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Adjustment for stabilisation or growth? Ghana and the Gambia
Abstract
Ghana and The Gambia are part of the group of African states that have been following programmes of structural adjustment (SAPs) throughout most of the 1980s and into the 1990s. They are also amongst the states that the Bretton Woods institutions (BWIs) have periodically cited as success stories for adjustment. The aims of adjustment policies are well known to analysts of African political economy. Their theoretical foundations lie within a brand of neo‐classical economics that emphasises the advantages of nonintervention in the free market and, conversely, the risks attendant on state attempts to regulate or intervene in the market. It follows that this line of thought anathematises the attempts of various African states to promote indigenous industrial development. State spending on such aims is deemed inflationary and wasteful inasmuch as it is believed to promote inefficient industries that can only survive on the basis of state subsidisation and protection against foreign competition. State concentration on the industrial sector can also be seen as providing a disincentive to those sectors of the economy that are actually productive, notably the rural sector, since it is the producers in the latter sectors that have to foot the bill for state intervention.
Structural adjustment is designed to counteract these tendencies through a variety of policy measures, including imposition of limits on fiscal and public spending policies in order to limit inflationary and wasteful state expenditure; deregulation and privatisation which are also designed to reduce state spending; liberalisation of the tariff regime in order to ensure that the productive sectors are opened up to market competition and therefore have to use resources efficiently; and devaluation which is necessary to counteract the tendency towards overvaluation of the currency that results from the pursuit of inflationary policies. An examination of the economic policies of many African states (including Ghana and The Gambia) suggests they have fallen into these very traps. The BWIs have therefore insisted that such states must undergo structural adjustment so that they will utilise their resources more efficiently — in accordance with the free market, that is. Only through taking this course can the foundations for growth be laid argue the BWIs. The following case studies examine how the conditions for growth actually have been attained in Ghana and The Gambia, paying particular attention to the issue of how far adjustment policies are conducive to industrial growth.
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