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Kafo Didi: Living
Large but Producing Very Little
J.
Atsu Amegashie
Conventional wisdom strongly suggests that corruption is a way
of life in Ghana. There is perhaps no Ghanaian of adult age who
has never paid a bribe for a government service.
About 28.5% of households in Ghana live on less than $2 a day.
Recently revised and favorable figures by the Ghana Statistical
Service show that the country’s per capita GDP is not more than
$1500; the IMF’s figure (PPP) is $1600.
How are people expected to live in a country where the average
income is $1600, credit markets are very weak or inaccessible to
most people, and yet people must make two-year advance payments
of about $2000 or more for a decent apartment? The cost of
living is very high in Ghana. We are not producing enough. Our
GDP is very low. Yet that does not deter many Ghanaians from
living large .
There
are three ways of living large when you don’t produce enough:
(1) borrow (what you have not produced); (2) steal (what you
have not produced): corruption; and (3) depend on the charity of
others: foreign aid or welfare payments.
Most people in the western world go for the first option and
also rely on the third option because they could receive
transfers from the state. This is because they have well
developed credit markets and are integrated in global credit
markets; their banks can raise funds on international credit
markets (e.g., borrow from China by issuing financial
securities). Of course, the recent financial crisis has shown
that this not a sustainable plan. You cannot borrow forever. In
western economies, transfers from the state to the poor are
possible because of their sufficiently high national output.
In countries like Ghana where credit markets are very weak or
not easily accessible, most people choose to steal what they
have not produced (corruption). And, in most cases, they do so
by stealing from the state. This means that resources required
for crucial public investments in human capital (i.e.,
education, health care), roads, law and order, etc end up in
hands of private individuals (politicians, civil servants)
corporations, etc. This creates a vicious circle where the lack
of these investments reduces the economy’s productive capacity
which, in turn, creates the conditions that exacerbate the
incentive to steal.
Differences in law enforcement and monitoring also account for
the differences in corruption. However, the lack of credit could
also force people to find corrupt ways of making ends meet. In
addition to reducing the state's capacity to raise revenue for
public goods, corruption, if seen as an extra tax on economic
activities, worsens the efficiency losses of taxation especially
when the government has optimally chosen taxes (including duties
and user fees).
Foreign aid may facilitate "living large but producing very
little". But it is not enough and rarely ends up in the hands of
those who really need it; note that the USA’s MCA aid of $547
million over 5 years was approximately $5 per Ghanaian per year.
More importantly, foreign aid has the deleterious effect of
redirecting energies from domestic sources of revenue
mobilization to foreign sources. This is evident in the recent
revelations that emerged from Anas Aremeyaw’s undercover work
“Enemies of the nation.” If foreign aid is a gift (pure
transfer), it makes us lazy and overly dependent on it and if it
is a loan, then we still have to produce enough to consume and
have something left over to repay the loan. Dependence on
foreign aid is not the path to economic prosperity.
Theft can be legal or illegal. When theft is legal, it is
euphemistically referred to as rent-seeking, a term coined by
Anne Krueger of Stanford University and former chief economist
of the World Bank. Political lobbying may be legal but it may
still be a corrupt activity. Lobbying for government regulations
that redistribute income from one group to another but reduce an
economy’s output of goods and services is an example of
rent-seeking. In a 1974 article, Anne Krueger provided
quantitative estimates of the social losses imposed on the
economies of India and Turkey by rent-seeking for import
licences from the state.
According to her estimates, such losses amounted in 1964 to 7.3
per cent of the national income of India and to a staggering 15
per cent of the national income of Turkey. While rent-seeking
activity exists in every economy, it is worse in economies with
a weak private sector and a public sector that is the major
employer.
In these economies, it leads to a misallocation of talent
because some of the best and brightest end up being sycophants
and rent-seekers in the public sector rather than competing in
the private sector. Others vote with their feet by leaving the
country. A weak private sector also means there is a very high
return to gaining power in the public sector, so national
elections become "do-or-die" affairs.
