Not too long ago, I wrote a piece, which I argued that the importation of rice is not the cause of the falling cedi. And someone, whom my position touched on his sensibilities, commented categorically that I should stick to writing articles on politics rather than economics. He felt I wrote gibberish. Though, I gave him a short answer to his sarcasm, it is obvious that his opinion is not just an inconsequential lonely voice echoing in some feverish mind, but only a tip of a dangerous iceberg in the general population. After all, the president himself is beating the drum of self reliance in food production instead of cheer leading for increase productivity in the sectors of the economy that we have competitive advantage.
As a country, we are not producing enough food competitively to feed our selves. It is very difficult to accept the foregone statement, especially, when you go to the market, and you see mountain of rotten food at the wholesale centres. What can resolve the veracity of my claim are food prices. The average earner in the country uses about two thirds of his income on food. If we produce enough to go around prices will be much cheaper than what comes in from outside. Before I proceed I will offer one cue to buttress my assertion. Have any of the policy makers asked themselves the question why poultry products are so expensive in the country? The unadulterated answer is that the main ingredients of their feed maize, millet etc. are very expensive. It is, therefore, the underlying reason for the importation of offal into the country to supplement, which some people think it is rubbish.
The rice that is produced in the country is way beyond the pocket of the average consumer and is of poor quality. Therefore, what comes in as imports only augment our effort. If rice production in the country is done at a cheaper cost and sold competitively on the market there is no way any sensible person will buy imported rice. For some people it’s fine if local producers bring their rice to the market at much higher price than imported ones, because it supports local industry. That may well be when those who have the purchasing power to buy continue to do so. On the other hand, what about those who will be priced out of the market? They will go to their second best meaning they will now be consuming, for example, maize that should have been available for others. So it becomes a regression. When you stop the importation of rice it is not instantaneously that you see people clutching their stomach, but a gradual progression. Imported rice has an additional cost, besides its production i.e. shipment, import and export duties etc. that is added to the price. Therefore, if it can still be sold at a cheaper price to what is produced locally then we are not doing something right.
Britain, for example, doesn?t produce enough to feed herself, but rely on food produced from outside her borders. It?s not that Britain cannot produce enough to feed herself, but she came to the realisation over a century ago that she can obtain cheaper elsewhere what can be produced in Britain. Due to that line of thinking, when you go to an average fresh produce market in Britain you will be amazed the sort of exotic food items that are available for sale from all corners of the globe including off season produce like winter strawberry. Producing the quantity of rice we need is not the solution. We can produce all the tonnage we require, but it will still be expensive.
Currently, the capacity to produce the quantity we require is simply not there. In other words, even if we are able to produce enough of rice, for example, the factors of production, capital, labour and land that will go into it will not be worth the effort, when the same scarce resources can be used to produce maize, millet cassava cheaper and more abundantly. It is called competitive advantage. For all that you know, we have problem with water so how can we contemplate cultivating a crop like that. Besides, we lack the enduring expertise we do have, for instance, in the growing of cocoa.
The ongoing cacophonous discourse about the distress of the national currency is driving us towards mercantilism. Our policy makers are obsessed with that economic model that has outlived its usefulness. Mercantilism is what pushed the world economy into a cardiac arrest after the 1929 stock market crash, which led to the election of Adolf Hitler eventually plunging the world into a bitter six year war.
Our panic stricken leaders are employing knee jerk responds to problems that needs cool heads. Most of them admit to the fact that the depreciation of the national currency is a perennial problem. One of them even suggested that the cedi has depreciated since the seventies. If they are aware of this what makes them think that they can solve such a persistent problem with an ad hoc solution? Even a sophomore analyst knows that a recurrent problem doesn?t need improvised solutions, but long term approach. During the oil shock of the 70s, which brought a lot of pressure on our dollar requirements, Acheampong implemented his self reliance programme ‘operation feed yourself’ which alleviated the pressure for a while. But because it was an interim solution we reverted back to the quagmire we still find ourselves.
Productivity is the key, and not the cosmetic solution being applied to an old aged economic cancer. For example, productivity in the cocoa industry has not matched our population growth. It is an area that the government can address with all the seriousness it deserves. During the 60s when Ghana was the leading producer of the crop, a population of less than 8 million was able to produce at its peak 557,000 tons. Fast track to 2014 and with a population of 25.2 million we are unable to produce twice the quantity. Some will argue that the land under cultivation is finite, which is a valid point. However, our output per hectare is just about 50% of the output in places like Asiatic producing countries. The use of cocoa is on the increase as more nations become affluent like China so the market is there.
