Wright State University CORE Scholar Browse all Theses and Dissertations Theses and Dissertations 2007 The False Promise of International Financial Institutions in Building Stable Democracies in Third World Countries Foday Sulimani Wright State University Follow this and additional works at: https://corescholar.libraries.wright.edu/etd_all Part of the International Relations Commons Repository Citation Sulimani, Foday, "The False Promise of International Financial Institutions in Building Stable Democracies in Third World Countries" (2007). Browse all Theses and Dissertations. 128. https://corescholar.libraries.wright.edu/etd_all/128 This Thesis is brought to you for free and open access by the Theses and Dissertations at CORE Scholar. It has been accepted for inclusion in Browse all Theses and Dissertations by an authorized administrator of CORE Scholar. For more information, please contact [email protected]. THE FALSE PROMISE OF INTERNATIONAL FINANCIAL INSTITUTIONS IN BUILDING STABLE DEMOCRACIES IN THIRD WORLD COUNTRIES A thesis submitted in partial fulfillment of the requirements for the degree of Master of Arts, International-Comparative Politics By FODAY A.S. SULIMANI B.A. (General), Fourah Bay College (University of Sierra Leone), 1992 2007 Wright State University WRIGHT STATE UNIVERSITY SCHOOL OF GRADUATE STUDIES June 4, 2007 I HEREBY RECOMMEND THAT THE THESIS PREPARED UNDER MY SUPERVISION BY FODAY A. SULIMANI ENTITLED “THE FALSE PROMISE OF INTERNATIONAL FINANCIAL INSTITUTIONS IN BUILDING STABLE DEMOCRACIES IN THIRD WORLD COUNTRIES” BE ACCEPTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF “MASTER OF ARTS, INTERNATIONAL-COMPARATIVE POLITICS.” ______________________________ December Green, Ph.D. Thesis Director ______________________________ Laura M. Luehrmann, Ph.D. Director, Master of International- Comparative Politics Program Committee on Final Examination: ___________________________________ December Green, Ph.D. Department of Political Science ___________________________________ Liam Anderson, Ph.D. Department of Political Science ___________________________________ Laura M. Luehrmann, Ph.D. Department of Political Science ___________________________________ Joseph F. Thomas, Ph.D. Dean, School of Graduate Studies ABSTRACT Sulimani, Foday A.S. M.A., International-Comparative Politics Program, Wright State University, 2007. The False Promise of International Financial Institutions in Building Stable Democracies in Third World Countries. The available literature on the democratic process in third world countries shows that there is a strong correlation between the strength of a country’s economic and social infrastructure and the successful promotion of democratic principles. It is my assumption that democracy can not be established without strong economic and social infrastructures. Furthermore, the current aid programs as operated by international financial institutions (IFIs) like the International Monetary Fund (IMF), the World Bank and the United States Agency for International Development (USAID) give false hope to third world countries that fail to develop sound socioeconomic policies and yet want to establish stable democratic societies. Are neo-liberal policies advocated by international financial institutions necessarily associated with successful democratization? Is a strong economic and social infrastructure a necessary prerequisite in order for neo-liberal policies to be correlated with strong democracies? Two third world countries that have received aid from international financial institutions are Ghana and Mauritius. A case study of these countries will help to determine if the success of neo-liberal aid programs in promoting democracy is strongly correlated with the strength of that country’s pre-existing infrastructure when the aid program begins. iii Table of Contents Introduction……………………………………………………………………………………1 1.1. Research…………………………………………………………………………3 1.2. Review of the Literature………………………………………………………...4 1.3. Methodology…………………………………………………………………...13 Ghana………………………………………………………………………………………...17 2.1. Historical Background……………………………………………………........18 2.2. Post Colonialism: Economic Growth and Political Development……………..24 2.3. Debt Crisis: 1970s and 1980s………………………………………………….29 2.4. Economic Recovery Programs (ERP)………………………………………….36 2.5. Impact of ERP on Economic Development and Socioeconomic Infrastructure…………………………………………………………………………44 2.5.1. Economic Growth and Income Inequality……………………………….45 2.5.2. Education…………………………………………………………….......49 2.5.3. Healthcare and Sanitation……………………………………………….52 2.6. ERP and Democratization………………………………………………….......55 Mauritius……………………………………………………………………………………..62 3.1. Historical Background…………………………………………………………63 3.2. Post Colonialism: Economic Growth and Political Development……………..71 3.3. Debt Crisis: 1970s and 1980s………………………………………………….76 3.4. The Export Processing Zone (EPZ)……………………………………………87 3.5. Impact of EPZ on Economic Development and Socioeconomic Infrastructure………………………………………………………………………..101 iv 3.5.1. Economic Growth and Income Inequality……………………………...102 3.5.2. Education…………………………………………………………….