African Societies? . .. 31 III. GHANA AS A NATION-STATE ANDTHE VISIONS OF DEVELOP1\1ENT. .. .. .. .. .. .. 34 Pursuit oflnappropriate Policies After Independence . .. .. 36 Urban Bias . .. .. .. .. .. .. 36 Dominant Development Ethos . .. .. .. 38 Transaction and Agency Costs . .. .. 41 Political Ideology of the Nkrumah Regime . .. 43 The First Military Coup in Ghana .. .. .. 44 Second Republic and the Busia Administration . .. .. .. 46 The Coming of Acheampong . .. .. .. .. .. .. .. 4 7 General Akuffo and the SMC II Regime . .. 5 I Party Politics and Preamble to the Third Republic . .. .. 53 First Coming ofJerry J.Rawlings . .. .. .. 54 The June 4th Revolution and the AFRC Regime . .. .. .. 55 Reflectionsof Rawlings and the AFRC Period . .. .. .. 58 The Third Republic in Ghana and the Limann Administration . .. .. 60 The Beginning of the End forthe Third Republic . 64 IV. THE POLITICAL ECONOMY OF DUAL TRANSITION IN GHANA ............................................... 69 Design and Implementation of Structural Adjustment Programs . 70 Ghana's Ethnic and Religious Groups and Political Regions .. .. 74 V Table of Contents-Continued CHAPTER The Case Study Approach and Relevant Literature on Ghana 79 The Dual Transition Program in Ghana . .. .. .. .. .. .. 82 V. DEVELOPMENT CHALLENGESFACING GHANA INTHE 1980s AND1990s: THERAWLINGS FACTOR . .. .. 90 The Search fora New Political System by the PNDC . .. .. 92 The Establishment of DefenseCommittees . .. .. .. 93 The First Year of the PNDC Regime .. .. .. .. .. .. 94 The Structural Adjustment Program of the PNDC . .. .. .. 97 The Reversal of Fortune in Ghana: From Prosperity to Austerity . 99 Administratively Easier Reforms . .. .. .. .. .. .. .. 103 Politically Difficult Reforms .. .. .. .. .. 107 VI. CONCLUSION: WHAT DOES THEFUTURE HOLD FOR GHANA? . .. .. .. .. .. .. .. 111 Future of Democracies in the Third World ...................... 114 Political and Economic Obstacles to the Reformof the PNDC . .. 116 Political Obstacles . .. .. .. .. .. .. .. .. .. .. 116 Economic Obstacles . .. .. .. .. .. .. .. .. .. 118 Economic and Political Processes Needed to Sustain Ghana in the Future .. .. .. .. .. .. .. 119 Economic Sustainability .. .. .. .. .. .. .. 119 Political Sustainability 127 APPENDICES A. Ghana's Regimes, 1957-1994 ................................. 135 VI Table of Contents-Continued APPENDICES B. Political and Economic Events in Ghana in Chronological Order Since World War II (1945-1996) .......................... 137 BIBLIOGRAPHY. 140 Vil LIST OF TABLES 1. Levels of Development Based Upon United Nations Standards ........ 112 Vlll LIST OF FIGURES 1. Structure of Indirect Rule .. .. .. .. .. .. 20 2. Administrative Divisions of Ghana, 1994 ..... · . .. 76 IX CHAPTER I INTRODUCTION: THESISMETHODOLOGY AND THE CASE STUDY APPROACH Political economy is the interaction of politics and economics in an environment where economic forcesinfluence political processes and behavior. The political process and economic decisions resulting thereby affectand, in many cases, determine the allocation of economic resources, which are oftenscarce. The conventional wisdom on the relationship between political and economic reforms, or more aptly, between democracy and development in Third World countries, such as Ghana, is entwined in the "cruel dilemma" thesis, which contends that there is a trade-offbetween democracy and economic development, and that authoritarianism is more compatible with rapid economic development. Another research tradition argues that democracy does not necessarily hamper economic development, but may actually advance it. This is in line with the claim in Western public policy circles and offered by some theorists that there is a positive relationship between liberal economic and political reforms and the expectation that economic growth and a democratic governmentcould be jointly achieved through the implementation of the Structural Adjustment Program (SAP) and the political transition program.