I’m John Mahama But Not Gordon Brown

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Parent Category: Our Country

Category: Business & Finance

Created on Wednesday, 23 October 2013 00:00

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I’m John Mahama But Not Gordon Brown

A Review of “Gordon Brown confronts his borrowing problem”, Posted by David Smith; and The Synopsis of a Former Ghanaian Finance Minister: “Ghana economy is in tatters”.

Asante Fordjour

COMMENTARY

In November 2002, Gordon Brown, attracted worst time and headlines, since becoming Chancellor of the Exchequer in May 1997. David Smith wrote: “After five years in which the iron chancellor had kept a vice-like grip on the public finances, the autumn of 2002 saw a big change…The public finances, were often in surplus and debt being repaid, even without such helpful windfalls as the £22.5 billion auction of third generation mobile phone licences. The chancellor and his Treasury team wore their prudence with pride. This was a different kind of Labour government, one that made room for extra spending in priority areas but only after sorting out the books first. Previous Labour administrations had spent first and picked up the pieces later. Under Brown, prudence produced a win-win situation. Reducing government debt, for one thing, cut debt interest payments, and the money could instead be channelled into health and education.” With this economic heights, Gordon, naturally, became a Prime Minister.

But by the time Brown had his exit poll on 11 May 2010; most Britons, thought the new Labour project that was trumpeted by his predecessor- Tony Blair, was basically flawed economically as it failed to recognise the supply performance issues that challenge the UK economy and the way that many of the central problems arose out of a ratio of public spending that was too high in relation to national income. Warwick Lightfoot (31 August 2010), wrote this about New Labour’s rhetoric and fiscal rules honed by Gordon Brown with the help of Ed Balls, as new Keynesian agenda: “Higher public expenditure and higher government borrowing dressed up in words such as prudence that pretended they were something else. The fiscal rules far from being an effective restraint on public spending and government borrowing accommodated any level of government spending and the creation of a significant budget deficit when the economy was operating at the peak of the economic cycle and overheating…”

Why, then, should I have desired to be Prime Minister Gordon Brown but not President John Dramani Mahama? Whereas Brown’s Government paid parents and guardians Welfare Benefits: Child Benefit, Child Tax and Working Tax Credits to families of low-income group, Housing Benefit, Disability Living Allowance to “qualifying people” with all forms of disabilities such as mental health, blindness, hearing impairment or with mobility problems, John Dramani Mahama, like many Ghanaian leaders before him, pays no Job Seekers Allowance (JSA) or Employment and Support Allowance (ESA) or Carer’s Allowance, to any of his citizens. Ghana, like in most African countries, is survival of the fitters.

It might therefore, not be surprising that the Gordon Brown-led New Labour, accumulated a huge increase in government spending which aggravated the British economy’s long-term structural supply-side challenge at a time when it was about to become more difficult to manage as compared to Communist China, Indian and other emerging economies which become more competitive. Lightfoot (searchingfinance.com) stated that “the spending, taxation and regulation of New Labour made the traded goods and services sectors and the manufacturing sector in particular less internationally competitive. As well as seriously aggravating these long-term structural supply performance problems Gordon Brown created the conditions for the acute fiscal crisis that is now overlaying these structural supply performance matters.” What is true of our country? In July this year, Former Finance & Economic Minister: Nana Yaw Osafo- Marfo said:

“The economy is in tatters, and things are getting worse. Government is no longer in denial. There is now consensus that the economy is in bad shape. This is why it is lamentable that the president is sounding from the rooftop that wherever he has gone to, he is being commended for managing the economy well…The consequence of the decline in both domestic and foreign inflows is that our deficit in the first quarter has escalated out of target (by 28 percent). What this suggests is that we are unlikely to achieve even the outrageously high deficit of 9 percent programmed into the 2013 budget statement…” Amid these ups-and-downs in both business and consumer confidence, the former Finance Minister in the John Agyekum Kufuor NPP-led government stated that this negative development is not new and that over the past four years and half, there has been unsatisfactory economic growth in spite of the fact that the nation has had so many opportunities, including oil revenues.

Osafo-Marfo submitted that in 2008, the Ghanaian economy grew in real terms by 8.4%, without the nation benefitting from crude oil exports. This is sharp contrast to However, 2012, where it showed 7.9 percent, both oil and non-oil sub-sectors put together, alleging that “the oil proceeds are not being used to grow the economy.” And that the President John Evan Atta Mills-Mahama administration bequeathed with a total public debt of US$8billion, which translates to some GH¢9.5billion at the beginning of 2009, has jumped to a hooping GH¢38.5billion, within 4 years and a half, and that under the NDC, the Republic is adding GH¢6.4billion every year to its public debt. “A great chunk of this total debt, indeed, 55 percent, is from domestic borrowing”, Osafo-Marfo said, noting this trend means that government has been competing with, and squeezing out private enterprise from borrowing from the banks.

“This trend explains the reason interest rates on government bills (91-day, 182-day and 1-year fixed note) have risen from about 11 percent in December 2011 to about 23 percent in December 2012. This has caused lending rates to rise. Private enterprises cannot access capital to grow their business in order to employ the youth…Unless we change cause, the unemployed youth will continue to roam the streets without employment with all the attendant social vices,” he warns. Finance and Economic Minister- Mr Seth Terkper, rebutted these projections, stating that Ghana’s economy is not in tatters contrary to Osafo-Marfo’s synopsis and that the stabilisation levy introduced by the Kufuor administration is no different from what Mahama’s regime is doing: “This is not the first time we are using temporary measures to try and resolve positions… The Kufuor administration sought solace in the same tax instrument during the global food crisis and so why the opposition is hitting hard at the government…”

The Kufuor regime, signed up to the Highly Indebted Poor Countries Initiative in 2001. According to World Bank, HIPC Initiative launched by the World Bank and the IMF in 1996, and further expanded in late 1998 (Enhanced HIPC Initiative), is the first international response to provide comprehensive debt relief to the world’s poorest, most heavily indebted countries. Under the Initiative, the WB and IMF Boards first decide whether or not a country is eligible for debt relief (decision point document). In a second step, all creditors (multilateral, bilateral, and commercial) commit debt relief to be delivered at a “floating” completion point. In between those steps, the country tries to implement the policies determined at the decision point (which are triggers to reaching the completion point). Some 34 Sub-Saharan Africa countries qualified for HIPC and the underlying principle is that due debt being owed, are rather retained by these poor countries and earmarked for specific social interventions.

The former Chancellor of the Exchequer- Gordon Brown had been a known voice when it came to the question of Africa’s debt-traps: soft-lending for ostentatious projects that benefited the ruling class at the expense of the masses in the past: sophisticated armaments; whose bullets and service costs could have fed and maintained millions of the diseased, ailing and impoverished peoples; unending bunkers; trenches; bullet-proof cars and jackets; not forgetting economically viable projects but sited in wrongful locations but for political or ideological considerations, are well documented as sources of Africa’s unending debt-shackles. It is said that no true leader or family, will bondage the future of his/her peoples with debt-burden or ramshackle soil. The Pol Pots, Saddam Husseins and on our sub-region, Sergeant Doe, of Liberia, did it. But the strategy remains the same- build, destroy and reconstruct at their cost.