The phenomenon of living large but producing very little is more
likely in countries with strong extended families. In his 1955
book, “the theory of economic growth”, the Carribean economist
and nobel laureate, the late W. Arthur Lewis remarked that:
“Where the extended family system exists, any member of
the family whose income increases may be besieged by
correspondingly increased demands for support from a large
number of distant relations … A strong sense of family
obligation ... may cause a man to appoint relatives to jobs for
which they are unsuited ...” (Lewis 1955, p. 114).
The above sentiment will resonate with most successful
Ghanaians. This pressure from the family may also cause them to
steal from the state or from their employer in the private
sector. It may be fear rather than affection for their family
members which drives them to nepotism and theft (corruption).
This point was made by Jean-Philippe Platteau in his 2000 book
“Institutions, Social Norms, and Economic Development”,
“… principles of equity are so adverse to change [that] a single
individual, even when endowed with special qualities and
powerful psychological resources, cannot successfully defy the
conventions of the society. He will unavoidably … be squashed by
various forms of opposition, especially when his economic
success depends on his behavior as a hardnosed businessman in
dealing with fellow tribesmen. To break through, he needs the
protection afforded by the deviant actions of a sufficient
number of other innovators in his locality. Rising economic
opportunities alone will usually not suffice to generate dynamic
entrepreneurs in the absence of a critical mass of cultural
energies harnessed towards countering social resistance.”
Related to the previous point is a useful idea stressed by
Jean-Philippe Platteau in his aforementioned book. It is the
distinction between limited versus generalized morality. In
hierarchical societies, codes of good conduct and honest
behavior are often confined to small circles of related people
(members of the family, or of the clan).
Outside of this small network, opportunistic and highly selfish
behavior is regarded as natural and morally acceptable. In
contrast, modern democratic societies tend to have abstract
rules of good conduct that are applicable to many social
situations, and not just in a small network of personal friends
and relatives. As argued by Weber, the emancipation of the
individual from feudal arrangements has typically been
associated with a diffusion of generalized morality, and with
the ability to identify oneself with a society of abstract
individuals who are entitled to specific rights. This engenders
nation building and, with reasonable law enforcement, reduces
the incentive to steal from the state, and also induces people
to enter into credit contracts and other contracts with
strangers.
It has been argued that in most sub-Saharan African countries,
the kin system is a valuable institution that provides critical
community goods and insurance services in the absence of market
or public provision. However, the nature of risk-sharing and
insurance are different from how these institutions are commonly
understood in modern economics. In modern economies, the
participants in an insurance market periodically pool their
risks (i.e., contribute to the insurance fund through the
payment of premiums) before the state of the world is known (who
will be lucky or fortunate; who will be in a car accident or
not; who will be unemployed or not; etc).
In the insurance scheme of the extended family or kinship
system, no risks or contributions are pooled before the state of
the world is known. Instead, there is an implicit social
contract that, after the state of the world is known, the lucky
ones should transfer resources to the unlucky. Once the state of
the world is revealed, everyone depends on those that were
successful for a very long time, if not forever. This has helped
many hard-working Ghanaians. But in most cases, it appears that
it has been abused. This insurance scheme is more redistributive
than it is efficiency-enhancing.
While most participants in insurance schemes in modern economies
take their actions behind a Rawlsian “veil of ignorance”, the
insurance schemes of the extended family system are driven by a
“veil of full knowledge.” This need not be a problem if, like a
system of pay-as-you-go social security, the population of those
who are successful is rising faster than the population of those
who are unsuccessful. Unfortunately, this is not the case. In a
world of poor governance, limited opportunities, and perverse
incentives, successful family members carry a very heavy burden.
This leads to low national output and worsens the problem of
corruption.
However, family pressures or a high dependency ratio do not
explain everything. Greed also plays a very important role; it
partly explains the desire to "live large while producing very
little". During their tenure in office, government officials
like the president and some ministers of state enjoy so many
perks; some do not pay taxes, do not pay for their
accommodation, electricity, transportation, healthcare, clothing
and security. They are also paid a decent salary with enviable
bonuses and per diems.
