Thursday, February 21, 2013
Our CTED operations Ghana
Wednesday, January 23, 2013
Live from the WEF Today
Wednesday, August 8, 2012
Is There a Separate Economics for Africa?
Friday, January 20, 2012
Congratulations to Tom Sargent
Wednesday, April 13, 2011
Dance, Laugh, Drink. Save the Date: It's a Ghanaian Funeral.
http://www.nytimes.com/2011/04/12/nyregion/12funerals.html?ref=africa
Tuesday, March 29, 2011
Kgalema Mothlante at NYU - says Ouattara won election
Friday, February 11, 2011
Further Comments on Ending Bribery
Kafo Didi: Living Large but Producing very Little
J. Atsu Amegashie
February 11, 2011
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 only two ways of living large when you don’t produce enough: (1) borrow (what you have not produced); or (2) steal (what you have not produced): corruption.
Most people in the western world go for the first option. 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 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) orporations, 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 orruption. However, the lack of credit can also force people to find corrupt ways of making ends meet.
Foreign aid, a different form of borrowing, may help. 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 over 5 years was approximately $5 per Ghanaian. 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, 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 behavior. Government regulations that redistribute income from one group to another but reduce an economy’s output of goods and services are examples 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.
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).
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 aureate, 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 must 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 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 each period, the participants in an insurance market typically pool their risks (i.e., contribute to the insurance fund) 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 and once the state of the world is revealed (i.e., a relative has a good job), everyone else depends on him/her. This has helped many hard-working Ghanaians. But in most cases, it appears that it has been abused. 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.”
In Ghana and most countries in sub-Saharan Africa, most of our problems are typically chicken-or-egg problems. Solving such problems requires some 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. 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?
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 six cars, two houses, a luxury holiday package, a lifelong health package, security personnel, $1 million for a foundation, and many more. Is this sheer wickedness? 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 has his own mansion at Agyirigano, a suburb of Accra, but wants the state to accommodate him. Everyone is trying to raid the “commons.”
We care too much about social class and status, especially status that is based on material wealth. Our politicians care about being above everybody. In the western world, the richest people are in the private sector and the politicians 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 John 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. 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, work hard, and not glorify theft. We are part of the problem.
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”.
Thursday, February 10, 2011
How to End Corruption at the Ports in Africa- A Picture is Worth a Thousand Words
http://www.youtube.com/watch?v=FyxQBEkcSPw
http://www.youtube.com/watch?v=nouELdVAqxc
http://www.youtube.com/watch?v=69iOMp_JUZ0
http://www.youtube.com/watch?v=XpsPRMtsHmU
This has resulted in a lot of excited engagement from Ghana's President (see http://www.youtube.com/watch?v=ed57WhR5ouQ), who is otherwise a very bland speaker (see this in comparison: http://www.youtube.com/watch?v=E3KSgOt4zMA&NR). Whatever one thinks of Anas (and there are rumours he may have been on the government payroll), it appears that his one video will have much more of an effect than the zillions of reports and academic papers. My only problem with all of this is that the president sounds too much like a father scolding his errant children. Dad, I mean Mr. President--what you should do is announce that the Law Enforcement officers are going to have a continuous stream of undercover or sting operations, and all those caught from now on will be getting prison sentences, with assets confiscated and big fines imposed.
Sunday, December 19, 2010
Ivory Coast – The Contrarian View
Thursday, December 16, 2010
Ivory Coast – Declare Victory and Rule
Sunday, December 12, 2010
Ivory Coast - Just Say No to the Incumbent and Loser of the Election
It looks like things are on the right track. The AU has suspended Ivory Coast from the body. The Economic Community of West African States (ECOWAS) has suspended Ivory Coast. The UN security council also thrown its support to Ouattara. President Obama has condemned Gbagbo. Ivory Coast shares a common currency, the CFA Franc, with several other African countries with a common issuing Central bank, the BCEAO, which has been asked to only honor orders from the Outtara group. There should be no excuses. Gbagbo must concede and leave. Let us see what happens next.
Monday, October 18, 2010
My rumblings on the BBC about the Millennium Development Goals (MDG's)
Monday, October 4, 2010
Monday, August 23, 2010
Mark Twain, Diamonds in Africa and a Fantastic Insider Trading Story
Saturday, June 19, 2010
Portfolio's of the Poor - Book by my colleague Jonathan Morduch and others
I just made a pitch in a video for the great book "Portfolio's of the Poor" by my colleague Jonathan Morduch and others. It is great to have the poor of the world being treated as ordinary and everyday real people - making the best of bad infrastructure, lack of financial institutions and, of course, poverty. Too many portrayals make the poor seem like aliens from another planet. The book tracks individuals over time and records their decisions - primarily savings and financial decisions. It is great, it is about real people. I enjoyed reading it.
Thursday, February 18, 2010
Kwame the Cabby, Brain Drain and Health
I took a cab this morning – it was a Ghanaian taxi driver. He remembered picking me up several years ago. What a memory he has. Anyway, he has 4 children, two older ones one of which is a doctor. He also has two younger kids in private school. All his kids seem to be doing exceptionally well, and he is paying for elite schooling from his taxi driver salary. Many have spoken about the positive effects of the brain drain. Kwame, this morning’s cabby, made those arguments real to me. Why do we never consider the benefits to the migrant when talking about the African brain drain? (See AidWatch blog.) I was so proud of all of Kwame's successes from what I know is an extremely difficult job.