About 50 years ago, not many families will contemplate the education of their daughters beyond standard seven as they used to call it. Now, most people will move heaven and earth for them to go through university. So the question is how could they do it from the sort of income that come from subsistence agriculture? We cannot afford to continue with our antiquated productive methods and expect to get ahead of the pack. Our current misery is not due to our colonial economic structure, nor any of the factors being attributed to it, but simply a problem of productivity. During the 18th century as a result of the inadequacies of productive techniques available at the time, it led Robert Malthus to develop his doomsday Malthusian catastrophe. So ask yourself how we can make any meaningful strides when we still employ 60% of our workforce in agriculture. It is an incontrovertible proof of the lack of productivity in the economy. United States employs 0.7% of their workforce and United Kingdom also utilises 1.4% with France plucking away at 3.4% and these are the top economies in the world.
Obviously, what is eating up your thoughts is how do we increase productivity. For those in charge, they think that the intelligence, industry and dynamics that fuel productivity is a rocket science. It is not anything spectacular; it’s the by product of our desire to better our lives. It is as fundamental in every human psychic as we breathe oxygen. Adam Smith put it more eloquently when he wrote ‘it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.’ The government?s micro management of the economy is the bane of our lack of productivity. However, they wouldn?t have anything to say on that. For example, the government’s rigid control of the cocoa industry is what results in the abysmal performance and the occasional smuggling that blight that important sector of the economy.
Before the liberalisation of economic activities in china, most Chinese were on starvation diet. Chairman Mao adopted similar policies like what our current policy makers are implementing, which resulted in government guaranteed subsistence on poverty level called the iron rice bowl. It was literally an egalitarian distribution of misery. From 1949 till 1976, when the Chinese economy was under complete control of the government, living standards withered away with the years. Productivity in China plummeted so much that according to one statistics the 36 million Diaspora Chinese at a point were producing more wealth than all the billion living in the main land. Deng Xiaoping came and said lets some people get rich first. And now see the results, in the next two decades the Chinese economy will most likely overtake the American and become the premier economy, because they allowed the allocation of resources, which have alternative uses into the hands of the private sector.
Let?s assume the chief executive of cocobod gets paid Q-amount. Now, irrespective of how hard he works that is what he will be paid. If the industry produces the projected 850,000 metric tons he will still be paid the same amount, likewise if it falls short. So there is no incentive for him to go the extra mile to shore up output any further. Now, put a private man whose income will depend on what the industry produces. That person will seek expert knowledge for onward transmission to his producers to increase their yield. Perhaps, even help them with capital equipment that will reduce their cost. He will move heaven and earth to streamline his operations to eliminate wastage and increase efficiency. But when this private businessman makes a multiple of what a disinterested government official earns it will be seen as unacceptable. But it is his huge profit that will bring about massive productivity, which will affect the economy in multiple directions. Increased productivity means more drivers for haulage, market for agrochemical producers, more purchasing power for the farmers to support struggling local industries and many more.
On the other hand, an armed robber picks up a firearm in the middle of the night to terrorise his victims, because he also wants to better his life. However, it is not a legitimate business and the laws of the land bars his way. The incentive to carry on with his chosen profession is neutralised by the law. Even the possibility of death discourages most people from going into it. So, for example, a cocoa farmer who wakes up early in the morning to go about his legitimate business should be ultra incentivised to do more through the private sector not the ossified, corrupt and lazy cocobod.
I will part with the mind boggling inconsistency of our leaders, which beggars the imagination. They want to stop the importation of rice, yet they will allow the export of yam, gari etc. for foreign exchange, though it will also reduces the local food stocks, which will effectively cause prices to rise. Curtailment of certain imports is not the way forward. Perhaps, an interim solution is to increase the import tariff on rice rather than stopping it outright, though I am even queasy about this solution. Increased productivity is the way forward; it will fix a rocket to our economic prospects. So every vista of solution should be seen through the kaleidoscope of productivity and not the ad hoc try and error cowardly approach. Please! Think outside the box.
Philip Kobina Baidoo Jnr