Yet when ex-president Kuffour left office in 2009, he wanted the
state to give him six fully insured vehicles – fueled and
chauffeur driven, to be replaced every four years; two houses;
an annual luxury holiday package; a lifelong health package; a
non-taxable pension; security personnel; $1 million for a
foundation, and more. When his predecessor, JJ Rawlings left
office in January 2001, he moved into the now ravaged mansion at
Ridge by merging two government bungalows. He is alleged to have
taken 13 cars with him. He was in power for 19 years -- 11 years
as a dictator -- and has his own mansion at Agyirigano, a suburb
of Accra, but wants the state to accommodate him.
Why do our leaders seek medical attention abroad (in Western
countries) while they refuse to invest enough resources in our
domestic health system? Foreign hospitals for the elites but
ill-equipped and under-staffed local hospitals for the masses?
Everyone is trying to raid the “commons.”
In poor and very unequal societies, the return to social status
is very high. Ghana has both: a high level of poverty and a high
level of inequality. Unfortunately, this creates the right
conditions for a poverty trap because in societies with higher
levels of poverty, the emphasis on material-driven status --
when it financed from public coffers --- is relatively more
counter-productive. A very high return on social status is
likely to induce professors, doctors, engineers, and other
high-ability individuals to invest more in directly unproductive
rent-seeking activities like lobbying, and networking with the
political elites as part of wealth redistribution (i.e., get
their piece of the national pie).
We care too much about social status that is based on material
wealth regardless of how such material wealth was acquired. In
the western world, the richest people are in the private sector
and the politicians, at least while in office, do not dream of
competing with them nor do they see it as a sign of lower
status. They cannot afford the cars and houses that these people
in the private sector can afford.
In Ghana and other parts of Africa, the politician wants to earn
more than or be in the same class as the businessmen, CEOs, and
other professionals in the private sector. A friend in Ottawa
(Canada) rides the bus with the Governor of the Bank of Canada.
When US vice-president Joe Biden was a member of the senate, he
took the train to work. Even if the public transport system is
good, I do not think that a professor, governor of the central
bank, or minister of state in Ghana could take the bus or train
to work without public ridicule. One former official of Ghana,
whose name I have forgotten, justified the practice of allowing
ministers to retire with state cars on the grounds that
ex-ministers should not use the same means of transportation as
the public.
The attitudes of our leaders and are own attitudes reinforce
each other. After all, our leaders are the products of our own
societies and so reflect our values. How many Ghanaians wouldn’t
laugh at a former minister of state if his car was below the
average quality of cars in Ghana? How many will praise him for
his selflessness and unassuming lifestyle if he lived in a
modest two bedroom apartment? We, the people, have to respect
and honor those who lead a modest life and work hard; we should
not glorify theft. We are part of the problem. Still, our
politicians must lead by example.
In Ghana and most countries in sub-Saharan Africa, most of our
problems are typically chicken-or-egg problems. Solving such
problems requires a lot of discipline. Given that we are not
producing enough for all, we have to change our values by not
trying to live large; too many people want SUVs; want to pay the
fees of their kids for an education in a western country; afford
big houses and vacations abroad; etc. We cannot reap what we
have not sown. We have to invest, be patient, and wait for the
fruits of our labor to grow. But doing so requires a
demonstration by our leaders that they are in the same boat with
us or that their boat is not too big and cozy.
The fight against corruption requires a non-partisan approach;
it should not be politicized. The test should not be which party
did marginally better than the other. The benchmark should not
be what the other party did. Instead, it must be a high level of
demonstrable commitment to fight corruption from the top to the
bottom. Let’s produce more and stop living large. In the era of
accountability and responsibility, Kutu Acheampong’s “Kafo didi”
should not be our guiding principle. When we produce very little
but live large , we are, to borrow the words of the dancehall
musicians Bounty Killer and Barrington Levy, “living
dangerously”.
Source: J. Atsu Amegashie, University of Guelph, Canada
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