…107 3.5.3. Healthcare and Sanitation……………………………………………...111 3.6. EPZ and Democratization…………………………………………………….114 Analysis of Findings and Conclusion………………..……………………………………..121 4.1. The Structural Adjustment Programs (SAPs) in Ghana and Mauritius……....123 4.1.1. Socioeconomic Growth and Development……………………………...132 4.1.2. Democratization………………………………………………………...138 4.2. Conclusions and Further Research……………………………………………142 Bibliography…………………………………………………………………………....148 v List of Figures Figure 2.1. Ghana’s debt service as a percentage of GDP (1970-1981)………………..31 Figure 2.2. Ghana’s annual growth rates (1965-2003)…………………………………39 Figure 2.3. Foreign aid to Ghana (1960-2000)…………………………………………41 Figure 2.4. Ghana’s external debt (1983-2000)………………………………………...45 Figure 3.1. Mauritius’ debt service as a percentage of GDP (1970-1980)……………..81 Figure 3.2. Mauritius’ annual growth rates (1981-2003)……………………………….95 Figure 3.3. Foreign aid to Mauritius (1968-2000)……………………………………...96 Figure 3.4. Mauritius’ external debt (1981-2000)…………………………………….104 Figure 4.1. Human Development Trends; Ghana, Mauritius, and sub-Saharan Africa…………………………………………………………………………………...132 vi List of Tables Table 2.1. Ghana’s Governments since Independence…………………………………21 Table 3.1. Mauritius’ Governments since Independence……………………………….67 Table 4.1. Ghana, Mauritius, and sub-Saharan Africa; Human Development Index (1975-2004)……………………………………………………………………………..131 Table 4.2. Development Indicators for sub-Saharan Africa, Ghana, and Mauritius….135 vii List of Acronyms AFRC Armed Forces Revolutionary Council AGS Accelerated Growth Strategy BTI Bertelsmann Foundation Index CAM Comité d’Action Musulman CIA Central Intelligence Agency CPP Convention People’s Party CPI Corruption Perception Index EC European Community EEC European Economic Community EU European Union EPZ Export Processing Zone EOI Export Oriented Industrialization ERP Economic Recovery Program FDI Foreign Direct Investment GDP Gross Domestic Product HDI Human Development Index HIPC Heavily Indebted Poor Country HIV/AIDS Human Immunodeficiency Virus / Acquired Immunodeficiency Syndrome ICT Information and Communications Technology IFI International Financial Institutions ILO International Labor Organization viii IMF International Monetary Fund IPEA Applied Economic Research Institute ISI Import Substitution Industrialization JEC Joint Economic Community JSS Junior Secondary School LDCs Least Developing Countries MCB Mauritius Commercial Bank MEDIA Mauritius Export Development and Investment Authority MEPZA Mauritius Export Processing Zone Association MLP Mauritian Labor Party MMM Mauritian Militant Movement MSM Mauritian Socialist Movement NDC National Democratic Congress NGO Non-Governmental Organization NLC National Liberation Council NPP National Patriotic Party NRC National Redemption Council OASS Old Age Social Security OFI Operation Feed Your Industries OFY Operation Feed Yourself PAMSCAD Program of Action to Mitigate the Social Costs of Adjustment PHC Public Health Community PMSD Parti Mauricien Social Démocrate ix PNDC Provisional National Defence Council PNP People’s National Party PP Progress Party PSM Mauritian Socialist Party PQLI Physical Quality of Life Index SAL Structural Adjustment Loan SAP Structural Adjustment Program SMC Supreme Military Council UC University of Connecticut UK United Kingdom UN United Nations UNAIDS United Nations Programme on HIV and AIDS UNDP United Nations Development Program UNCTAD United Nations Conference on Trade and Development UNESCO United Nations Educational, Scientific and Cultural Organization UNICEF United Nations Children’s Fund USA United States of America USAID United States Agency for International Development WDI World Development Indicator WDR World Development Report WHO World Health Organization WRI World Resources Institute WTO World Trade Organization x Acknowledgement Many people have been a part of my growth and I would like to express my profound gratitude to them for making it possible. I am bound to my family for their abundant support: my son (Alhaji) and daughter (Isata) who have taught me the value of unconditional love and to my wife (Fanta), who continues to provide a shoulder of support during hectic moments. Thanks to Rev. Kemoh Sulimani (Jr.) and Dr. Lewis, who respectively ignited my curiosity about the indebtedness of African countries