Anyway, Kwame said he is glad to see me, but he nearly died this year. “Died?” I asked, not sure I heard him clearly through all the
I will be at dinner with the Minister of Health for
I finally got off the taxi, and left a huge tip. I felt very proud of Kwame as I thought of his 4 children educated off his taxi earning. I also reminded myself to redo the calculations on the pluses and minuses of the Brain Drain to account for the Kwame’s.
Wednesday, February 17, 2010
Could the Brain Drain be Good for Africa?
Tuesday, February 16, 2010
It’s Education, Stupid
Could it be that many of the problems of Accra, perhaps of Ghana, are due to the low levels of education of substantial numbers of people? Will there be a big impact on the economy when the Mayors future cohorts of 8-hour a day students hit the job market? Well, all that remains to be seen. This Mayor has placed his bets on this. As a seasoned politician, I suspect he knows that this will go over very well with the Accra residents (and therefore, ultimate, his electorate). So, perhaps indeed it’s Education, stupid.
Monday, February 15, 2010
My breakfast meeting with the mayor of Accra
There was a time I thought it would be really cool to be the mayor of Accra. The city is large, and complex, and a whole lot of fun. Ghanaians are always laughing, cracking jokes and making fun of each other. The highlife nightclubs in Accra are really lots of fun. It is one of the safest cities I know - I drive through the city regularly at very late hours feeling extremely safe and comfortable. So, I figured at the time, Accra would be a manageable entity, fun, and yet a place where you could possibly do extremely well by the residents. It would be a great place to be mayor.
Accra is a city of, I hear, some 2 or 3 million people. A large city, but not a mega city like many others – Mexico City, Mumbai, or even Nairobi. Because almost all the building are have one, two or three floors, the city is extremely manageable.
Anyway, back to the mayor I am having breakfast with tomorrow. He is Alfred Vanderpuye, a member of the ruling National Democratic Party of Ghana. What are some of the things I should say to him tomorrow?
First, in coming to the US, he should continually remind himself (and his hosts) that Accra is a culturally rich, colorful and vibrant city. It is my favorite city. Too often African leaders come to the US hoping to get some kind of charity and completely destroy the image of Africa. So, Honorable Mayor, please do not do this to the city of my birth. Please tell the people of America about the great things about the city. It is peaceful – there is no war going on in Accra! Serious, I am sure you will be asked this. Some parts of Accra are really gorgeous – the old colonial style houses in Cantoments and Airport residential area; the beautiful waters of the Atlantic Ocean; the fishing areas of Jamestown.
On the other hand, as you, Honorable Mayor, know very well, there is a lot to be done in the city. I will stay away from some of the larger national issues – water, electricity and general poverty of large sections of the population. Here is a list of some of the things I believe that you, as mayor, should and can do.
a. Clean up the city: I am told that Kigali, the capital of Rwanda is now one of the cleanest cities in Africa, perhaps the world, because of conscious efforts at the top (like banning the use of plastic disposable bags). The lonely planet, one of the authoritative guidebooks for tourists said that Accra is "Ugly, chaotic, sprawling and completely indifferent to its waterfront location." So, honorable mayor, please spruce up the city. On that note, here is my second request:
b. Can someone explain why the gutters in Accra are not covered? I was told there is a scientific reason for this – or is it purely financial? It really is an eyesore, probably a breeding ground for mosquitoes and many other creatures which will remain nameless. My untrained mind says – "gutters already built, city close to Atlantic Ocean, so why are the gutters so disgusting?" Lee Kuan Yew, the big Man of Singapore, mentions in his autobiography that one of the first things he did to bring business to the country was to clean it up. I am sure the residents of Accra would also really appreciate not having to smell that Accra gutter smell.
c. Another theme from Lee Kuan Yew: how about a greening campaign for the city – build lots of trees and plants everywhere. Yes, it is so surprising that the city in a damp tropical area is often so incredibly dusty. I know, I am beginning to sound so bourgeois and this will be a hard sell for your residents. Yet, Nana Konadu Rawlings, the former First Lady has been a big champion of this for years. Singapore is an incredibly clean city, part of which is due to the greening campaign. And, Honorable mayor, do not forget that this is also good for tourism and for foreign investment, and, most importantly for the residents of Accra!
d. Back to those nightclubs: Why not start a highlife carnival in Accra, to put the spotlight on Ghanaian and African music. We have a wonderful heritage in music, and I think this could be something that would attract lots of tourists which in turn would generate income for your city's residents. It could also help the local music industry which is currently focused too much on hiplife (rap music in the local language), which probably could use some infusion of new ideas from Ghana's past.
So, Honorable Mayor, above are a few easy schemes for you. If you really get ambitious how about designing an accessible heart of Accra, with areas where people can freely walk without getting hit by cars – a downtown, or central area with bars and clubs? Think of a larger and more indigenous version of Accra's Oxford Street. Anyway, see you tomorrow, Honorable Mayor.

